By Tyler Wurtz
BLOG OVERVIEW: Directive (EU) 2023/970 requires EU employers to report on gender pay gaps using prior-year payroll data, but the Directive's broad definition of "pay", covering bonuses, allowances, benefits in kind, and other variable components, combined with each Member State's freedom to set its own data collection methodology, creates a far more complex compliance burden than the calculations themselves suggest. Compounding this, fragmented payroll systems, mandatory works council consultation under Article 9(6), and GDPR restrictions under Article 12 on how pay data can be used and disclosed all add operational complexity that cannot be solved by statistical analysis alone. Employers preparing for the June 7, 2027, reporting deadline should pull a clean, comprehensive year-end 2026 pay data snapshot now and engage HR data experts, legal counsel, and local works councils well before national transposition legislation is finalized.
Setting the Stage: What the Directive Actually Requires Employers to Report
The EU Pay Transparency Directive (the Directive) adopted in May 2023 and set for full transposition by June 7, 2026, represents the most significant legislative push toward pay equity in the European Union's (EU) history. At its core, the Directive is designed to close the persistent gender pay gap, which, as noted in the Directive's own Recital 15, stood at 13% in 2020 with significant variation across member states. For employees, it creates new rights to pay information and legal recourse. For employers, it creates a new compliance landscape that touches every stage of the employment relationship, from job postings to ongoing pay reporting.
On paper, reporting sounds like a structured set of calculations applied to payroll data. In practice, the data requirements underlying those calculations are far more demanding than they initially appear. Employers should understand that getting a head start on understanding the full complexities of this directive is imperative. By reviewing the data collection methodology, the broad definition of pay, and the red tape of reporting in the EU, employers can be better prepared to submit reports when each EU member state finally transposes the EU Directive.
More Than a Snapshot: Understanding What Pay Data Reporting May Look Like
One of the most important questions for employers preparing for the Directive's first reporting cycle is deceptively simple: What exactly does “reporting on prior year pay data” require in practice? The Directive itself specifies that Article 9 reporting must be based on data from the “previous calendar year,” with the first reports for employers with 150 or more employees due by June 7, 2027, covering 2026 pay. But the Directive does not prescribe the specific methodology by which employers must collect, structure, or present that data. This ambiguity in reporting methodology is consequential, because it means member states will fill it differently.
What we do not yet know with certainty is how each member state will operationalize the data collection requirement. Some may require only a point-in-time snapshot, for example, a December 31 snapshot. Others may require more continuous or granular data collection throughout the year, particularly where variable pay components, mid-year workforce changes, or leave-related pay adjustments need to be captured in a way that a single snapshot cannot accurately reflect. Lithuania, for example, has already established a model in which employers submit monthly pay data to the State Social Insurance Fund Board (SoDRA), which then calculates and publishes pay gap indicators centrally. Other member states are still in the process of drafting their transposition legislation, and several have not yet published detailed guidance on reporting methodology at all.
This uncertainty has a direct practical implication for how multinational employers think about data preparation. An employer with entities in five different EU Member States may ultimately face five different definitions of the worker population to be included, each requiring its own approach to pulling data and constructing rosters: A point-in-time snapshot in one jurisdiction, monthly extracts in another, full-year coverage of any worker who received compensation in a third, etc. The Directive's baseline framework is consistent across all of them, but the data infrastructure required to satisfy each nation’s specific approach may differ considerably. Employers who assume a single centralized data pull will satisfy all jurisdictions are likely to find that assumption challenged as national guidance firms up over the coming months.
It is also worth noting separately the contingent obligations that sit alongside the standard Article 9 pay-gap reporting metrics. Leave records, for instance, are not themselves one of the seven Article 9 indicators reported routinely to national monitoring authorities. However, if a joint pay assessment is triggered under Article 10, which is required when a gender pay gap of 5% or more in any worker category cannot be justified on objective, gender-neutral criteria, an assessment must include data on the proportion of employees who received a pay improvement following their return from maternity, paternity, parental, or carer's leave. Employers cannot know at the start of the year whether they will breach that threshold, which means thoughtful record-keeping throughout the year remains prudent regardless of what any individual country ultimately requires for standard Article 9 reporting.
Given all of this uncertainty, the most practical guidance for employers approaching their first reporting cycle is straightforward: plan to pull a well-organized, comprehensive year-end snapshot of 2026 pay data. Until member states finalize their transposition legislation and publish detailed methodological guidance—much of which is still pending as of mid-2026—employers are unlikely to have the clarity needed to build more sophisticated continuous data collection processes. A clean, complete December 31 snapshot that captures base pay, all variable and complementary pay components, worker categories, and quartile pay band data will position employers to meet their Article 9 obligations in most jurisdictions. This will also set up employers to respond quickly as country-specific requirements become clearer. To help employers be prepared for the full transposition of EU pay transparency across all European countries, DCI would advise employers to follow a “4-Stage Readiness Plan” which was elaborated upon in a past EU Deep Dive.
The Complementary and Variable Pay Components Problem: Broad Definitions, Hard Calculations
The Directive's definition of “pay” is deliberately broad. Under Article 3(1)(a), pay encompasses not only an employee's ordinary basic or minimum wage or salary, but any and all benefits, direct or indirect, in cash or in kind, that a worker receives from their employer in connection with their employment. The Directive's Recital 21 provides a non-exhaustive list of what qualifies as a complementary or variable component, including bonuses, overtime compensation, travel facilities, housing and food allowances, compensation for attending training, payments in cases of dismissal, statutory sick pay, statutory required compensation, and occupational pensions.
The Directive recognizes that gender-based pay disparities often manifest not in base salary, but in the discretionary or supplementary compensation. These types of pay components have historically been less visible and less scrutinized by governing bodies. Reporting on those components separately from base salary or total compensation, in terms of both the size of the gap and the proportion of each gender who receives them at all, is central to the Directive's purpose. But for employers, that breadth creates a significant and genuinely difficult measurement problem.
The first challenge is definitional: Which benefits belong in the complementary or variable bucket? For cash-based components like annual bonuses, commissions, or overtime pay, the answer is relatively clear. However, many employers provide compensation that does not arrive in a paycheck, such as company cars, subsidized housing, employer-provided meals or meal allowances, gym memberships, professional development stipends, and stock-based compensation, among others. The Directive does not exclude these; any benefit received “in cash or in kind” that a worker receives “directly or indirectly” from their employer is potentially within scope. Employers will need to make defensible, documented decisions about which non-cash benefits they are including in their complementary and variable pay calculations and why. These types of decisions are likely to attract scrutiny from member states and works councils. For this reason, including HR data experts and legal counsel will be crucial to ensure employers can defend themselves.
The second challenge is monetization. For benefits that are genuinely non-cash, calculating a gender pay gap requires assigning a monetary value. A company car provided to a senior employee has to be converted into a comparable figure before it can be aggregated with bonuses paid to other workers in the same category. The methodologies for doing so are not specified in the Directive and will likely vary across member states as national implementing legislation takes shape. Employers operating in multiple countries may find themselves applying different valuation standards for the same benefit depending on jurisdiction.
The third challenge is timing and aggregation. Variable pay, by its nature, is paid at irregular intervals and in varying amounts. Some components such as annual performance bonuses are straightforward to annualize. Others are less so. Spot bonuses paid on a one-time basis raise the question of whether they qualify as regular compensation or fall into a different category. The Directive itself does not resolve this question, and member states are expected to provide clearer guidance through their national transposition legislation. Until that guidance is available, employers will face judgment calls about periodicity that could either undercount or overcount their variable pay exposure.
Multinational Complexity: Systems, Red Tape, and the Limits of Aggregation
For employers operating in multiple EU Member States, the reporting challenges described above are compounded by the operational realities of running HR and payroll functions across different national systems, legal frameworks, and institutional requirements. What looks like a single reporting obligation from the perspective of EU law quickly fragments into a patchwork of distinct local compliance exercises, with each member state requiring its own data definitions, procedural requirements, and actors involved.
Fragmented Payroll Infrastructure
Most multinational employers do not run payroll on a single, unified system. Instead, they operate through a combination of global HR platforms, local payroll vendors, and country-specific configurations. The data required for EU Pay Transparency reporting—including granular, dated records of base pay, every qualifying complementary and variable component, and worker category assignments—needs to flow from all of those systems into a consolidated dataset. That consolidation is not a trivial technical exercise. It requires not only data extraction across systems that may use different field names, pay codes, and categorization logic, but also meaningful harmonization of definitions. What one country’s payroll system records as a “housing allowance” may be encoded differently in another’s. Both may need to be mapped to the Directive’s broad definition of complementary pay before the figures can be compared.
Employers that have invested in global HR platforms capable of serving as a system of record for this kind of consolidated reporting are better positioned than those relying on a federation of local systems. However, even the most sophisticated platforms will require significant configuration and validation work to ensure that the data they produce meets the Directive’s requirements and those of each individual member state.
The Regulatory Patchwork
The Directive establishes minimum requirements that all EU Member States must implement and explicitly permits Member States to enact stricter obligations. For instance, France has proposed applying reporting thresholds to employers with 50 or more employees rather than the Directive’s baseline of 100. This is a significant expansion driven by France’s existing gender equality index infrastructure, though the draft has not yet been passed into law as of the June 2026 transposition deadline. Other states such as the Czech Republic have proposed a delay in pay gap reporting to start in April of 2028 instead of June 2027. Denmark is implementing a specialized wage-statistics infrastructure through which employers may report pay information to Statistics Denmark or an employers’ organization. Each of these national variations means that an employer with workers in multiple EU countries cannot simply design a single reporting process and replicate it across jurisdictions. The definitions, thresholds, reporting formats, and submission procedures may all differ.
For HR and compliance teams managing EU-wide pay transparency programs, the practical result is a matrix of country-specific requirements that must be tracked, interpreted, and operationalized in parallel. This will also require them to maintain a unified view of the organization's overall pay data for consolidated analysis. That is a significant burden, particularly for employers who are also managing the job evaluation and worker categorization work that underpins meaningful reporting.
Works Councils and the Consultation Requirement
A less discussed but operationally significant feature of the Directive is its requirement for employer involvement of workers’ representatives. Under Article 9(6), the accuracy of pay reporting must be confirmed by the employer’s management after consulting workers’ representatives, and those representatives must have access to the methodologies applied. In jurisdictions where works councils are a well-established part of labor relations such as Germany, the Netherlands, France, and Belgium, this means that the process of designing a pay transparency reporting program is not purely an internal management exercise. Works councils in these countries typically have formal codetermination or consultation rights over HR processes and systems, and their involvement in the design and rollout of new pay data collection and reporting infrastructure is not optional.
In practice, this means that multinational employers building a centrally designed pay transparency program cannot simply deploy it uniformly across all EU entities. Local entities in works council-heavy jurisdictions will need to run consultation processes that take time before new data collection practices can be implemented. Employers who underestimate the timeline implications of this consultation requirement may find themselves unprepared to collect 2026 data in the format needed for 2027 reporting.
GDPR and the Limits of Data Sharing
Finally, data protection law adds another layer of complexity to the challenge of compiling data for the Directive. The Directive explicitly acknowledges that pay data is personal data subject to the General Data Protection Regulation (GDPR). Under Article 12(2) of the Directive, any personal data processed pursuant to Articles 7, 9, or 10 may not be used for any purpose other than applying the principle of equal pay. This is not merely a compliance formality. It means that the infrastructure employers build to support pay transparency reporting cannot be repurposed freely for other HR analytics, talent management, or business intelligence uses without a fresh legal basis.
In addition, Article 12(3) of the Directive permits member states to restrict public access to reported pay data where its disclosure would, directly or indirectly, reveal the pay of an identifiable worker. This means that employers with small worker categories in particular locations may find that certain required reporting metrics cannot be disclosed in their standard public reports without violating data protection obligations. Managing those exceptions, documenting the legal basis for each decision, and ensuring that data flows across systems to comply with GDPR transfer requirements all add procedural complexity to a process that is already demanding.
Conclusion
Taken together, these challenges underscore a broader point. Successful compliance with the Directive’s reporting requirements is not primarily a question of running the right statistical analyses. Rather, it is a question of whether an organization has the data governance infrastructure, the cross-functional coordination, and the operational planning to produce the compliance reports. These reports must then be accurate, defensible, on time, and in the right format for each of the relevant jurisdictions. Employers who begin work now—before 2026 pay data begins to accumulate—will be in a significantly stronger position than those who wait for national legislation to finalize before starting.
The data challenges explored in this piece are not reasons to delay. They are reasons to start now. Employers who invest in the right data infrastructure, build cross-functional coordination across HR, payroll, legal, and IT, and engage proactively with local works councils will be far better positioned when June 2027 arrives. The Directive’s requirements are demanding, but they are not insurmountable with the right preparation in place. By partnering with legal counsel and HR experts, employers can be in the right position to be in compliance by next year.
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References
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European Parliament & Council of the European Union. (2016). Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation). Official Journal of the European Union, L 119, 1–88. https://gdpr-info.eu/
European Parliament & Council of the European Union. (2023). Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023 to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms. Official Journal of the European Union, L 132, 21–44. https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32023L0970
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Wurtz, T. (2026). Czechia Moves Toward Implementing EU Pay Transparency Directive. DCI Consulting Group. https://blog.dciconsult.com/czechia-moves-toward-implementing-eu-pay-transparency-directive