Pay Transparency Law 2026: What the new EU rules mean for DACH companies

What the Pay Transparency Law and the EU Pay Transparency Directive will specifically require from companies from 2026 onwards – and how to prepare HR, controlling and leadership teams at an early stage.

1. Introduction

In 2023, the EU took a major step to promote the principle of “equal pay for equal work”. With the adoption of the EU Pay Transparency Directive (Directive (EU) 2023/970), the principle of equal pay between women and men is to be strengthened through greater transparency.

The Directive must be transposed into national law in EU member states by 7 June 2026 at the latest. [2]

Starting point

Lawmakers are responding to a problem that has existed for years: across the EU, women earn on average around 13 per cent less per hour worked than men.[1] One key reason is the lack of transparency in organisations, which makes unfair pay differences difficult to identify.

Objectives of the EU Pay Transparency Directive

This is precisely where the new rules are intended to make a difference: by giving greater visibility into organisational pay structures, the EU aims to ensure that unequal treatment becomes visible and fairer conditions can be created.

More specifically, the Directive pursues the following objectives, among others:

• making gender-based pay differences visible
• making individual and collective rights to equal pay easier to enforce
• reducing structural discrimination in pay decisions
• creating a comparable minimum standard for pay transparency across Europe

Even today, there is a clear global trend towards greater transparency in pay. More and more countries are introducing rules that are very similar to the EU’s requirements. In the UK, mandatory gender pay gap reporting has already established an important transparency framework for large employers.[3]

Early-adopter countries are showing positive effects

Initial experience suggests that greater openness does have an impact: both Denmark and the United Kingdom have seen mandatory reporting on gender pay structures increase visibility and public accountability around pay differences.

At the same time, employee expectations are changing significantly. A survey shows that around 80 per cent of applicants are less likely to apply for a role if no salary level is provided.

2. What does pay transparency mean?

Pay transparency means that employees can more easily understand how wages and salaries are determined. At its core, it is about openness:

• Who earns how much?
• For which role?
• On the basis of which criteria is pay determined?

The aim is to ensure that women and men are paid equally for the same work or work of equal value. When pay is no longer kept hidden, it becomes much harder to maintain unconscious – or deliberately created – unequal treatment on the basis of sex or other factors.

Reducing disadvantage through transparency

For many years, conversations about personal pay were unwelcome in most organisations. Employees often did not know how their colleagues were paid, and in some companies it was even explicitly forbidden to talk about one’s own salary. This is exactly where the Directive intervenes: such restrictions should no longer be permitted in future. Employees must be allowed to speak openly about their pay without fearing disadvantages. Greater transparency is intended to strengthen trust within the organisation and enable employees to identify and address pay-related disadvantage themselves.

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Pay transparency in practice: four key building blocks

Pay transparency covers several areas, including:

• transparent hiring processes
• open access to internal pay information
• clearly defined pay and job structures
• published reports on pay equality

Taken together, these measures are intended to create a pay system that is more understandable and easier for everyone involved to review. The core idea is simple: when pay is not kept hidden, employers and employees can work together to ensure that work is rewarded on the basis of gender-neutral criteria. At the same time, structural inequalities can be identified more quickly and tackled more effectively.

“There is no single reason why a woman doing the same kind of work should earn less than a man,” said European Commission President Ursula von der Leyen in 2023.

3. What does the EU Pay Transparency Directive regulate in practice?

The Directive introduces a wide range of new requirements for employers. Its central aim is to create greater openness around pay and to enforce the right to fair remuneration more effectively.

Overview: key obligations for employers

The most important obligations include:

• establishing transparent pay structures and job categories
• employees’ rights to information on pay and average pay levels
• transparency obligations during recruitment (salary ranges, ban on asking about previous pay)
• regular pay reporting with gender-based analysis
• joint assessments where unexplained pay gaps exist
• rules on enforcement, sanctions and reversal of the burden of proof

These topics are explained in more detail below.

1) Pay structures and job architecture

Grouping roles into job categories

Employers of all sizes must in future be able to group roles in such a way that functions involving the same work or work of equal value can be brought together in common categories. This requires a clearly structured job architecture that sensibly groups similar areas of responsibility.

Gender-neutral criteria and transparency

For each of these categories, the objective and gender-neutral criteria on which pay decisions are based must be described. Such criteria may include:

• qualifications
• professional experience
• level of responsibility
• level of competence
• performance assessment

The decisive point is that these criteria must apply consistently across the organisation and that no one is favoured on the basis of sex.

The principles and criteria according to which pay is determined must be accessible to all employees. Employees should be able to understand which factors influence their pay and which requirements they must meet in order to progress professionally. This is intended to prevent unjustified pay differences, so that people in the same job category are paid according to the same neutral criteria.

Tip: It makes sense to start reviewing job categories and the underlying pay criteria now. In some organisations, existing grading structures from collective agreements can serve as a starting point. It is also advisable to create clear job descriptions for each category, setting out responsibilities and duties transparently. This creates a reliable basis for objective pay evaluation.

Note: In some member states, very small organisations may be exempt from the obligation to create formal pay structures. Employers with fewer than 50 employees may therefore be exempt from certain transparency requirements relating to pay criteria. Regardless of company size, however, it is advisable to establish clear pay principles.

2) Employees’ right to pay information

Individual rights to information

One important innovation is that employees will in future have the right to obtain information about their pay. Specifically, an individual can request information about their own pay and about the average pay levels in the same category, broken down by sex. This right applies to all employees, regardless of company size.

If an employee believes that their own pay is too low compared with colleagues, the relevant comparative figures can be requested. The employer is obliged to:

• provide the requested information within a reasonable period
• present the information in an understandable format
• provide additional information and a comprehensible explanation where data is unclear or incomplete

In addition, employers are required to inform all employees at least once a year about this right and explain how they can exercise it. This ensures that every individual knows their rights and options.

Pay is no longer a taboo subject

In future, employers will no longer be permitted to forbid employees from talking about their own pay. Agreements intended to keep pay secret are not permissible if they hinder the enforcement of equal pay. Employees can voluntarily share their pay with colleagues, union representatives or others without being disadvantaged for doing so.

This marks a fundamental cultural shift: pay is no longer a taboo subject within the organisation. Overall, employees gain significantly more transparency and room to act. They can take action themselves if they notice inconsistencies. For HR departments, this means that the requested data must be provided quickly and accurately without breaching data protection rules or other legal requirements. A strong HR system can support these new responsibilities reliably.

3) Pay transparency in the hiring process

Information on pay

The Directive also introduces requirements for the period before new employees are hired.Employers must inform applicants about the starting salary or the expected salary range, including any relevant collectively agreed arrangements. This information must be provided before pay negotiations begin – ideally already in the job advert, but at the latest before the first interview. The aim is to enable transparent and well-informed discussions in which candidates know the framework from the outset.

In addition, employers will in future be prohibited from asking about an applicant’s current pay or salary history. This is intended to prevent previous salaries from disadvantaging a person in a new role and perpetuating existing inequalities. All applicants should be assessed on the basis of the pay range for the advertised role and their qualifications, not on what they previously earned.

Impact on the hiring process

These requirements have significant implications for the hiring process. In future, job adverts must include either a specific salary figure or a salary range for the advertised position. Many organisations have already begun including pay information in their adverts, as this can increase the number of applications. At the same time, it makes it easier for HR to ensure equal conditions in salary negotiations, because all applicants – regardless of their negotiating power – are informed about the salary range.

Alignment with equal treatment rules

The Directive also requires job adverts and job titles to be phrased in a gender-neutral way and for the entire recruitment process to be free from discrimination. In practice, this means avoiding gender-specific wording and ensuring that no recruitment channels are used that indirectly exclude one sex. These requirements are consistent with existing equal treatment rules, but will now become even more important.

4) Pay reports and gender-disaggregated pay statistics

Making structural inequalities visible

One of the most far-reaching obligations affects larger organisations, which will in future have to produce regular reports on gender pay differences. These reports and analyses are intended to show whether there are differences between women and men within the various job categories. The aim is to create a data basis that makes structural inequalities visible.

More specifically, this means:

• companies with at least 100 employees must produce a gender-disaggregated pay report
• organisations with more than 250 employees must report annually, while companies with 100 to 249 employees must report every three years
• companies with fewer than 100 employees are currently not subject to this EU-wide reporting obligation

The reports must contain gender-disaggregated data, such as the average earnings of women and men within the defined job categories. In addition, the proportion of women and men receiving bonus payments or variable remuneration must be recorded. The exact requirements on format and content are expected to be defined in the national implementing legislation.

5) Joint assessment where unexplained pay differences exist

Obligation to explain pay gaps of more than five per cent

Data alone has only limited value if it is not followed up. For that reason, the Directive includes a mechanism that applies as soon as reports reveal significant gender-based pay differences. If, according to the report, the pay gap between women and men in a particular job category is more than five per cent and cannot be explained, a joint pay assessment is required.

As a rule, three conditions must be met:

• the pay gap between women and men within the same job category is more than five per cent
• the difference cannot be explained by objective, gender-neutral criteria such as different educational backgrounds, responsibility or experience
• the difference has not been remedied within six months of being identified in the report

If all three conditions are met, the company must promptly carry out a joint pay assessment with employee representatives. The outcome is usually an action plan to eliminate the gender-based pay differences. This may include both pay adjustments for the underpaid group and changes to the pay criteria in order to make them fairer.

6) Enforcement and reversal of the burden of proof

Reversal of the burden of proof as a core instrument

To ensure compliance with the Directive, it also contains provisions on enforcement, burden of proof and sanctions. These strengthen the legal position of employees in cases of unequal pay and create incentives for employers to meet the requirements.

One of the most important innovations is the introduction of a reversal of the burden of proof under certain conditions. If a company fails to fulfil its obligations under the Directive – for example by not producing a pay report or by refusing to provide pay information – discrimination will be presumed in an equal pay case. This means that if an employee challenges unequal pay, any pay difference between women and men will initially be treated as discrimination until the employer proves otherwise. In that case, the burden of proof lies with the employer rather than with the employee.

If, on the other hand, the employer complies with all transparency obligations, the burden of proof remains with the employee, who must then demonstrate that discrimination has occurred.

Sanctions and compensation

In addition, member states must provide for effective sanctions for breaches, including fines. Employees who suffer disadvantage as a result of unequal pay are entitled to full compensation, including back pay and compensation for non-material damage.

4. When do the pay transparency rules apply?

Transposition into national law and timetable

The EU Pay Transparency Directive entered into force in 2023 and must be transposed into national law across EU member states by 7 June 2026. [5]

The Directive is intended to ensure that transparency tools – in particular reporting obligations and the right to request pay information – are designed in such a way that they are effective for employees without imposing disproportionate bureaucracy on employers. Its requirements will strengthen existing equal pay frameworks by adding comprehensive transparency obligations and more systematic use of data.[6][7]

Even though the principle of equal pay has already been enshrined in law for many years, the Directive is designed to support its practical enforcement through greater transparency and systematic data use.

Key deadlines for pay reports and recruitment

Some requirements apply as soon as the Directive has been transposed, while others come into effect in stages. Based on the current position, the following applies:

• Companies with ≥ 250 employees
  • First pay report: by 7 June 2027 (for the year 2026)
    Thereafter: every three years
  • First pay report: by 7 June 2027 (for the year 2026)
    Thereafter: annual reporting obligation
• Companies with 150–249 employees
  • First pay report: by 7 June 2027 (for the year 2026)
    Thereafter: every three years
  • Thereafter: every three years
• Companies with 100–149 employees
  • First pay report: by 2031 (for the year 2030)
  • Thereafter: every three years
• Companies with up to 99 employees
  • Currently no EU-wide reporting obligation

Employees’ right to request information about their pay is expected to apply from June 2026 once the Directive has been transposed into national law. The requirements for recruitment – in particular the obligation to state salary ranges in job adverts and the ban on asking about previous pay – must be observed from the point at which national implementation enters into force, so that all job adverts published from 2026 onwards comply with the new rules.

Now is the time to act

Companies should use 2025 and the first half of 2026 to prepare specifically for the new requirements. Particularly important are:

• building a robust data basis
• clarifying roles and responsibilities (HR, controlling, leadership)
• selecting and implementing suitable systems
• developing internal policies and communication concepts

At the same time, the Directive offers an opportunity to review existing pay structures and put them on a more professional footing.

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5. What impact will pay transparency have on my company?

The upcoming rules will affect almost every area of the business. The following functions will be particularly affected:

• HR/People team – data, processes, reporting
• Managers and leaders – pay strategies, budgets, communication
• Organisation and employees – culture, perception of fairness, collaboration

Impact on the HR department

HR will become the central point of coordination for implementation. The function must develop or adapt internal policies and processes, produce regular pay reports and analyse the data. This requires significantly more data-related work than before.

In practical terms, this means HR must:

• develop or adapt internal policies and processes on pay transparency
• produce regular pay reports and interpret the findings
• analyse pay, job category and gender data systematically
• work closely with controlling, payroll and, where necessary, external advisers

To do this, HR will need capabilities in HR analytics and data processing, a reliable HR and payroll system, and sufficient capacity for analysis and interpretation of the results. For small and medium-sized businesses in particular, the additional administrative burden may be noticeable. A comprehensive HR system and suitable HR controlling tools will become an important success factor.

What managers need to consider

Managers will need to align their pay strategy more closely with equal treatment and transparency. At the latest when analysis reveals unexplained pay differences, individual case-by-case decisions will no longer be enough.

Typical consequences for leadership include:

• more clearly defined or more centrally managed pay structures
• less room for spontaneous individual decisions on pay increases
• adjustments to individual salaries if analysis reveals inequalities
• closer coordination with HR and controlling in budget planning and pay review rounds

There is also a cultural dimension: employees will ask more critical questions about how their pay is explained. High performers who discover that their pay is below the average for their category will demand explanations. Studies show that fair pay strengthens engagement and supports diversity, equity and inclusion measures. Managers should therefore see the rules not only as an obligation, but also as an opportunity to strengthen culture and employer reputation.

Changes for the organisation and employees

For the workforce, greater transparency can lead to more trust and a stronger sense of fairness – provided the issue is handled professionally. As soon as pay structures become more understandable, the risk of mistrust falls. This can create a healthier working environment and increase motivation, particularly among women who may previously have felt disadvantaged.

At the same time, this shift also brings challenges. During the transition phase, transparency can create unrest – especially where previously hidden imbalances become visible. Employees who discover that they are worse off than colleagues may react with frustration if the organisation does not act consistently. This makes it all the more important for leadership to identify any inequalities and actively address them.

To shape this change constructively, targeted change management is needed with clear priorities:

• early involvement and enablement of managers
• open, honest communication with employees
• clear plans to eliminate identified gaps and track progress

“Pay transparency will affect every area of a company. It is not just about complying with new requirements, but about a fundamental cultural shift. That requires a digital solution that can adapt flexibly to the needs of each organisation. That is exactly what we can deliver with 4PLAN.” – Hanns-Dirk Brinkmann, CEO, S4U

6. What practical steps should companies take now?

Even though the new requirements will only apply from 2026, companies should begin early. Implementation is demanding, and those who act now will not only gain a time advantage, but can also use the changes strategically to support their own development.

At its core, seven fields of action can be identified:

• Review pay principles and pay criteria
  Define understandable, objective and gender-neutral standards for all functions – for example education, professional experience, performance or scope of responsibility. These criteria should be clearly worded, professionally grounded and documented in writing. If a pay policy already exists, it should be adapted so that it is understandable and transparent for all employees.
• Map job categories (job architecture)
  Determine which functions in your organisation are the same or of equal value, and develop a clear system for grouping roles, for example by area of responsibility or hierarchy level. Precise job descriptions that clearly define duties, responsibilities and requirements make it easier to classify “same” or “equal value” work and create a shared basis for future pay discussions.
• Capture and analyse pay data
  Record pay data centrally and structure it so that it can be analysed by gender and job category. Analyse the average difference between women and men in each category, identify the areas with the greatest deviations and review which differences can be objectively justified. Where this is not possible, pay adjustments should be considered.
• Adapt recruitment processes
  Update your job adverts so that they include a salary range or a clear starting salary for each role. Adapt interview guides and forms so that questions about previous pay are removed. Prepare your recruiters and hiring managers to communicate pay ranges transparently and comply with the new requirements.
• Train managers and strengthen internal communication
  Inform all managers about the upcoming rules at an early stage so that they are well prepared. Workshops and guidance can help answer typical questions about pay and transparency and ensure a consistent approach to handling information requests. Clear internal communication also signals that the company takes pay transparency seriously and is actively implementing it.
• Prepare data and IT systems
  Check whether your HR systems can reliably provide the data needed for reporting and whether pay information can be analysed by gender and category. Where Excel spreadsheets still dominate, it is worth investing in robust HR controlling or BI solutions, as reporting obligations will recur regularly and manual preparation creates significant workload.
• Keep track of legal developments
  Monitor the progress of implementation and familiarise yourself promptly with the details as soon as draft legislation is available in the relevant jurisdictions. Define internally who is responsible for monitoring legislative changes and how new requirements will be incorporated into policies, processes and training.

A detailed checklist structured around these seven areas will help you assign responsibilities and deadlines for the steps outlined above and manage implementation in a structured way through to 2026.

7. How digital HR controlling solutions support pay transparency

The new requirements can quickly create a high administrative workload. HR controlling tools can reduce this significantly by automating many of the work steps that would otherwise be handled manually or across numerous spreadsheets. Companies with large workforces or complex pay structures in particular will benefit from introducing a powerful HR and pay analytics system before 2026.

Modern HR technology can, among other things:

• provide a central pay database that serves as a “single source of truth”
• map job structures and job categories within the system
• automate pay reports and gender pay gap analysis
• simulate scenarios for pay adjustments and show their budget impact
• document data histories in an audit-proof way
• give managers transparent insights into pay structures via dashboards

A concrete example of a solution that covers many of these requirements is 4PLAN. With 4PLAN, companies receive a platform for modern HR management that enables precise workforce planning, budgeting, forecasting and HR analytics. In practice, this means that HR and controlling can jointly monitor personnel costs, allocate budgets fairly and identify irregularities at an early stage.

With regard to pay transparency in particular, 4PLAN helps companies categorise employees, define metrics for gender-based pay differences and produce the required reports – as far as possible in an automated way and based on current data. The system can usually be connected to existing time and payroll systems so that all relevant data is consistent. This enables HR to inform employees more effectively about their pay levels, while managers receive a sound basis for decision-making.

“Complying with the new rules does not have to become an administrative burden if the right systems are in place. Modern HR technology can automate data collection and reporting, create transparency in real time and support managers with data-based decisions. That gives HR more time to work strategically on fair pay and employee wellbeing.” – Hanns-Dirk Brinkmann, CEO, S4U

8. Conclusion: Prepare for 2026 in good time

The EU Pay Transparency Directive creates a clear framework requiring pay to become more open and more understandable. For employers, this brings not only new obligations, but also opportunities to review and improve their pay structures. The Directive’s core message is clear: equal work should be paid equally, and this must be demonstrable and enforceable. Transparency is the central instrument for making that happen in practice.

HR leaders and managers have demanding tasks ahead. They must:

• review existing pay structures
• implement suitable systems
• identify and correct inequalities
• support employees through the change

The benefits for both the business and its employees will, however, be tangible – in the form of a fairer, more transparent and ultimately more attractive workplace.

Internationally, there is a clear trend: transparency is becoming increasingly important. Countries such as Iceland are going even further than the EU and require certification for equal pay, which has helped make unexplained pay differences there almost disappear. Within the EU, all 27 member states are now moving in the same direction through the Pay Transparency Directive.

Ultimately, this is about people and fairness: anyone who works equally hard and creates the same value also deserves the same pay. Transparency is necessary to ensure that this principle applies not only on paper, but in practice.

In short: now is the right time to act. 2026 is approaching quickly, and the Pay Transparency Directive is being implemented. It is therefore strategically sensible to prepare early, use experience and data from your own organisation as well as from other countries, organise your pay structure, involve employees in the process and use modern technology to support the transition.

Further sources (overview)

• https://www.bmbfsfj.bund.de/bmbfsfj/aktuelles/pressemitteilungen/abschlussbericht-der-kommission-buerokratiearme-umsetzung-der-entgelttransparenzrichtlinie–274262
• https://www.bmbfsfj.bund.de/bmbfsfj/aktuelles/alle-meldungen/kommission-ueberreicht-abschlussbericht-an-karin-prien–273768#
• https://www.antidiskriminierungsstelle.de/DE/ueber-diskriminierung/recht-und-gesetz/allgemeines-gleichbehandlungsgesetz/allgemeines-gleichbehandlungsgesetz-node.html
• https://www.bmbfsfj.bund.de/bmbfsfj/themen/gleichstellung/frauen-und-arbeitswelt/lohngerechtigkeit/entgelttransparenzgesetz/entgelttransparenzgesetz

Vanessa Köster

Vanessa Köster ist Marketing Specialist bei der Software4You Planungssysteme GmbH und verantwortet dort die Inhalte rund um HR-Controlling, Personalkostenplanung und die 4PLAN HR-Produktwelt. Sie übersetzt komplexe Controlling-Themen in praxisnahe Inhalte und arbeitet dafür eng mit dem Produkt- und Beratungsteam von 4PLAN zusammen.