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The EU Pay Transparency Directive (Directive (EU) 2023/970) is required to be transposed by Member States by 7 June 2026. As at today, transposition has not been completed in all Member States, and the legal position is accordingly non-uniform across the Union.
The principle of equal pay is obviously not a novel construct. It is established in Article 157 of the Treaty on the Functioning of the European Union (TFEU), and the Directive does not alter the substantive principle; its function, instead, is to strengthen the evidentiary framework within which that principle is assessed and enforced.
It does so by requiring the disclosure of pay structures that were previously maintained as internal information. Workers, workers’ representatives, equality bodies, labour inspectorates, and judicial bodies will have access to greater volumes of pay-related information. Once such information is available, the determinative question is not whether an employer maintains an equal pay policy. It is whether any differential in pay can be objectively justified.
A gender pay gap does not, of itself, constitute an unlawful act. Equally, not every pay differential is discriminatory in character. However, an employer that is unable to demonstrate the basis on which roles were assessed, the criteria that were applied, and the reasoning by which a particular pay outcome was reached may be materially exposed. The relevant risk is, in the first instance, evidentiary rather than reputational.
The Directive creates rights of access to information. The substantive legal framework within which that information is assessed will continue to be determined by established case law, including Defrenne II (Case 43/75), in which the Court of Justice of the European Union confirmed the direct effect of the equal pay principle, and Bilka-Kaufhaus (Case 170/84), in which the Court set out the test for objective justification.
Direct effect and uneven transposition
The consequences of incomplete transposition should neither be overstated nor disregarded.
The general position is that a directive is addressed to Member States and imposes an obligation to achieve a specified result through national implementing measures. In the absence of transposition, a directive does not, as a general rule, create direct horizontal obligations as between private parties. Claims brought against the State, or against an emanation of the State, are subject to a distinct legal analysis.
This is, however, only the starting position. National courts are required, so far as possible, to interpret domestic law in conformity with the wording and purpose of EU directives – the principle of consistent interpretation established in Marleasing (Case C-106/89). Existing provisions of national law governing equal pay, discrimination, employment procedure, and evidence may accordingly fall to be construed in light of the Directive, notwithstanding the absence of full transposition.
Transposition therefore remains of material significance. Multinational employers will require a coherent pan-European approach, but the Directive does not eliminate local variance. Reporting thresholds, procedural mechanics, employee representation, limitation periods, sanctions regimes, and certification frameworks will remain matters of national law.
The baseline legal position also varies by jurisdiction. France maintains a professional equality index applicable to employers with at least 50 employees, which is below the Directive’s general reporting threshold of 100 workers. For a French employer with, for example, 80 employees, the Directive does not introduce pay transparency from the outset; it modifies an existing regulatory framework.
Italy presents a different starting point. Its framework combines reporting obligations with a gender equality certification mechanism under D.Lgs. 198/2006, as amended by Law No. 162/2021, which may generate tangible advantages including social security contribution relief and preferential treatment in public procurement.
For employers operating across multiple Member States, the practical implication is clear. A group-level policy may provide consistency, but it cannot substitute for jurisdiction-specific legal review.
The central legal issue: justification
Irrespective of the national implementing route, the same substantive question persists: can the pay differential be objectively justified?
Not every pay differential is unlawful. An employer may invoke market conditions, retention requirements, individual performance, seniority, geographical factors, or other legitimate business considerations. However, such justifications must be more than convenient characterisations. They must correspond to genuine, documented criteria; be unconnected to the sex of the workers concerned; and be applied consistently across the workforce.
This is the context in which ordinary management discretion may become problematic as a matter of evidence. A bonus policy applied only in practice and not recorded, a market premium determined without documentation, or an exception approved without written reasons may be difficult to defend in subsequent proceedings. A justification will carry substantially greater evidential weight where it was recorded at the time the relevant decision was made, rather than reconstructed in response to a request for information or litigation.
Work of equal value: beyond job titles and legal entities
The most complex disputes will not always concern two workers holding the same job title. They may concern workers in different roles said to be of equal value. This is the legal context in which job evaluation becomes of primary importance. The Directive requires comparison by reference to objective and gender-neutral criteria, including skills, effort, responsibility, and working conditions. The legal focus is on the work actually performed, not on the designation of the role.
The existing case law is consistent with this approach. In Rummler (Case 237/85), the Court of Justice held that job classification criteria may be used, but only where the system as a whole does not produce discriminatory outcomes and does not undervalue work typically carried out by workers of one sex. In Brunnhofer (Case C-381/99), the Court confirmed that formal job classification is insufficient; the actual work performed, and the reasons for any pay differential, remain subject to judicial examination.
For groups of companies, a further issue arises: where is the pay decision actually made?
Article 19 of the Directive provides that comparison is not limited to workers employed by the same legal entity, where a single source is responsible for establishing the relevant pay conditions. This principle is not introduced by the Directive alone; it is grounded in the Court’s prior case law, including Lawrence (Case C-320/00), Allonby (Case C-256/01), and Tesco (Case C-624/19).
This point requires careful analysis. Tesco arose in a specific factual and procedural context and does not establish that every group-wide pay policy will automatically permit cross-entity comparison. However, where pay is determined centrally (through common grading structures, shared bonus frameworks, or group-level approval processes) it may be considerably more difficult to maintain that pay decisions are exclusively local in character.
From recruitment to reporting
The Directive operates upstream of any dispute. Its obligations arise at the point at which pay is offered, negotiated, reviewed, and reported.
At the recruitment stage, applicants must be provided with information regarding the initial salary or salary range for the role. Employers are prohibited from requesting information about an applicant’s pay history. The purpose is to prevent prior pay inequality from being reproduced in a new employment relationship through the mechanism of salary history.
Once the employment relationship is established, the focus shifts from negotiation to comparison. Workers are entitled to information regarding their own pay level and the average pay levels, disaggregated by sex, for workers in comparable categories. This right is of practical significance because an equal pay claim cannot be effectively assessed without access to comparator data.
Reporting then addresses the matter at an organisational level rather than an individual one. Employers with at least 100 workers are required to report, but the applicable deadlines are graduated.
Employers with 250 or more workers must report by 7 June 2027 and annually thereafter. Employers with 150 to 249 workers must also report by 7 June 2027, but every three years thereafter. Employers with 100 to 149 workers must report by 7 June 2031, also on a triennial basis.
The five percent threshold requires careful interpretation. Where reporting discloses an average pay differential of at least five percent in any category of workers, and that differential is neither justified nor remedied within six months, a joint pay assessment becomes mandatory. This threshold is procedural in nature and does not constitute a permissible differential. A smaller unjustified differential may remain legally significant, particularly where it is indicative of a more systemic issue in job classification, pay progression, variable compensation, or remuneration upon return from family-related leave.
Pay transparency as a data governance obligation
Pay transparency is necessarily contingent upon the processing of data. Salary information constitutes personal data for the purposes of Regulation (EU) 2016/679 (the GDPR) wherever it relates to an identified or identifiable natural person.
Article 12 of the Directive acknowledges this inherent tension. Information disclosed pursuant to individual information rights, reporting obligations, and joint pay assessment requirements must be processed in accordance with the GDPR and used solely for the purpose of applying the equal pay principle.
The principal difficulty concerns the requisite level of granularity. Categories must be sufficiently precise to permit meaningful comparison. Categories that are excessively broad may render comparison ineffective; categories that are excessively narrow may result in the indirect disclosure of individual pay data. This risk is heightened in the context of small teams, senior roles, or highly specialised functions.
A further dimension arises where pay data is combined with other HR data. Such combination may give rise to inferences concerning special category data and engage the requirements of Article 9 GDPR. This issue is of particular relevance where employers deploy analytics tools, cross-border HR databases, or automated reporting systems.
Employers should accordingly treat pay transparency compliance as a data governance obligation co-extensive with their employment law obligations. Prior to any disclosure or reporting, employers should: identify the applicable lawful basis for processing; define access controls; restrict use to the equal pay purpose; establish retention periods; and assess whether the scope or sensitivity of the data processing requires a Data Protection Impact Assessment under Article 35 GDPR.
Evidence, remedies, and sanctions
The Directive does not solely confer rights of access to information. It also shapes the procedural and substantive consequences that follow from the exercise of those rights.
Burden of proof
Article 18 follows the established logic of EU discrimination law: where a worker establishes facts from which discrimination in pay may be presumed, the burden shifts to the employer to demonstrate that no breach of the equal pay principle has occurred.
Article 18 further introduces a specific rule in cases of transparency failures. Where an employer has failed to comply with its obligations under Articles 5, 6, 7, 9, or 10, it bears the burden of proving the absence of pay discrimination. The sole exception is where the non-compliance was manifestly unintentional and of a minor character.
The practical consequence is significant. Non-compliance with transparency obligations is not confined to its administrative dimension; it may materially weaken the employer’s position in the substantive proceedings.
Enforcement
Article 15 permits associations, organisations, equality bodies, workers’ representatives, and other legal persons with a legitimate interest to act on behalf of, or in support of, workers bringing equal pay claims. This mechanism is distinct from the regime for representative consumer actions under Directive 2020/1828. Its precise scope and effect will depend upon applicable national rules governing collective and representative proceedings.
Remedies and limitation periods
Article 16 requires that workers who suffer loss as a result of a breach of the equal pay principle receive full compensation or reparation, without a prior cap. Article 21 requires that limitation periods be of at least three years, and that time does not begin to run before the claimant was aware, or could reasonably have been expected to be aware, of the infringement. This provision is of direct relevance to historic pay claims. The quantum of a claim will depend not only upon the magnitude of the differential, but also upon the extent of the period in respect of which recovery is available.
Sanctions
Article 23 requires that Member States provide for effective, proportionate, and dissuasive penalties, including financial penalties for repeated infringements. Article 24 further links equal pay compliance to eligibility for public contracts and concessions. For employers active in public procurement, compliance with the pay transparency regime may accordingly have commercial consequences extending beyond the employment law sphere.
Conclusion
The Pay Transparency Directive effects a structural change to the evidentiary and procedural framework within which the equal pay principle is enforced. Its substantive impact will be contingent upon the effectiveness of national implementing measures and the practical availability of the rights conferred. For employers, compliance preparation should not be deferred until the point of a specific request or reporting deadline. Job evaluation structures, pay criteria, documentation practices, and data governance frameworks will all be subject to external scrutiny and should be capable of withstanding it.
Sources
Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023.
Regulation (EU) 2016/679, General Data Protection Regulation.
EUR-Lex, “The direct effect of European Union law.”
Service-Public Entreprendre, “Index de l’égalité professionnelle.”
D.Lgs. 198/2006, as amended by Law No. 162/2021; D.M. 29 April 2022 on Italian gender equality certification.
