What to Do About Pay Gaps Under the EU Pay Transparency Directive? Ask the Navigator

BLOG OVERVIEW: A gender pay gap within a worker category is not automatically a violation of the EU Pay Transparency Directive, but it does require investigation. Employers should first confirm their worker categories are built on objective, gender-neutral criteria, then separate the explained portion of any gap from the unexplained portion. Unexplained gaps of 5% or more that are not remedied within six months trigger a Joint Pay Assessment for reporting employers. Strong documentation, clean pay data, a right-to-information process, and attention to each member state’s national law are essential to a defensible approach.

Question:

What do I do when there is a pay gap in a worker category at the center of a right to information request?

Response:

Don’t panic, and don’t start handing out raises yet. A pay gap in the data isn’t automatically a violation, but it does indicate an area for further research to ensure those pay differences can be justified by objective, gender-neutral criteria.

Here is our recommendation for how to unpack this further.

1. Ensure You Are Analyzing the Right Thing

The EU Pay Transparency Directive’s Right to Information (Article 7) concerns average pay for men and women within categories of workers doing the same work or work of equal value. These categories must be formed in a non-arbitrary way using objective, gender-neutral criteria. Categories built on existing job architecture, leveling, and pay grades don’t necessarily meet this standard, and a category that wasn’t created using objective, gender-neutral criteria can undermine pay gap analyses built on it.

Same-work comparisons tend to track conventional job structures, while equal-value comparisons require evaluating roles on skills, effort, responsibility, and working conditions, rather than market rates or organizational hierarchies. If your gap appears in a category you built from pay grades alone, step one is revisiting the category, not the pay itself.

Check out DCI’s blog on Defensible Worker Categories to learn more.

2. Split the Gap into Explained and Unexplained

Calculate the mean and median gender pay gap for base salary, as well as complementary or variable pay such as bonuses and allowances. Then look at what’s driving the differences. Factors like job level, tenure, performance, and location may explain part of a gap, but only if they are objective, gender-neutral, and documented. Use caution with market premiums and negotiated starting pay, which are easy to apply inconsistently and often won’t hold up unless they follow a documented, consistently applied, gender-neutral approach. Whatever remains after accounting for legitimate factors is your unexplained gap, and that is the portion you will need to address.

Check out DCI’s blog on Justifying Pay Gaps to learn more.

3. Know the Requirements That Matter

Several key thresholds determine which requirements apply to you and how quickly you need to act.

• 5% rule: If a gap in average pay of 5% or more within a worker category cannot be justified by objective, gender-neutral factors, and is not fixed within six months of the reporting date, employers who report must carry out a Joint Pay Assessment with workers’ representatives.

• Burden of proof: Under the Directive, if a worker presents facts suggesting pay discrimination, the burden shifts to the employer to show there was no discrimination, which highlights the importance of documentation.

• Reporting duties depend on size: Employers with 150 or more employees begin reporting in 2027 (annually for 250 or more, every three years for 150-249), and employers with 100–149 employees begin in 2031. Below 100, there’s no reporting duty under the Directive itself, but the right to information requirement still applies. It is important to keep in mind that these employee numbers are contained in the Directive, and each member state can set lower thresholds. Some member states will begin reporting later than the dates in the Directive.

Check out DCI’s blog on Understanding the EU Pay Transparency Directive to learn more.

4. Practical Steps

Once you’ve analyzed your gaps and identified differences, the next step is turning those findings into a defensible, repeatable process.

• Get employment or labor law counsel involved early, which also helps protect your analysis.

• Fix data quality issues: ensure worker categories, full-time-equivalent adjustments, and pay components are captured accurately.

• Document the process for creating your worker categories.

• Document the objective rationale for each remaining pay difference.

• For unexplained gaps, plan remediation actions such as targeted adjustments, changes to starting pay and promotion practices, and a review of bonus criteria. Continue to ensure legal counsel’s involvement in these decisions.

• Prepare a process for handling employee requests for their individual pay level and for average pay by sex within their worker category (within two months), and for notifying employees of this right on an annual basis.

• Watch GDPR and small-group issues: where a category has very few employees, averages can effectively reveal individual pay.

Check out DCI’s 4-Stage EU Pay Transparency Directive Readiness Plan to learn more.

5. Comply with Relevant National Laws

The transposition deadline was June 7, 2026, but member states have implemented the Directive at different speeds and in different ways, so the exact obligations depend on where your employees are. Be sure to verify the current status for each member state you operate in to ensure full compliance with each unique national law.

Check out DCI’s EU Pay Transparency Directive Member State Tracker to see the latest updates.