The Pay Transparency Directive (Directive 2023/970)

The Pay Transparency Directive, formally Directive (EU) 2023/970, strengthens the application of the principle of equal pay for equal work or work of equal value between men and women, enshrined in Article 157 TFEU. Adopted on 10 May 2023 with a transposition deadline of 7 June 2026, the Directive introduces binding pay transparency measures, pay gap reporting obligations, joint pay assessments, and enhanced remedies for victims of pay discrimination. The Directive responds to the persistent gender pay gap in the EU, which has remained at approximately 13 per cent despite the existence of the equal pay principle since 1957.

Pay Transparency Before Employment

The Directive prohibits employers from asking job applicants about their previous pay history (Article 7), addressing the perpetuation of pay gaps through reliance on historically lower pay received by women in previous roles. Employers must provide prospective workers with information about the initial pay level or pay range for the position, either in the job vacancy notice or before the job interview. The information must be provided in a gender-neutral manner and must not be framed in a way that directs applicants toward lower pay expectations.

Pay Information Rights for Employees

The Directive grants employees the right to request and receive information about their individual pay level and the average pay levels of other employees performing the same work or work of equal value, broken down by gender (Article 11). Employers with at least 50 employees must make information available about the criteria used to determine pay and career progression. The employer must respond within a reasonable period, typically two months. Employees may be represented by a trade union or workers’ representative in making the request.

Employers with more than 250 employees must report annually on the gender pay gap in their organisation (Article 9). Employers with 150 to 249 employees must report every three years. The reporting must include: the gender pay gap in mean and median terms across the organisation; the gender pay gap by category of employee (broken down by ordinary workers and management); the proportion of female and male employees receiving complementary or variable pay components; and the proportion of female and male employees in each quartile of the pay distribution.

Joint Pay Assessment

Where the gender pay gap reported by the employer exceeds 5 per cent and is not justified by objective, gender-neutral factors, the employer must conduct a joint pay assessment (Article 10) in cooperation with workers’ representatives. The assessment must include: analysis of the proportion of female and male workers in each category of employee; information about the pay levels and gender pay gap for each category; reasons for the gender pay gap, including the criteria used for pay determination; and measures to address the gap if it is not justified by objective factors. The joint pay assessment must be communicated to workers’ representatives and made available to the labour inspectorate and the equality body on request.

Remedies and Enforcement

The Directive provides for full compensation for victims of pay discrimination, including back pay and related bonuses or payments in kind, compensation for lost opportunities, and non-material damage (Article 14). The burden of proof is reversed: where an applicant or employee establishes facts from which it may be presumed that there has been direct or indirect pay discrimination, it is for the respondent to prove that there has been no breach of the equal pay principle.

The Directive requires Member States to ensure effective judicial remedies and to designate equality bodies with competence to promote, analyse, monitor, and support equal pay for equal work. Equality bodies must have the power to investigate complaints, issue opinions, and initiate or participate in litigation. They must also have the power to engage in strategic litigation and to bring representative actions on behalf of groups of workers.

Penalties

Member States must establish penalties for infringements of the national provisions transposing the Directive. Penalties must be effective, proportionate, and dissuasive, and must include fines calculated on the basis of the employer’s total annual turnover or total annual wage bill. Member States may take into account aggravating or mitigating factors, including the number of affected workers, the gravity and duration of the infringement, and the size of the employer. The Directive requires Member States to ensure that workers can enforce their rights through judicial proceedings and that trade unions, workers’ representatives, equality bodies, and civil society organisations have standing to bring claims on behalf of affected workers.

Relationship with Existing EU Law

The Directive builds on the existing legal framework for equal pay, including Article 157 TFEU (directly effective, having been recognised as such in Defrenne v Sabena (Case 43/75)), the Recast Equal Treatment Directive (2006/54/EC), and the extensive case law of the Court of Justice on equal pay. The Directive does not affect the application of more favourable provisions in national law or collective agreements. Member States with more developed pay transparency regimes — such as Iceland, which has required equal pay certification since 2018 — may maintain or adopt more stringent measures.