Navigating EU Pay Transparency: A guide for Employers

As the EU moves to mandatory pay transparency, employers in Great Britain (‘GB’), particularly those who operate internationally, may face greater pressure to provide greater transparency of pay and align with the approach adopted in Europe.

What is the EU Pay Transparency Directive?

The Pay Transparency Directive (EU 2023/970) is the EU’s framework for enforcing the principle of equal pay between men and women. It aims to close the gender pay gap through greater transparency in pay systems and robust enforcement.

• Came into force: 7 June 2023.
• Member States implementation deadline: 7 June 2026.
• It applies to all employers in the EU.
• It does not apply in GB (as the Directive was adopted after Brexit).
• GB employers operating in the EU must comply in each Member State in which they operate.
• Employers in GB may be indirectly affected if they choose to harmonise pay practices across their international practices, aligning operations in GB with their EU operations.

 Which employers must report?

Member States may impose more onerous requirements including lower thresholds, so smaller employers may also be required to report. For example, in Ireland gender pay reporting obligations apply to employers with 50 or more employees.

What must employers report?

Employers must publish gender pay gap reports, including:

• Mean and median gender pay gaps between men and women.
• Median gender pay gap in ‘complementary or variable components’ such as bonuses.
• The proportion of men and women in each quartile pay band, and the proportion receiving complementary or variable components.
• Breakdown of pay gaps by categories of workers, by basic pay and by complementary and variable components (which creates a requirement to assess those who are doing work of equal value).
• Explanation of gaps, and whether they are justified by objective, gender‑neutral factors.

Management must confirm the accuracy of the report. Workers’ representatives also have access to the methodologies applied by the employer.

Employers must remedy any difference in pay identified which cannot be objectively justified by gender neutral factors within a reasonable period of time.  Where the gender pay gap is 5% or more, the employer must take further action (see below). Penalties also apply for non-compliance.

Pay transparency rights for individuals

The Directive also gives employees and job applicants new rights:

Applicants

• Must be told the initial pay or pay range in a published job vacancy notice and before the interview.
• Delegates cannot be asked about their current or past pay history.

Employees

• Cannot be prevented from discussing their rate of pay for the purpose of ensuring equal pay.
• Must have access to clear and objective criteria used to determine pay, pay levels and pay progression
• Can request written information on:
  • Their own pay level.
  • The average pay levels (broken down by sex) for categories of workers doing the same work or work of equal value to them.
• Employers must respond within 2 months and remind employees annually of this right.

Joint pay assessment and closing the pay gap

If reporting reveals a 5% or more gender pay gap in any category of workers and the employer cannot justify it on gender-neutral factors, and it is not corrected within six months, the employer must conduct a joint pay assessment in consultation with worker representatives. This is essentially an audit of the gender pay gap to identify, remedy and prevent differences in pay and close the gender pay gap.  This is one of the Directive’s most onerous requirements and requires publishing more detailed information and analyses.

Consequences for employers

The Directive has “teeth” and requires proactive correction of unjustified pay gaps.  Each Member State has to ensure effective enforcement, compensation or reparation for the loss and damage sustained, in a dissuasive and proportionate manner.

Consequences of breach include:

• Mandatory orders to stop the infringement and to take remedial measures to ensure the principle of equal pay is applied.
• No cap on compensation for breaches of equal pay (including back pay, related bonuses, payments in kind, compensation for lost opportunities, and interest on arrears).
• Penalties for non-compliance to deter employers from discriminatory pay practices.
• Burden of proof shifts to the employer to demonstrate that no discrimination occurred in equal pay litigation.

How the Directive differs from the gender pay gap reporting in Great Britain

The Directive is the ‘gold standard’ in pay reporting  which goes significantly further than the gender pay gap regime in GB. Under the Employment Rights Act, from 2027 it will become mandatory for GB employers with 250 or more employees to publish action plans, alongside their gender pay gap reports, setting out how they intend to reduce their gender pay gaps. Employers are encouraged to begin publishing voluntary action plans from April 2026.

The Directive differs from the GB regime in that it:

• Has a lower reporting threshold (100 vs 250 employees).
• Requires a greater level of detail in the information reported.
• Includes variable pay, benefits and equal‑value analysis.
• Requires employers to take action to fix gender pay gaps that cannot be objectively justified.
• Creates individual pay transparency rights and introduces fines and compensation for non-compliance.

 What should employers do now?

Employers operating in (or alongside) the EU should:

• Review national laws in the Member States in which they operate as there may be local variations.
• Implement pay structures for different roles or alternatively review existing pay structures for different roles.
• Map job categories and assess where workers are in comparable situations using equal value criteria (such as skills, effort, responsibility, working conditions, and if appropriate any other factors which are relevant to the specific job or position –  applied in an objective gender-neutral manner).
• Train recruiters on new rules (pay ranges, no salary history).
• Test run a pay gap report to identify high risk areas and take appropriate action.
• Prepare internal processes for responding to pay information requests.

This is only intended to be a summary and not specific legal advice. If you would like further information or advice, please contact Greene & Greene solicitors Employment team.