EU Pay Transparency Directive 2023/970: Complete Compliance Guide

The EU Pay Transparency Directive (2023/970) represents a landmark step toward closing the gender pay gap across Europe. With member states required to transpose this directive into national law by June 7, 2026, organizations must begin preparing now. This comprehensive guide covers everything compliance teams need to know.

What is the EU Pay Transparency Directive?

Adopted in May 2023, Directive 2023/970 aims to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women. It introduces binding measures on pay transparency, including mandatory reporting requirements, employee access rights, and enforcement mechanisms.

Key Deadline: EU member states must transpose the directive into national law by June 7, 2026. Organizations should not wait—implementation requires significant preparation.

Key Requirements Overview

1. Job Posting Transparency

Perhaps the most immediately visible change: all job postings must include salary information.

Initial pay or pay range must be disclosed before the interview or in the vacancy notice
Pay information must be based on objective, gender-neutral criteria
Employers cannot ask about current or historical pay of applicants
Job titles must be gender-neutral

2. Employee Right to Information

Employees gain new rights to request and receive pay information:

Right to their individual pay level
Right to average pay levels broken down by sex for categories of workers doing equal or equivalent work
Right to criteria used for pay determination and pay progression
Information must be provided in writing within two months of request
Workers can request through representatives (works councils, unions)

3. Gender Pay Gap Reporting

Companies above certain size thresholds must report gender pay gap data:

250+ employees: Annual reporting starting 2027
150-249 employees: Report every 3 years starting 2027
100-149 employees: Report every 3 years starting 2031

4. Required Reporting Metrics

Gender pay gap (mean and median)
Gender pay gap in complementary/variable components
Median gender pay gap in complementary/variable components
Proportion of female and male workers receiving complementary/variable components
Proportion of female and male workers in each quartile pay band
Gender pay gap by categories of workers, broken down by basic pay and complementary/variable components

The 5% Gap Trigger: Joint Pay Assessment

A critical provision requires action when pay gaps exceed 5%:

If reporting reveals a pay gap of 5% or more in any category of workers that cannot be justified by objective, gender-neutral factors, employers must conduct a joint pay assessment with worker representatives.

The joint pay assessment must include:

Analysis of the gap and its causes
Measures to address unjustified differences
Evaluation of effectiveness of past measures
Timeline for remediation (reasonable but no fixed period specified)

Defining "Equal Work" and "Work of Equal Value"

The directive requires member states to establish systems for job evaluation. Work is considered of equal value when it is comparable based on:

Skills: Education, training, professional experience required
Effort: Physical, mental, and emotional demands
Responsibility: For people, equipment, safety, resources
Working conditions: Physical environment, psychological demands, schedule flexibility

Organizations must develop objective, gender-neutral job classification systems to categorize roles for comparison purposes.

Enforcement and Penalties

The directive significantly strengthens enforcement mechanisms:

Compensation Rights

Workers who suffered pay discrimination are entitled to full compensation
Compensation includes full recovery of back pay and related bonuses
Compensation for lost opportunities and non-material damage
Interest on amounts owed

Burden of Proof Shift

Crucially, the directive shifts the burden of proof to employers:

Where an employee establishes facts that give rise to a presumption of discrimination, it falls to the employer to prove there was no discrimination. This applies in all judicial or administrative proceedings.

Penalties

Member states must establish effective, proportionate, and dissuasive penalties. While the directive does not specify amounts, penalties may include:

Fines (amount determined by member states)
Exclusion from public procurement and concessions
Exclusion from public subsidies
Compensation orders including back pay

Implementation Timeline

May 2023: Directive adopted
June 7, 2026: Member states must transpose into national law
June 7, 2027: First reporting deadline for 250+ and 150-249 employee organizations
June 7, 2031: First reporting deadline for 100-149 employee organizations

Practical Steps to Prepare

Step 1: Job Architecture Review

Develop or review job families and categories
Ensure classification criteria are objective and gender-neutral
Document the skills, effort, responsibility, and conditions for each role
Create clear salary bands for each level/category

Step 2: Pay Data Analysis

Calculate current gender pay gaps across all required metrics
Identify any gaps exceeding 5% by job category
Document objective factors that may explain any gaps
Prepare remediation plans for unjustified gaps

Step 3: Process Updates

Update job posting templates to include salary ranges
Train recruiters not to ask about salary history
Establish process for responding to employee pay information requests
Create documentation for pay decisions and progression criteria

Step 4: Technology and Systems

Ensure HR systems can produce required reporting metrics
Implement job classification tracking
Set up employee request management workflow
Establish audit trail for pay decisions

Interaction with GDPR

Pay data is personal data under GDPR. Key considerations:

Legal basis for processing: Likely legal obligation (compliance with pay transparency requirements)
Data minimization: Only collect/report what's required
Aggregation: Individual data should be aggregated for reporting (minimum group sizes apply)
Employee requests: Balance transparency rights with privacy of other employees
Retention: Keep records to demonstrate compliance

GDPR cannot be used to refuse legitimate pay transparency requests. The directive explicitly states that member states must ensure employers cannot invoke data protection to deny or restrict access to pay information.

Getting Started with Pay Transparency

The June 2026 deadline may seem distant, but the scope of required changes is significant. Organizations that begin preparation now will have time to conduct thorough pay equity analyses, develop compliant job classification systems, and remediate any identified gaps before mandatory reporting begins.

MultiComply's Pay Transparency module helps organizations manage job categories, document salary bands, calculate pay gaps, and handle employee information requests—all in one integrated platform alongside your GDPR compliance workflows. Start your free trial to begin your pay transparency compliance journey.