EU Pay Transparency Directive: What It Means for Employers and Employees in 2026

In May 2023, the European Union adopted Directive (EU) 2023/970, a landmark piece of labour law aimed at tackling persistent gender-based pay disparities. Often referred to as the EU Pay Transparency Directive, its primary objective is to transform the principle of “equal pay for equal work or work of equal value” into enforceable practice through transparency, reporting, and accountability.

Why This Directive Matters

Despite decades of law promoting equal pay, wage inequalities across the EU persist. According to recent Eurostat figures, the average gender pay gap remains around 12 – 13 %, with notable differences across Member States.

The Directive is designed to:

• Make pay practices transparent

• Equip workers with the right to information

• Expose unjustified pay gaps

• Encourage early correction and remedies

In this way, transparency becomes a tool not just for disclosure, but for action.

Key Deadlines Every Employer Should Know

EU Member States must transpose the Directive into national law by 7 June 2026. Only after this transposition will the specific obligations become enforceable at the national level.

Once national laws are in place, employers need to prepare for phased pay gap reporting:

• 250+ employees: first reports due by 7 June 2027 (then annually)

• 150 – 249 employees: first report by 7 June 2027 (then every 3 years)

• 100 – 149 employees: reporting begins by 2031 (every 3 years)

Member States may impose even stricter requirements or include smaller companies in reporting obligations.

What Employers Will Be Required to Do

Once implemented nationally, the Directive introduces several important duties:

1. Reporting on Gender Pay Gaps

Employers with 100+ employees will need to publish detailed pay gap reports, covering:

• Average gender pay gap

• Gap in variable or supplementary pay

• Median and mean pay comparisons

• Distribution of men and women across pay quartiles 

If a pay gap of 5 % or more is identified and cannot be justified on objective, gender-neutral grounds, companies must take action to correct it within six months of reporting.

2. Salary Transparency in Recruitment

Employers will be required to include salary ranges in job postings and disclose the criteria used to determine pay. Potential and current employees should have the right to request information on pay comparisons for roles of equal value.

This is intended to prevent discriminatory negotiation practices and reduce information asymmetry in hiring.

3. Objective Pay Setting

The Directive strengthens the legal principle that equal work or work of equal value must be remunerated equally. Employers must rely on objective, gender-neutral criteria when determining remuneration.

How Employers Can Prepare Now

With the June 2026 deadline approaching fast, preparation should begin immediately:

• Audit Current Pay Structures: Start collecting and analysing internal pay data by gender across all job categories.

• Establish Transparent Pay Policies: Create documented, objective criteria for salary decisions and ranges for roles.

• Engage HR, Legal & Compliance: Integrate reporting and compliance tasks into your HR and governance frameworks.

• Educate Leaders and Employees: Build internal understanding of the Directive’s requirements and expectations.

Conclusion

The EU Pay Transparency Directive marks a significant shift from “equal pay as a principle” toward equal pay as proof. It places employers and policymakers on a shared journey toward measurable gender pay equity, backed by enforceable transparency measures and accountability.

For employers operating across the EU and HR professionals supporting them early action is not only wise, it’s essential. Compliance will require strategic planning, cultural change, and robust data management, but it also presents a unique opportunity to lead on fairness and equity in the workplace.