The European Union is introducing fundamental changes in the way employers determine, calculate, and communicate employee pay.

Under the new Directive (EU) 2023/970 on strengthening the application of the principle of equal pay for men and women for equal work or work of equal value through pay transparency and enforcement mechanisms, which all Member States must transpose into their laws by 7 June 2026, strict rules on pay transparency are being introduced with the aim of reducing inequality, especially between men and women.

Employers will have to clearly state the starting salary or its range in the job advertisement or no later than before the interview itself with the candidate. At the same time, it will be prohibited to request information about the candidate’s previous earnings, in order to avoid discrimination based on salary history.

Employees will have the right to request detailed information about pay grades in their company. The Directive expressly prohibits “pay secrecy” clauses that have so far prevented workers from disclosing their earnings, thereby protecting them in exercising the right to equal pay for equal work or work of equal value.

Deadlines for compliance with these obligations vary depending on the size of the employer. Companies with at least 250 employees must begin regular annual reporting on pay differences between men and women by 7 June 2027. Employers with 150 to 249 employees must do so every three years, while those employing between 100 and 149 workers must submit their first report by 7 June 2031, and then also every three years.

If a report shows a difference of at least five percent in average pay between the sexes in certain categories, and that difference is not justified by objective and gender-neutral criteria, and such a situation is not remedied within six months, employers will have to carry out a joint pay assessment in cooperation with workers’ representatives and adopt a corrective action plan aimed at eliminating the injustice.

This Directive also brings changes to the way job offers are published for candidates. Advertisements must be more transparent and contain specific salary data, while job titles and the entire selection process must be gender-neutral and free of stereotypical expressions. The aim is to ensure that recruitment is based exclusively on the candidate’s skills, responsibilities, and abilities, and not on their previous salary.

Workers have the right to access information about their own pay grade, as well as insight into the average pay of their colleagues broken down by sex in jobs of the same or approximately equal value. Employers are required to respond to such requests within two months, and in addition they must alert workers at least once a year to their rights related to access to pay information. The criteria used to determine pay and promotions must be clear, objective, and fair, entirely free of gender discrimination, and access to this data must be easily available to employees, for example through internal policies or the intranet.

By introducing this directive, the practice of employers concealing pay information is abolished; more precisely, workers may no longer be prohibited from disclosing their own salary. Workers must no longer have their right to openly discuss their earnings restricted, which represents an important step toward greater fairness and reducing the possibility of discrimination.

Penalties for non-compliance with these rules can be serious and include the worker’s right to full compensation for damages without any prescribed limit, and this includes unpaid arrears, supplements, non-material damages, and default interest. Member States will be obliged to prescribe a system of financial penalties that must be effective, proportionate, and strong enough to have a preventive effect. Also, the burden of proof shifts to employers in situations where there are indications of discrimination or failure to comply with transparency obligations, for example when they refuse to provide relevant data or reports.

It is important to emphasize that the concept of pay under this directive refers to all types of remuneration, both fixed and variable, including basic salary, supplements, bonuses, benefits in the form of services or material goods, paid overtime hours, and severance pay.

The final deadline for aligning national legislation with this directive is 7 June 2026, but it should be emphasized that after that date implementation will be in accordance with national regulations, which means that some states may begin implementation earlier, before the official deadline.

This Directive represents a strong step forward toward full pay transparency, eliminating discrimination, and creating a more equal labor market throughout the European Union. Employers are encouraged to begin preparations as soon as possible because compliance will bring numerous changes to payroll calculation, reporting, and pay communication systems.