The EU Pay Transparency Directive

The right of women and men to equal pay for equal work or work of equal value is one of the fundamental principles of the EU. However, women’s average earnings per hour are still less than men’s. To be precise, in 2018 and 2020, there was a pension gap of around 30% and an average pay gap of 13% between men and women. The lack of transparency when it comes to salaries plays a crucial role in that matter. The EU Pay Transparency Directive now aims to strengthen the right to equal pay for men and women for equal work and work of equal value. This is to be guaranteed by means of a series of binding measures.

In general, there are three main objectives that characterise the Directive. The first is to enable employees to enforce their right to equal pay – before, during and after employment. In addition, there will be a general increase in the transparency of pay systems, and the enforcement of rights and obligations regarding equal pay for men and women is to be improved.

As has already started with job applicants, extended transparency provisions will apply. In future, employers must provide information about the starting salary or salary range of the advertised position, either in the job advertisement itself or through other measures before the job interview. Moreover, employers are no longer allowed to ask job applicants about their current salary or salary development in previous employment relationships.

In the case of employees, the rights to information regarding their individual pay level and the average pay level for a group of employees who perform the same or equivalent work as them will be extended (this information is to be broken down by gender). Upon request, employees must also receive information about the criteria used by the employer to determine the pay and career development of an employee in their company. These criteria must be objective and gender-neutral. Employers must annually inform all employees about their right to information.

However, it is not only employees who will have extended information rights in the future. Their representatives, supervisory authorities and equal treatment bodies will also have the right to request clarification and details of this information from employers, including explanations of any existing gender pay gaps.

In addition to the rights to information, the Directive also imposes a special reporting obligation on companies. Until 7 June 2027, companies with more than 250 employees must annually report on the gender pay gap in their organisation to the competent national authority. Companies with between 100 and 250 employees are obliged to report every three years; while companies with fewer than 100 employees are exempted from this regulation.

If the reporting shows an average pay gap of at least 5% for a group of employees who perform the same or equivalent work and the difference is not justified by objective and gender-neutral factors, the employers concerned are obliged to carry out a joint pay assessment, together with employees’ representatives.

Moreover, access to justice is to be improved under the Directive, as employees who have suffered pay discrimination will now receive full compensation. Also, the burden of proof in pay discrimination cases, which has traditionally fallen on the employee, will now be on the employer. However, according to the Austrian Equal Treatment Act, employees who earn less for the same work, or for work recognised as equivalent, simply because of their gender already have a claim against their employer for payment of the difference in pay and compensation for any personal detriment. In view of the Directive, this provision can now be interpreted in such a way that the employee is entitled to a non-discriminatory situation, both in the past and in the future.

In addition, the Directive now provides for a three-year limitation period for filing a lawsuit, starting from the moment the plaintiff has become aware of the infringement or breach. Furthermore, an ongoing limitation period is suspended or interrupted as soon as the plaintiff files the lawsuit.

The EU Pay Transparency Directive represents a landmark initiative to strengthen the application of equal pay principles within the EU. By promoting pay transparency, encouraging equal pay audits, and enhancing enforcement mechanisms, the Directive aims to combat pay discrimination and advance gender equality in the workplace.

The extended obligations of companies implemented by the Directive have undoubtedly created a suitable instrument for combating the pay gap between men and women for equal work or work of equal value, which individuals should be able to invoke throughout the EU from 8 June 2026 at the latest. Even if the end of the implementation period is still far in the future, employers are well advised to analyse their compensation policies and potential issues before the national regulations come into force.