EU Pay Transparency Directive: Practical Steps for Companies as June 2026 Legislation Takes Effect

With the transposition deadline of 7 June 2026 for Member States, companies across the EU need to prepare for a new level of transparency and accountability in pay practices.

The directive (Directive 2023/970) introduces minimum requirements to strengthen equal pay for equal work or work of equal value, supported by pay transparency and enforcement mechanisms.

For companies, this is not just a compliance exercise, it represents a shift towards more structured, transparent, and defensible pay practices.

At the core of the directive is a clear expectation:

Employers must have pay structures that ensure no gender-based pay differences unless justified by objective, gender-neutral criteria.

Practical steps:

• Assess whether your current pay system allows comparison between roles

• Ensure criteria such as skills, effort, responsibility, and working conditions are applied consistently

• Check that pay decisions are based on objective, non-discriminatory factors

👉 A structured and transparent pay system is the foundation for everything else in the directive.

The directive introduces new expectations even before employment begins.

Applicants must receive:

• information on the initial pay or pay range

• relevant collective agreement provisions (if applicable)

At the same time:

• employers must not ask about salary history

• job postings and titles must be gender-neutral

👉 This requires companies to rethink how they approach salary communication in hiring.

Transparency does not stop at hiring.

Employers are required to make accessible:

• criteria for pay levels

• criteria for pay progression

These criteria must be: objective and gender-neutral!

Practical steps:

• document how pay increases are determined (e.g. performance, skills, seniority)

• ensure consistency across departments

• make this information available to employees

👉 Transparency builds trust, but only if your criteria are clear and consistently applied.

Employees will have the right to request:

• their individual pay level

• average pay levels by sex for comparable roles

Employers must:

• provide this information within a reasonable timeframe

• inform employees annually about this right

👉 This means companies need to be ready with accurate, structured data at any time.

Companies with 100+ employees will face reporting obligations, including:

• gender pay gap

• median gender pay gap

• pay gaps across categories of workers

• distribution across pay quartiles

Reporting timeline based on company size:

• 250+ employees: first report due by June 2027, then annually

• 150–249 employees: first report due by June 2027, then every three years

• 100–149 employees: first report due by June 2031, then every three years

• Below 100 employees: reporting is not mandatory (unless required nationally), but voluntary reporting is possible

👉 The first mandatory reports will be based on pay data for the 2026 reporting year.

If reporting reveals a pay gap of at least 5% that cannot be justified, companies must conduct a joint pay assessment with workers’ representatives.

This includes:

• analysing pay differences

• identifying root causes

• implementing corrective measures

👉 Companies should not wait for this trigger and internal reviews should happen proactively.

One key principle runs through the directive:

👉 Differences in pay must be justified by objective, gender-neutral criteria.

This means companies need:

• clear documentation of pay decisions

• consistent application of criteria

• the ability to explain pay differences if challenged

👉 If transparency is lacking, the burden of proof may shift to the employer in case of disputes.

Beyond compliance, the directive will directly affect how companies operate:

• pay transparency becomes part of corporate governance

• equal pay becomes relevant in public procurement processes

• non-compliance can lead to financial penalties and potential exclusion from tenders

👉 In practice, strong pay transparency can become a competitive advantage, especially in regulated industries and public contracts.

The directive emphasizes:

• worker representation

• social dialogue

• collaboration in assessments and corrective measures

👉 Practical takeaway:

• involve HR, legal, and leadership early

• prepare for cooperation with employee representatives

• build internal alignment on pay strategy

The EU Pay Transparency Directive introduces significant changes, but it also creates an opportunity.

Companies that prepare early will:

• build stronger, more transparent pay systems

• reduce the risk of disputes

• strengthen trust internally and externally

👉 Most importantly, they will move from reactive compliance to proactive and sustainable pay practices.

June 2027 for the first reporting (for the 2026 reporting year) may seem far away, but implementation takes time.

Starting early allows organizations to:

• review pay structures

• assess data readiness

• align internal processes

Under this directive, transparency in pay practices and the prevention of gender inequalities are no longer optional; they are becoming a standard expectation for doing business in the EU.

For organisations looking to understand better what these changes mean in practice, feel free to contact us at Flagship. We can help clarify any questions you may have related to the gender pay gap and support you in analysing your organisation’s unique situation in detail. Schedule a call and discuss your challenges with our expert.

Eliška Jaros is a Sustainability Strategist at Flagship Impact