By Joanna Colosimo and David Cohen

Blog Overview:
Employers with a presence in Europe must prepare for annual pay reporting requirements as part of the European Union Pay Transparency Directive. While European Union member states are still working to transpose this Directive into their own versions of the law, reporting on 2026 pay data is set to begin in 2027.

The European Union (EU) Pay Transparency Directive, adopted in April 2023 and implemented in June 2023, is designed to bridge the gender pay gap and includes the expectation for member states to be fully in compliance by June 7, 2026, with reporting obligations beginning in 2027. This landmark Directive focuses on transforming how organizations in the EU approach salary transparency, equal pay, and accountability across all member states, with the end goal of fair pay for all. DCI has digested the Directive to help employers prepare for 2027 reporting obligations and is monitoring each member state’s adoption of the provisions.

Who is Covered by the Directive?

The Directive is comprehensive and applies to all workers, not just those in full-time positions, and includes part-time staff, workers on fixed-term contracts, temporary agency workers, and those in management. National laws within the EU and collective agreements will help define the scope.

As mentioned previously, EU member states are expected to comply with the Directive by June 7, 2026. Each EU member state can also introduce additional, more stringent measures beyond the baseline of requirements stemming from the Directive. Reporting obligations for employers will begin, at the latest, on June 7, 2027, and continue every year thereafter for employers with 250+ workers. As of July 2025, eight EU countries have created proposed legislation to comply with the Directive, with Sweden and Belgium introducing draft legislation in 2024 and other nations following suit in this past year.

What are the Key Provisions of the Directive?

The key provisions include pay transparency in hiring, employee rights to pay information, pay reporting, potential joint pay assessments, and enforcement and remedies.

Pay Transparency in Recruitment

EU employers are required to disclose salary ranges for open positions, either in the job listing or before interviews take place. Additionally, employers cannot ask job candidates about their salary history. Criteria for setting and increasing pay must be objective and free from gender bias.

Employees’ Access to Pay Information

Under the EU Pay Transparency directive, employees have the right to request:

• Their own salary details
• The average pay (broken down by gender) for colleagues performing the same or similar work

Pay Gap Reporting Requirements

Reports must include:

• Mean and median pay gaps;
• Mean and median pay gaps in complementary or variable pay;
• The proportion of female and male workers receiving complementary or variable components;
• The proportion of female and male workers in each quartile pay band;
• The gender pay gap between employees by “categories of workers” broken down by ordinary basic wage and complementary or variable components.

Note: Categories of workers may be similar to the concept of similarly situated under Title VII of the Civil Rights Act.

Additionally, another report called a Joint Pay Assessment is required if:

• There is a gender pay gap of 5% or more, and
• The employer can’t explain the gender pay gap with impartial, objective factors

Such assessments must involve employee representatives.

Enforcement and Legal Remedies

In cases of pay discrimination, the employer must prove that pay practices are fair.

Employees may seek:

• Back pay for lost wages
• Compensation for discrimination

Member states must designate penalties and ensure access to the courts for affected workers.

When are EU Pay Transparency Reports Due?

The first mandatory gender pay gap report under the EU Pay Transparency Directive will be due in 2027, depending on the size of the employers by employee count:

What Counts as Pay?

The definition of pay under the Directive—and in accordance with the case-law of the Court of Justice—is broad. Employers are required to include both base pay and "complementary or variable components" of pay in reporting. Under complementary or variable components, any benefits in addition to the ordinary basic or minimum wage or salary which the worker receives directly or indirectly, whether in cash or in kind, should be taken into account. 

Complementary or variable components may include but are not limited to: bonuses, overtime compensation, travel facilities, housing and food allowances, compensation for attending training, payments in the case of dismissal, statutory sick pay, statutory required compensation and occupational pensions. The concept of pay should also include all elements of remuneration due under law, collective agreements, and/or practice in each member state.

To help ensure consistency and clarity in reporting, all pay information must be presented as gross annual pay and the corresponding hourly rate, no matter how often salaries are paid. This makes it easier to compare wages and spot discrepancies.

Other Considerations Regarding the EU Pay Transparency Directive

Worker Rights

Workers have the right to be represented by a trade union or a representative of their choice, ensuring a shield against retaliation when pushing for equal pay. Additionally, any workers can ask for information about their own pay, as well as the average pay (broken down by sex) for colleagues doing similar work. Employers must remind staff of this right every year.

Focus on Discrimination Based on Sex

While data collection focuses on sex, the rules acknowledge that discrimination can be intersectional, involving other protected characteristics such as race or ethnic group. Both the letter and the spirit of the law are about fairness based on EU protected characteristics. However, employers are only required to collect and report on data related to sex.

Objective and Gender-Neutral Pay Structures

Employers now need to use formal compensation systems based on clear, objective, and gender-neutral criteria that accounts for skill, effort, responsibility, and working conditions. This ensures there is no unexplained gender pay gap for equal work or work of equal value.

Moving Forward

The EU Pay Transparency Directive marks a significant shift in how organizations across Europe address pay equity, fairness, and accountability. With its expansive coverage, detailed reporting requirements, and enforcement mechanisms, it moves beyond mere compliance and toward cultural change in compensation practices. While some implementation details remain in the hands of individual member states, the message is clear: organizations must act now to build transparent, gender-neutral pay systems and prepare data-driven scrutiny. DCI is committed to guiding employers through this transition by offering expertise, monitoring evolving rules from each member state, and providing tailored support to ensure employers not only meet their 2027 obligations but lead the way in fair pay practices across the EU.

DCI will be hosting a webinar covering the requirements of the EU Pay Transparency Directive in October.  To receive more information, sign up for our webinar alerts.