Overview & Background
The EU Pay Transparency Directive (Directive 2023/970) was published in the Official Journal of the European Union on May 17, 2023, and entered into force on June 6, 2023. EU member states have until June 7, 2026 to transpose it into national law.
The directive builds on Article 157 of the Treaty on the Functioning of the European Union and the principle of equal pay for equal work. It introduces the most comprehensive set of pay transparency requirements ever enacted in Europe, going far beyond previous equal pay legislation.
The core premise is straightforward: pay secrecy enables pay discrimination. By requiring transparency at every stage — from job advertisements to ongoing employment to organizational reporting — the directive aims to close the gender pay gap across the EU, which stood at 12.7% in 2022.
Salary Disclosure in Job Advertisements
Perhaps the most immediately visible requirement: every employer in the EU must disclose the starting salary or pay range for a position, based on objective, gender-neutral criteria. This information must be made available to job candidates before the first compensation negotiation — typically in the job posting itself.
Key Rules:
- •Pay range or starting salary must be published in the job ad or shared before the first interview
- •The range must be based on objective, gender-neutral criteria — not what candidates previously earned
- •Employers are prohibited from asking candidates about their salary history at current or previous employers
- •Pay secrecy clauses in employment contracts are explicitly banned
For most companies, this is the most immediate challenge. Setting salary ranges requires reliable compensation benchmarking data — and according to research by Trusaic, 84% of organizations currently lack reliable salary benchmarks.
Fairpay can help: Our compensation benchmark reports provide market-rate salary data by role, location, experience level, and company size — exactly the data you need to set defensible, compliant pay ranges. Get a benchmark report from $49 →
Employee Pay Information Rights
The directive gives every worker the right to request — and receive — information about their individual pay and the average pay levels, broken down by sex, for workers doing the same work or work of equal value.
Employer Obligations:
- •Respond to employee pay information requests within two months
- •Provide average pay levels broken down by sex for comparable roles
- •Make criteria for pay determination and pay progression easily accessible to all workers
- •Inform employees annually of their right to request this information
- •Ensure pay secrecy clauses are not included in any employment contract
This means companies need to have their compensation data organized, defensible, and aligned with market rates. When an employee asks “why am I paid less than the average for my role?” — you need a clear, data-backed answer.
Gender Pay Gap Reporting
Companies above certain employee thresholds must submit regular gender pay gap reports to a designated national authority. These reports must be made publicly accessible.
| Company Size | Reporting Frequency | First Report Due |
|---|---|---|
| 250+ employees | Annually | June 7, 2027 |
| 150–249 employees | Every 3 years | June 7, 2027 |
| 100–149 employees | Every 3 years | June 7, 2031 |
Reports must include the mean and median gender pay gaps for both base pay and variable/complementary components, the proportion of men and women receiving variable pay, and the distribution of employees across pay quartiles by gender.
Importantly, these reports must use objective, gender-neutral job evaluation criteria — assessing roles based on skills, effort, responsibility, and working conditions. Companies will need structured job classification frameworks to comply.
Remediation & Enforcement
The 5% Rule
If a gender pay gap of 5% or more exists within any worker category and cannot be justified by objective, gender-neutral factors — and is not remedied within 6 months — the employer must conduct a joint pay assessment with employee representatives and implement corrective measures.
Penalties for Non-Compliance
The directive introduces some of the strongest enforcement mechanisms in EU employment law:
- •Workers who suffer pay discrimination are entitled to full compensation with no upper limit — including back pay, bonuses, lost opportunities, non-material damages, and interest
- •The burden of proof shifts to the employer when transparency obligations are not met
- •Non-compliant employers can be excluded from public procurement processes
- •Some member states are implementing additional penalties — Cyprus, for example, imposes fines up to €10,000 and/or imprisonment
Timeline & Deadlines
Transposition Status (March 2026)
As of March 2026, implementation across member states is fragmented:
- •Only 2 of 27 member states have notified full transposition measures
- •11 countries have published draft legislation
- •9 countries show no documented government action
- •The Netherlands has announced it will miss the June 2026 deadline
- •Some states (Sweden, Cyprus) are going beyond minimum requirements
This fragmentation means companies operating across multiple EU countries face additional complexity, as national implementations may differ in specific requirements and penalties.
Who Is Affected
The short answer: every employer in the EU. The directive applies to all EU employers, public and private sector, as well as non-EU companies with EU-based employees.
All EU Employers
Must comply with salary transparency in job ads and employee information rights. This includes the estimated 25 million SMBs operating in the EU.
Companies with 100+ Employees
Subject to mandatory gender pay gap reporting obligations, phased by size. An estimated 200,000+ companies across the EU.
Even micro-businesses with fewer than 10 employees — which make up approximately 90% of EU firms — must disclose salary ranges in job postings and respond to employee pay information requests. The directive leaves no employer untouched.
How to Prepare
With the June 2026 deadline approaching, here are the practical steps every EU employer should take now:
Audit your current compensation data
Gather all salary data across roles, levels, and locations. Identify gaps in your data and inconsistencies in how roles are classified.
Benchmark salaries against market rates
Use reliable external compensation data to understand how your pay compares to the market. This is essential for setting defensible salary ranges.
Define salary bands for every role
Create structured pay ranges based on objective criteria: skills, responsibility, effort, and working conditions. These ranges will go into your job postings.
Analyze pay equity internally
Compare compensation across gender within each role category. Identify any gaps above 5% and prepare justifications or remediation plans.
Build reporting infrastructure
If you have 100+ employees, prepare the data pipelines and processes needed for gender pay gap reporting by 2027.
Update recruitment processes
Remove salary history questions from interviews. Add salary ranges to all job postings. Train hiring managers on the new requirements.
Start with Step 2: Get Your Benchmark Data
Fairpay provides compensation benchmarks by role, location, experience, and company size — starting at $49. The same data enterprise consultants charge $10,000+ for.
Sources & Further Reading
- EU Directive 2023/970 — Official Journal of the European Union (EUR-Lex)
- European Commission — Pay Transparency overview and FAQ
- Trusaic — Global Pay Equity Readiness Report (2024)
- PwC — EU Pay Transparency Directive implementation tracker
- Ogletree Deakins — EU Pay Transparency analysis series
- Jones Day — EU Directive on Pay Transparency: Insights