Guide

The EU Pay Transparency Directive: a plain-English guide for employers

By the Equaudit team · Updated 6 October 2026 · 5 min read

Directive (EU) 2023/970, usually called the EU Pay Transparency Directive, is the biggest change to pay practice in Europe in a generation. It entered into force in June 2023, and member states had until 7 June 2026 to turn it into national law.

If you run HR, finance or payroll for a company with a few hundred employees, you do not need to read the legal text to get started. This guide explains what the directive asks of you, which duties depend on your headcount, and the order in which most employers should tackle them.

What the directive is trying to do

The principle of equal pay for equal work, or work of equal value, has been in EU law for decades. In practice the pay gap between women and men has barely moved, partly because workers cannot see what colleagues earn and cannot prove they are underpaid. The directive attacks that opacity. It gives workers and job applicants rights to pay information, forces larger employers to publish pay gap data, and makes it easier to win a claim when something is wrong.

It is a directive, not a regulation. That means each member state writes its own law, and details such as thresholds, report formats and penalties can differ. Always check the national rules where your employees work, and read this guide as the common EU baseline.

Who is covered

Public and private employers, of any size, are covered by the core rights. The directive protects workers with an employment contract or employment relationship as defined in national law, which can include part-time, fixed-term and temporary agency workers, and it also protects job applicants.

Headcount matters for one thing in particular: pay gap reporting. Only employers with at least 100 workers have to report under the directive, and the reporting calendar is staggered by size. The deadlines article has the dates.

The six obligations that matter

Pay transparency before hiring. Applicants must receive the initial pay or pay range for the role, based on objective, gender-neutral criteria, before the interview. You may not ask about their pay history. See salary ranges in job ads.
Transparent pay-setting. Workers must be able to find out the criteria used to set pay levels and pay progression. Those criteria must be objective and gender-neutral. Member states may exempt very small employers from the career-progression part.
Right to information. Any worker can ask in writing for their own pay level and for the average pay, broken down by sex, of colleagues doing the same work or work of equal value. You must answer within two months at the latest and remind workers of this right every year. See the right to pay information.
Pay gap reporting. Employers with at least 100 workers must report a set of indicators: the mean and median gap, the gap in variable pay, the share of women and men receiving variable pay, the split by pay quartile and the gap by category of workers. See how to calculate the gender pay gap.
Joint pay assessment. If the report shows a gap of 5% or more in any category of workers that you cannot justify with objective, gender-neutral criteria and you have not fixed within six months, you must carry out a joint assessment with workers' representatives. See the 5% rule.
Enforcement. Workers who suffered discrimination can claim full compensation including back pay and related bonuses. The burden of proof can shift to the employer, particularly where transparency duties were not met, and member states must set penalties that include fines.

Equal work and work of equal value

Everything in the directive rests on comparing workers who do the same work or work of equal value. You compare jobs using objective, gender-neutral criteria that include skills, effort, responsibility and working conditions. The way you group jobs into categories drives your pay gap report, your answers to employee requests and your exposure to a joint pay assessment, so it deserves real attention. We cover it in defining job categories.

A sensible order of work

Find out the status of the national law in each country where you employ people. Reports in mid-2026 showed most member states still finishing their laws, so expect details to move.
Fix job titles and job ad templates now. This is the duty that applies to every employer and the cheapest to get right.
Document your job architecture: levels, categories and pay bands, with the criteria behind them.
Export a clean payroll extract and run a trial gap analysis on last year's data. Surprises are much cheaper to find in a trial than in a filed report.
Investigate every category where the gap is 5% or more. Either document the objective reason or plan a correction.
Prepare a process and templates for employee information requests, including who answers and how you protect personal data.

Where tooling helps

The arithmetic is simple, but it is easy to get wrong when you do it by hand across hundreds of rows, and you will want to repeat it as you test corrections. Equaudit takes a payroll CSV, computes the reporting indicators and flags categories at or above 5%. It stores only percentages and head-counts, never individual salaries. You can read how it works before you try it.

Frequently asked questions

Does the directive apply to companies with fewer than 100 employees?

The reporting duty starts at 100 workers. The rights to pay information, the rules on pay in recruitment and the pay-setting transparency duties are not tied to the reporting thresholds, and member states can go further than the directive, so smaller employers should still check their national law.

Is a directive directly binding on my company?

A directive binds member states, which turn it into national law. Your obligations come from the national law of the country where your workers are employed. During the delay in transposition, workers may still rely on the equal pay principle already in EU law.

What is the difference between a pay gap and unequal pay?

The pay gap compares average or median pay of all women and all men in your workforce, which reflects who holds which jobs. Unequal pay means a woman and a man doing the same work or work of equal value are paid differently. The directive addresses both, using the 5% category gap as the trigger for further analysis.