The EU Pay Transparency Directive is legislation adopted by the European Union to promote equal pay between women and men, prevent pay discrimination, and increase transparency around pay. The directive introduces new obligations for employers related to recruitment, transparency around pay-setting criteria, employees’ access to pay information, and gender pay gap reporting.*
*The Finnish Government’s proposal on the national implementation of the directive was submitted to Parliament in July 2026. According to the proposal, the legislation is intended to enter into force on January 1, 2027. The content of the legislation may still change during the parliamentary process.
What does the Pay Transparency Directive require – and what does it mean for all employers?
Equal work and work of equal value:
Employers must be able to identify equal work and work of equal value based on objective, gender-neutral criteria. The assessment should consider factors such as the skills, responsibility, effort, and working conditions required by the role. The focus is on the demands of the role, not the individual employee’s performance.
The existing requirements concerning gender equality plans and pay surveys for employers with at least 30 employees will remain in place under the new legislation.
Recruitment:
All employers must provide job applicants with information about the starting salary or salary range for the position sufficiently early in the recruitment process.
Contrary to a common assumption, the law does not require salary information to be included in the job posting. The requirement can be met by providing the salary information either in the job posting or, at the latest, before the first job interview.
However, including the salary range directly in the job posting is becoming increasingly common and is a more transparent practice. It helps applicants understand the level of responsibility and seniority of the role and assess whether the position is a good fit for them. At the same time, employers may receive more relevant applications and make the recruitment process more efficient. The salary range can also be relatively broad if there is flexibility based on the candidate’s experience.
Where necessary, applicants must also be provided with the relevant salary provisions of the applicable collective bargaining agreement.
Employers are not allowed to ask applicants about their previous salary. However, asking about salary expectations is still permitted.
Pay transparency:
Employers must inform employees about the criteria used to determine pay and pay levels. Employers with at least 50 employees must also disclose the criteria used to determine pay progression and salary increases.
Employees will have the right to receive information about their own pay level as well as comparative information about the pay levels of employees performing equal work or work of equal value. This comparative information will be provided as the average pay of the relevant employee group, broken down by gender. Individual employees’ salaries will therefore not be disclosed.
Employers must inform their employees of this right to information annually.
Which employers will be subject to pay gap reporting?
Employers with at least 100 employees will also be subject to gender pay gap reporting requirements.
- 100–149 employees: first report in 2031, based on 2030 data
- 150–249 employees: first report in 2028, based on 2027 data
- 250 or more employees: annual reporting starting in 2028
Organizations with at least 150 employees will therefore need to begin collecting the necessary pay data from payroll in 2027.
How should employers prepare for pay transparency?
Employers should start preparing for the changes before the legislation enters into force:
- assess your job architecture and the demands of different roles
- define salary ranges
- document the criteria for determining pay and salary increases
- update your recruitment process
- establish a process for handling employee pay information requests
- ensure the quality of your HR and payroll data
- train managers on the new practices
What are the consequences of non-compliance?
Failure to comply with pay transparency obligations may affect the burden of proof in pay discrimination cases. Authorities may also use conditional fines to enforce compliance with the obligations.
According to the Finnish Government’s proposal, failure to conduct a required joint pay assessment may result in a non-compliance penalty of €5,000–€80,000.
Although the final details of the legislation may still change during the parliamentary process, employers should not wait to start preparing. Now is the time to review your pay structures, criteria, data, and recruitment practices and identify where greater transparency is needed.
If you would like to learn more or continue the discussion about the EU Pay Transparency Directive, get in touch!