The Pay Transparency Act – New Rules in the Labor Market

Current Situation and Roadmap

Directive (EU) 2023/970 establishes a binding European framework. Member States are required to transpose it into national law by 7 June 2026. Until national implementing legislation enters into force, existing domestic regulations remain applicable.

However, the Directive already provides clear guidance on future obligations. Employers are therefore well advised to review their remuneration systems and internal processes at an early stage in order to ensure timely compliance.

What Applies and When

From June 2026 (subject to national transposition): Employers must provide information on the initial pay level or pay range for a position before or during the recruitment process. Employers may no longer ask applicants about their previous remuneration.

From 2027: Employers with at least 100 employees will be subject to periodic reporting obligations on gender pay gaps. Employees will have extended rights to request information on their individual pay level and average pay levels for comparable categories of workers.

Key New Obligations and Rules

• Employees may not be prevented from discussing their remuneration. Contractual confidentiality clauses prohibiting such discussions will be invalid (“Right of Transparency”).
• If reporting reveals a gender pay gap of at least 5% in any category of workers and this gap can not be objectively justified, employers must conduct a joint pay assessment together with employee representatives (“Reporting and Joint Pay Assessment”).
• Pay systems must be based on objective, gender-neutral criteria and be documented in a clear and comprehensible manner (“Transparent Pay Structures”).
• Employees will be entitled to claim compensation in cases of discrimination. The burden of proof regarding compliance with equal pay principles rests with the employer (“Right of information”). Member States must provide effective, proportionate and dissuasive penalties (“Sanctions”).

What should be done now?

• Analyze Remuneration Structures: Create a complete database for all remuneration components.
• Define Clear Responsibilities: Assign contact people and establish processes for requests and reporting.
• Train Managers: Provide training on nondiscriminatory pay and new obligations.
• Establish Objective Systems: Develop or standardize fair, gender-neutral pay structures.

Implementation and Developments

In many Member States, including Germany, Spain and Poland, national transposition is still pending. While the core obligations are defined at EU level, national legislation may specify procedural details and enforcement mechanisms.

We will continue to monitor legislative developments and keep you informed to support timely and legally compliant implementation. A dedicated webinar on this topic will take place on 1 April, offering additional insights and practical guidance.