The Pay Transparency Directive imposes numerous new obligations on employers. We explain all the key aspects and provide guidance on implementation for companies in Germany.
In a nutshell
- The main aim of the Pay Transparency Directive is equal pay for equal work.
- The Pay Transparency Directive introduces extensive transparency and reporting obligations for employers.
- The new requirements are far more than just another obligation under employment law and have a profound impact on the HR structure of companies.
- The Pay Transparency Directive came into force on 6 June 2023; the requirements must be transposed into national law by 7 June 2026.
Significance of the Pay Transparency Directive for Germany
The Pay Transparency Directive (Directive (EU) 2023/970) (EUPTD) is a directive of the European Parliament and of the Council which entered into force on 6 June 2023 (full text of the directive). Its aim is to strengthen the principle of ‘equal pay for equal work or work of equal value’ and to systematically reduce gender-based pay gaps.
The German legislature is obliged to transpose the requirements of European law into national law by 7 June 2026 at the latest.
The so-called Pay Transparency Act (EntgTranspG) has been in force in Germany since 30 June 2017, providing for initial measures to promote equal pay between women and men. It is expected that this Act will now undergo a comprehensive reform in line with the requirements of the Directive.
The future requirements go significantly beyond the current legal situation. They concern not only the question of how remuneration is structured internally, but also affect recruitment processes, documentation obligations, governance structures and potential liability risks.
In practice, the impact of the German Pay Transparency Act has so far been limited. In particular, employees’ rights to information have been exercised relatively rarely, and many companies have so far only been confronted with specific obligations on an ad hoc basis.
The EU Pay Transparency Directive now goes considerably further. There is a significant need for action here, particularly for companies with established salary structures, individual remuneration agreements or salary ranges that have developed differently over time.
Furthermore, the German Pay Transparency Act has so far only applied to employers with more than 200 employees. The Directive now affects significantly more companies than before.
What are the objectives of the Pay Transparency Directive?
The Directive aims to promote sustainable pay equality by creating transparency in remuneration structures and strengthening measures against unequal pay. The starting point is Art. 157 TFEU and the prohibition of discrimination under Art. 4 of Directive 2006/54/EC, according to which equal or equivalent work must be remunerated equally regardless of gender.
The key objectives of the Directive are:
- Identifying and reducing the gender pay gap, i.e. gender-specific pay differences;
- Creating transparency in remuneration systems and pay structures;
- Extending employees’ rights to information and access to data;
- Establishing binding reporting and monitoring mechanisms for employers;
- Stronger enforcement mechanisms.
Who is affected by the Pay Transparency Directive?
The Directive applies equally to employers in both the private and public sectors. They are subject to extensive obligations, particularly with regard to transparency.
All employees who are employed in accordance with statutory provisions, collective agreements or the customary rules applicable in an EU Member State are protected, subject to the relevant case law of the Court of Justice of the European Union (CJEU) (Art. 2 EUPTD).
Under certain conditions, the scope of the Directive also extends to job applicants.
What are the key provisions of the Pay Transparency Directive?
Transparency prior to employment
A key element of the Directive is the obligation to ensure transparency as early as the recruitment process. This includes, among other things:
- Employers must clearly communicate pay ranges or starting salaries, e.g. in job advertisements or at the latest before the first interview (Art. 5 (1) (a) EUPTD).
- There is a ban on asking applicants about their previous salaries (Art. 5 (2) EUPTD). This is intended to prevent historical pay inequalities from being perpetuated.
Vague wording regarding salaries, such as ‘in line with market rates’ or ‘based on experience’, without specifying concrete figures, will no longer be permitted in future. Furthermore, job advertisements and job titles must be gender-neutral, and the recruitment process must be designed to be free from discrimination (Art. 5(3) EUPTD). German companies are already familiar with similar provisions under the General Equal Treatment Act (AGG).
Rights to information for employees
In addition to the requirements for recruitment, the European Pay Transparency Directive also contains comprehensive information and transparency obligations during the course of the employment relationship. In particular, the Directive provides for the following entitlements:
Information on pay
Employees have the right to receive information on the average pay of comparable employees, broken down by gender and groups (equal or equivalent work) (Art. 7 (1) EUPTD).
- Work is deemed to be the same if the tasks performed are identical in substance, whereby it is not the contractual title but the actual requirements and duties that are decisive.
- Whether a job is to be classified as of equal value, however, is determined by objective and gender-neutral criteria. These include, in particular, the required skills, the workload associated with the job, the scope of responsibility and the specific working conditions. Differences in the respective employment models, such as full-time or part-time employment, do not in principle preclude comparability.
The entitlement covers all components of remuneration, including indirect, supplementary and variable remuneration, as well as benefits in kind.
The information must be provided no later than two months after the request is made (Art. 7 (4) EUPTD). The entitlement applies regardless of the size of the business and is designed to apply across the entire organisation, not merely at the operational level.
Regular information on rights to information
Employers are obliged to inform their employees annually of their existing right to information (Art. 7(3) EUPTD).
Transparency regarding pay structures
Employees are also entitled to information on the criteria and structures used to determine pay (Art. 6 (1) EUPTD).
With regard to the specific implementation of this duty to provide information, the Directive provides for an opening clause, allowing national legislators to provide for exemptions for employers with fewer than 50 employees. It is not yet clear whether the German legislature will opt for such an exemption.
Prohibition of pay secrecy clauses
Contractual provisions that prevent employees from disclosing their own pay are invalid under the Directive.
Reporting obligations
Another key element is the new reporting obligations under Art. 9 EUPTD. In future, companies with at least 100 employees will be required to produce reports on gender-based pay gaps on a regular basis (either annually or every three years). This significantly broadens the scope of application compared to the German Pay Transparency Act, whose reporting obligation has so far only applied to companies with more than 500 employees. Consequently, it is no longer just large corporations but also numerous medium-sized companies that are affected by these reporting obligations for the first time.
The reports cover, among other things, gender-specific pay gaps as well as differences in supplementary or variable components, such as bonuses.
With regard to the phased implementation, employers with 150 or more employees must provide the relevant data for the first time by 7 June 2027, whilst employers with 100 to 149 employees have until 7 June 2031.
Furthermore, the Directive allows national legislators, via an opening clause, to provide for an exemption from this reporting obligation for employers with fewer than 100 employees.
Note: These reporting obligations are not merely a formal reporting requirement, but presuppose that the underlying remuneration data is available in a structured, consistent and reliable manner. In practice, this information is often spread across various systems – such as HR information systems, payroll systems, bonus tools, local Excel structures or international reporting solutions. Without early technical and organisational harmonisation, legally compliant and consistent reporting will be difficult to implement.
How are data protection and pay transparency regulated?
Particular attention should be paid to the tension between the requirements of the Pay Transparency Directive and the data protection provisions of the GDPR.
The implementation of the new transparency obligations inevitably requires the processing of personal remuneration data, particularly in connection with requests for information and gender pay gap reporting.
Companies face the challenge of, on the one hand, establishing the necessary transparency regarding pay structures and, on the other hand, complying with the principles of data minimisation, purpose limitation and confidentiality under Art. 5 GDPR. In particular, the question of the extent to which individualised remuneration data may be disclosed or presented in aggregated form requires careful legal scrutiny. Art. 12 EUPTD expressly clarifies that the processing of personal data must be carried out in accordance with the GDPR, which gives rise to complex demarcation and implementation issues in practice.
How does the Directive regulate the burden of proof?
The Pay Transparency Directive provides for a significant strengthening of enforcement mechanisms, in particular through a reversal of the burden of proof. In the event of a dispute, the employer must in future demonstrate and prove that existing pay differences are based on objective and gender-neutral criteria (Art. 18 (1) EUPTD).
This has significant implications in practice. Many companies currently have no documented basis for decisions regarding historical salary developments, bonus adjustments or individual salary increases.
Please note: It is precisely this lack of documentation that may lead to significant problems in providing evidence in future. Action needs to be taken promptly to rectify this.
What claims for damages does the Directive provide for?
For breaches of duty in the area of pay transparency, the Directive contains an opening clause that allows Member States to introduce a claim for damages.
It remains to be seen how the German legislature will shape a corresponding provision in national law.
When and how will the Directive be implemented in Germany?
Germany must transpose the EU Pay Transparency Directive into national law by 7 June 2026 at the latest. Implementation is expected to take place through a reform of the existing German Pay Transparency Act, which currently falls short of the Directive’s requirements in certain areas.
In preparation for implementation, a panel of experts has already been set up to draw up proposals for the national implementation of the Directive. The aim of these measures is to transpose the new transparency and equality requirements into German law within the prescribed timeframe.
On 27 January 2026, the Parliamentary State Secretary stated that the Federal Government was working on a “low-bureaucracy, one-to-one implementation” of the Directive.
Even though the specific legislative implementation is still pending, the key substantive requirements are already largely set out in the European Directive. The national legislature therefore has only limited scope for implementation, meaning that companies should already begin reviewing and adapting their remuneration and compliance structures.
Even in the event that the Directive is not transposed into German law within the prescribed timeframe, companies cannot rest on their laurels. Once the transposition period has expired, national courts are required to interpret existing law – in particular the German Pay Transparency Act and general principles of equal treatment under labour law – in a manner consistent with the Directive. This means that the content, objectives and assessments of the Pay Transparency Directive would already need to be taken into account as decisive factors in the judicial interpretation of national law. For companies, this could have significant practical implications, particularly in legal disputes concerning equal pay, rights to information and remuneration structures.
Recommendations for employers
The Directive leads to a significant increase in administrative obligations. Companies should first carry out the following tasks:
- Review existing remuneration systems and introduce transparent remuneration systems;
- Analysing bonus models;
- Review of processes in recruitment and remuneration management;
- Ensuring data and reporting capabilities.
In this context, the question of when a job is to be regarded as equivalent within the meaning of the Directive will become increasingly important in future. Such equivalence does not necessarily require identical job titles. Rather, comparability may also exist between different roles, for example in administration, sales or project management, provided that requirements, responsibilities, qualifications and workload are comparable overall.
The Directive also indirectly obliges employers to introduce and apply transparent remuneration systems based on objective and gender-neutral criteria. On this basis, it must be possible to understand how pay decisions are made and justified.
This poses a significant risk of conflict, particularly for companies with inconsistent job architectures. It is therefore particularly important to carry out an early legal review of the role and job structure in accordance with the Pay Transparency Directive.
Conclusion
The implementation of the Pay Transparency Directive is far more than just another formality under employment law. It affects remuneration, corporate culture and governance in equal measure.
Companies that act early not only reduce legal risks but also strengthen their position as modern and transparent employers. Those who, on the other hand, only react once specific requests for information or initial disputes arise expose themselves to avoidable liability and reputational risks.
This is all the more true given that the key substantive requirements are already laid down by EU law and that, once the implementation deadline has passed, national courts will be required to interpret existing law in a manner consistent with the Directive as far as possible.
The remaining months until June 2026 should therefore be used strategically to establish remuneration structures and processes in a legally compliant manner.