Preparing for the EU Pay Transparency Directive: Key Considerations and Guidance for Employers 

With less than one year to go until the EU Pay Transparency Directive (the ‘Directive’) takes effect in June 2026, organisations (including UK based multinationals) employing workers in the European Union should prepare for new obligations focused on the principle of equal pay for equal work or work of equal value between men and women. The Directive introduces a comprehensive framework of pay transparency measures and reporting requirements that require proactive attention from employers of all sizes, even where pay gap reporting headcount thresholds are not met.  

Key requirements of the Directive 

To comply with the Directive, employers should be aware of the following key obligations designed to promote pay transparency:

• Equal work and work of equal value: Member States must ensure that employers implement pay structures that guarantee equal pay for equal work or work of equal value, supported by accessible analytical tools, methodologies and structures designed to help assess and objectively compare the value of work, based on gender-neutral criteria.

• Rights to information: Employers of all sizes must be prepared to provide all workers with written information, upon request, about their individual pay and the average pay levels, broken down by sex, for comparable work or work of equal value. Employers must annually inform workers of this right. 

• Gender Pay Reporting: Employers must provide information regarding the mean and median gender pay gaps, including: (a) those based on complementary and variable pay components (such as bonuses), (b) the proportion of men and women receiving these pay components, (c) the gender distribution within each pay quartile and (d) pay gaps across worker categories broken down by basic salary and complementary or variable pay. (a) – (c) must be reported to the relevant authority and shall be made publicly available. (d) must be provided to workers and workers’ representatives, as well as the labour inspectorate and the equality body upon request. The thresholds are as follows:

1. Employers with 100-149 employees: Must publish the report by 7 June 2031 and every three years after. 
2. Employers with 150-249 employees: Must publish the report by 7 June 2027 and every three years after.
3. Employers with >250 employees: Must publish the report by 7 June 2027 and annually thereafter. 

• Joint pay assessments: Employers subject to the reporting obligation must conduct a joint pay assessment with worker representatives if their report shows a gender pay gap of 5% or more in any worker category that cannot be justified by objective, gender-neutral criteria and remains unaddressed six months after reporting. 

Implications of the Directive 

The Directive introduces significant new obligations that will impact employers operating in the EU, especially those with populations in countries with limited existing pay transparency requirements. The non-gender pay reporting obligations under the Directive will apply irrespective of headcount, and worker’s rights to information regarding their own pay levels, and the average pay levels for categories of workers performing the same work as them or work of equal value to theirs means that some form of analysis will be required for those employers to whom the reporting obligations do not apply, in order to compile the necessary data to comply with such requests.

The Directive will likely influence what is perceived as best practice, resulting in an increased volume of work for employers as they take steps to implement the administrative framework required under the Directive. The requirement for worker representative cooperation in determining work of equal value and in dealing with rights to information requests will mean determining a robust employee relations strategy will be key.

UK/EU Divergence

The Directive currently goes considerably further than any existing UK pay reporting obligations and so leveraging UK frameworks alone will not allow UK based multinationals to fully comply with the Directive’s provisions.  However, the UK government has recently issued a call for evidence seeking opinions on whether introducing legally binding pay transparency measures would be a proportionate and effective way to improve pay equality in the UK. 

What should employers do now?

With the deadline for implementation of the Directive fast approaching, organisations operating within the EU should begin preparing. For employers likely to fall within the scope of the gender pay reporting obligations, given that there is only one full annual payroll cycle remaining before the Directive comes into effect, now is the time to conduct a trial run of the reporting process to identify and address any potential pay gaps or areas of concern.

Employers should also consider establishing a legally privileged framework under which to seek advice and assess relevant risks as they prepare for compliance with the Directive.  

By taking these steps now, employers will be better positioned to comply with the Directive, reduce the risk of non-compliance, and demonstrate a strong commitment to pay equity and transparency across their EU operations. 

Authors Louise Skinner, partner ,Aaron Grant, associate ,Phoebe Fardell, associate 

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