New Employers’ Obligations regarding Equal Pay

EU legislation has set itself the goal of taking steps to close the pay gap and thus ensure equal remuneration.

Pay Transparency Directive

Aside from issues of fairness, equal pay is highly relevant for companies, particularly from a compliance perspective.

EU member states now have until June 7, 2026 to transpose the EU Pay Transparency Directive which came into force on June 6, 2023 into national law. Companies should take action before the transposition deadline as it will hardly be possible to implement the new requirements overnight. Figures from the Federal Statistical Office suggest that very few employers already have pay systems in place that are likely to meet the future requirements of the member states once the directive has been implemented. It is already foreseeable that employers will have to make a significantly greater effort to ensure that women and men are paid equally for equal work and work of equal value and that discrimination is prevented.

Forward-thinking employers are already developing communication and calculation strategies to proactively and transparently provide employees with information about their pay structures and decision-making processes. This will also avoid overloading the HR department as soon as the expected tightening of information and disclosure obligations applies.

In future, employers will probably have to provide detailed information not only on the level of individual pay, but also on the average pay of a group of employees. This will present employers with the challenge of assessing and comparing the value of work on the basis of objective criteria. This is not exactly a trivial process that requires careful preparation. If external influences are to be taken into account, deciding on the appropriate comparator can be a complex task which will require good preparation.

Practical Advice

The EU Pay Transparency Directive has been adopted and is now applicable EU law. We expect that the regulations will also be transposed into national law in Germany within the transposition period. This will lead to significant changes to the existing pay systems of almost all employers in Germany by mid-2026. There will also be an increase in the effort required to provide information on remuneration issues.

Employers are well advised not to wait until the directive is transposed into national law to optimize their remuneration systems. Compliance risks should be countered as proactively as possible in order to avoid fines and coercive measures. Employers can already ease the burden on HR departments by developing concepts to deal efficiently with the expected more comprehensive information requirements. In the prevailing labor market and what is often referred to as the “war of talents”, pioneering equal pay concepts can also have a positive impact on the attractiveness of employers in the competitive job market.

Photo: shutterstock / Hyejin Kang