EU Pay Transparency Directive

The EU Pay Transparency Directive (Directive (EU) 2023/970) sets common minimum rules to make pay fairer and more transparent across the European Union. A directive isn’t instantly applicable like a regulation; each Member State must turn it into national law by 7 June 2026. After that, employer reporting starts in two waves: 7 June 2027 for companies with 150+ and 250+ employees (the 250+ group reports annually, the 150–249 group every three years), and 7 June 2031 for 100–149 employees (every three years).

This guide is written for readers new to the topic. We start with plain language definitions, then walk through obligations, metrics, and an action plan.

Scope & key definitions

Who’s affected?

Most employers with 100+ employees will need to publish gender paygap stats on a set schedule once their country’s law takes effect. Smaller companies may still have transparency duties (e.g., show salary ranges, answer payinformation requests). For exact rules, check your national guidance when it’s out.

What “equal” pay means?

People doing the same job – or different jobs of equal value – should be paid fairly. “Equal value” is assessed with four simple factors: skills, effort, responsibility, and working conditions.

What “pay” covers?

Not just base salary. “Pay” includes variable or “complementary” elements such as bonuses, commissions, allowances, overtime, benefits in kind, and–where applicable–equity or share based pay. Treat total remuneration as the default unless your national rules say otherwise.

“Category of workers”

A group of employees performing the same work or work of equal value (e.g., “Customer Support L2,” “Software Engineer L3 – BE”). Categories are central to reporting and to the ≥5% joint assessment trigger.

Figure A – Worker categories × remuneration components

Worker Category	Base pay	Bonus	Commission	Allowances/ Overtime	Benefits in kind	Equity/ Share-based
Customer Support L1	✓	✓	–	✓	✓	–
Customer Support L2	✓	✓	–	✓	✓	–
Software Engineer L3	✓	✓	–	–	✓	✓
Sales Associate L2	✓	✓	✓	✓	✓	–
People Manager M1	✓	✓	–	–	✓	✓

Components vary by country; check local law.

Core obligations

Salary ranges in hiring

Show the initial pay or a salary range before interviews.

Example: “€52 – €60k base + target bonus; offer depends on level within the band.”

Salary history ban

Don’t ask about a candidate’s previous pay.

Example: Discuss the role’s band and skills evidence instead of “What did you make?”

Right to pay information

Employees can request their pay and the average pay for comparable roles by sex; respond in writing within your country’s set window.

Example: Send numbers plus the criteria you use to judge “equal value.”

Paygap reporting

Publish mean/median gaps, payquartiles, and % receiving bonuses on the required schedule.

Example: Post companywide figures annually or every three years as your law requires.

Joint Pay Assessment (JPA) trigger

If an unexplained ≥5% gap lasts 6 months in a worker category, run a JPA with worker reps to diagnose and fix causes.

Example: “Sales Associate L2” shows 6% after 6 months → JPA sets offerwithinband guardrails.

Enforcement & rights

Paysecrecy clauses don’t apply; the burden of proof can shift to the employer; compensation can be uncapped.

Example: Keep audit trails so decisions are defensible if challenged.

The reporting metrics

Metric	What it means	Notes
Mean gap	Average pay difference (%) across all employees.	Can be skewed by very high/low earners.
Median gap	Middle pay difference (%).	More stable headline figure.
Quartiles (Q1–Q4)	% women/men in each pay band.	Shows who reaches the top band (Q4).
Bonus Participation	% women/men receiving variable pay.	Includes bonuses, commissions, benefits in kind.

Unadjusted vs. Adjusted Gaps

Reports are typically unadjusted (the publicly reported topline figure). Internally, also compute adjusted gaps controlling for job, level, tenure, location, etc. The adjusted view helps target fixes but doesn’t replace the headline numbers.

Quick Example

If the median base pay is €50k for women and €55k for men, the median gap is (55−50)/55 ≈ 9.1%. If your quartiles show women concentrated in Q2–Q3 and underrepresented in Q4, you likely have progression or leveling issues–addressable via job architecture and promotion processes.

Figure C – Example visualization of paygap metrics

Unadjusted gaps

Mean 8.4%

8.4%

Median 9.1%

9.1%

Quartile distribution by sex

58% W

42% M

52% W

48% M

45% W

55% M

30% W

70% M

Example data for illustration; use your actual metrics when reporting.

Joint Pay Assessment (JPA)

Trigger

Unexplained ≥5% gap reported in a worker category + not remedied in 6 months.

Who

Employer and worker representatives.

What to cover

(a) evaluation of job classification (are categories and levels correct?)

(b) analysis of causes (e.g., bonus design, starting offer drift, promotion timing)

(d) timelines and monitoring

Illustrative scenario

You report a 6% median gap in "Sales Associate L2". After 6 months, it remains ≥5% and cannot be explained by objective factors. You initiate a JPA with worker reps, find that starting offers for women skew low within the band, and implement offerwithinband guardrails plus manager training. Follow-up reporting shows the gap narrowing below the threshold.

30 days action plan

Map data sources

List systems, fields, and data owners; resolve duplicates (e.g., payroll vs. HRIS).

Stand up job architecture

Define categories and "equal value" criteria; socialize with HRBPs and works councils.

Draft salary bands

Create ranges per role/level/location; document rules for offers, promotions, and outofband exceptions.

Run a baseline analysis

Compute mean/median and adjusted gaps; identify categories near the 5% trigger.

Prepare request responses

Draft templates and an FAQ for managers on how to discuss ranges and decisions.

Design reporting mechanics

Decide who publishes what, when, and where; add accessibility and translation steps.

Train managers

Short modules on transparent pay conversations, with example scripts and edgecase guidance.

Practical pitfalls to avoid

Too many metrics – Keep to required metrics; add minimal, clarifying context. Too many numbers = confusion.
Unaligned job levels – Gaps often stem from leveling drift. Fix architecture and calibration first.
Oneoff spreadsheets – Move to governed, repeatable reporting with permissioned access and an audit trail.
Manager surprise – Brief managers before employees begin requesting information, so answers are consistent and defensible.
Ignoring national specifics – Some countries may tighten timelines or add metrics. Track your country’s transposition updates.

How Alon can help

People Profile

A single, governed record for each employee; compensation history, role/level, skills and performance, so comparisons and reports use the same, current facts (no spreadsheet stitching).

Career Ladder

Transparent job architecture (families, levels, criteria) that defines "equal value," guides promotions, and keeps titles/levels consistent across teams.

Performance Assessment

Configurable reviews, calibration, and evidence capture that tie performance to pay decisions with an auditable trail managers and HR can stand behind.

Pay Equity

Alwayson analysis and reporting (raw & adjusted gaps, quartiles, bonus participation) with directiveready exports and alerts on potential ≥5% triggers.

Make pay decisions you can defend–starting today.

See how Alon automates analysis, reporting, and manager guardrails so you're audit ready before deadlines.

Disclaimer: This article is a practical overview and does not constitute legal advice. Always consult your national rules once enacted. For a country specific walkthrough, our team can help map requirements to your processes.

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