On 6 June 2023, the European Union took a significant step towards ensuring equal pay for equal work when Directive (EU) 2023/970 on pay transparency entered into effect. The directive aims to reduce persistent gender pay gaps across the EU labour market and requires all member states to transpose its provisions into national law by 7 June 2026.
The directive seeks to combat gender-based pay discrimination by obligating employers to adopt more transparent pay structures, introduce objective and gender-neutral remuneration policies, and provide insight into pay disparities within organisations. These measures will have a significant impact on all employers, who will need to review and, when necessary, adjust their HR and payroll practices in the coming years. The directive also presents a valuable opportunity to strengthen an organisation’s employer brand and to attract and retain top talent.
The directive introduces several obligations that will make remuneration policies more transparent, equitable, and legally enforceable. Employers will face increased requirements regarding transparency during recruitment and in their communications with current employees. At the same time, the legal balance shifts: the rights of employees are strengthened while employers will bear the burden of proof in certain disputes concerning pay inequality.
If the reported gender pay gap is 5% or higher and the employer cannot provide an objective justification, a joint pay assessment must be conducted in collaboration with workers’ representatives to identify the underlying causes, as well as measures to address the pay gap.
In legal proceedings involving alleged pay discrimination, the burden of proof will rest with the employer if the employee is able to provide facts from which it may be presumed that there has been direct or indirect discrimination. It is subsequently up to the employer to demonstrate that there has been no direct or indirect discrimination in relation to pay.
Employers will no longer be allowed to prohibit employees from sharing or discussing salary information. Any contractual provisions that restrict employees from disclosing pay are considered invalid under the directive.
Member states must introduce effective, proportionate, and dissuasive sanctions for employers who fail to comply with the directive. These may include fines, mandatory compensation for affected employees, or other corrective measures.
As the June 2026 deadline for national transposition approaches, member states will begin to draft and publish national legislation based on the directive’s provisions, potentially adding further details or requirements.
Employers can expect greater clarity over the precise scope and enforcement of the obligations at the national level. At the same time, labour inspectorates and equality bodies are likely to increase their focus on pay transparency and equal remuneration.
We can help you prepare to comply with this new legislation from an employment law perspective by, among others:
Corina Roks
Hester Sneper
BDO in Netherlands
The directive seeks to combat gender-based pay discrimination by obligating employers to adopt more transparent pay structures, introduce objective and gender-neutral remuneration policies, and provide insight into pay disparities within organisations. These measures will have a significant impact on all employers, who will need to review and, when necessary, adjust their HR and payroll practices in the coming years. The directive also presents a valuable opportunity to strengthen an organisation’s employer brand and to attract and retain top talent.
What Will Change for Employers?
The directive introduces several obligations that will make remuneration policies more transparent, equitable, and legally enforceable. Employers will face increased requirements regarding transparency during recruitment and in their communications with current employees. At the same time, the legal balance shifts: the rights of employees are strengthened while employers will bear the burden of proof in certain disputes concerning pay inequality.
Key Obligations
- Employers must disclose to candidates the starting salary or salary range for a position prior to the first interview. In addition, it will no longer be permitted to ask candidates about their previous or current salary, to help prevent the perpetuation of past inequalities.
- Workers have the right to request information on their own salary, as well as the average pay of colleagues performing the same or equivalent work, broken down by gender. The purpose behind this right is to make pay disparities more visible and actionable.
- Employers will be required to ensure that their pay and career advancement systems are based on transparent, objective, and gender-neutral criteria, including behavioural skills. These standards must be documented and applied consistently across hiring, promotion, and compensation decisions, avoiding indirect or unintended discrimination.
- Depending on the size of the organisation, periodic reporting obligations will apply as follows:
- Companies with 250 workers or more must report annually starting in 2027;
- Companies with 150 to 249 workers will be required to report every three years, also starting in 2027; and
- Companies with 100 to 149 workers will be required to report every three years, starting in 2031.
Mandatory Pay Assessment
If the reported gender pay gap is 5% or higher and the employer cannot provide an objective justification, a joint pay assessment must be conducted in collaboration with workers’ representatives to identify the underlying causes, as well as measures to address the pay gap.
Shift in Burden of Proof
In legal proceedings involving alleged pay discrimination, the burden of proof will rest with the employer if the employee is able to provide facts from which it may be presumed that there has been direct or indirect discrimination. It is subsequently up to the employer to demonstrate that there has been no direct or indirect discrimination in relation to pay.
Prohibition of Pay Confidentiality Clauses
Employers will no longer be allowed to prohibit employees from sharing or discussing salary information. Any contractual provisions that restrict employees from disclosing pay are considered invalid under the directive.
Mandatory Sanctions for Noncompliance
Member states must introduce effective, proportionate, and dissuasive sanctions for employers who fail to comply with the directive. These may include fines, mandatory compensation for affected employees, or other corrective measures.
What to Expect in the Coming Years?
As the June 2026 deadline for national transposition approaches, member states will begin to draft and publish national legislation based on the directive’s provisions, potentially adding further details or requirements.Employers can expect greater clarity over the precise scope and enforcement of the obligations at the national level. At the same time, labour inspectorates and equality bodies are likely to increase their focus on pay transparency and equal remuneration.
How Can BDO Help?
We can help you prepare to comply with this new legislation from an employment law perspective by, among others:
- Identifying which obligations apply to your organisation;
- Performing internal audits;
- Conducting any necessary revisions and adjustments of existing remuneration policies;
- Holding in-house knowledge sessions for staff;
- Adjusting current pay structures;
- Designing and and implementing job architecture, job framework, and job classification systems;
- Adjusting or designing and implementing competence management, performance management, and succession management;
- Adjusting current talent acquisition policies;
- Designing or adjusting current strategic HR and compensation policies; and
- Implementing culture and leadership changes.
Corina Roks
Hester Sneper
BDO in Netherlands