What does the EU Pay Transparency Directive mean?

The EU Pay Transparency Directive aims to make equal pay between men and women more enforceable. Although this principle has long existed, in practice, significant pay differences between men and women persist. According to the European Commission, the lack of transparency plays an important role in this.

Who does the directive apply to?

The directive applies to employers in both the public and private sectors. The concept of ‘employer’ is interpreted broadly and in practice covers virtually every organisation with employees.

The concept of ‘employee’ is also broad. It focuses on the actual employment relationship, not just the contractual form. This means that the obligations may also be relevant for organisations working with flexible employment relationships or atypical contracts.

The size of the organisation then determines which obligations apply. Some rules apply to all employers, while other obligations will be introduced in phases based on the number of employees.

The directive requires organisations to provide earlier and clearer insight into pay decisions. Employees are thereby given more opportunities to verify whether equal pay for equal or equivalent work is being applied.

What does this mean in practice?

The directive introduces obligations in different phases of the employment process.

Transparency in recruitment and selection Employers must inform applicants in advance about the salary or salary range of a position. In addition, it is no longer permitted to ask candidates about their salary history. The objective is clear: to prevent existing pay differences from carrying over into new employment relationships. For organisations, this means that vacancies, recruitment processes and employment condition discussions must be critically reviewed.
Transparency during employment Employees gain insight into their own salary and the average remuneration for comparable roles, broken down by gender. In addition, organisations must be able to provide insight into the criteria used for salary determination and progression. This requires clear job groups, consistent remuneration categories and a transparent substantiation of decisions.
Reporting obligations Organisations with more than 100 employees must periodically report on pay differences between men and women. The frequency depends on the size:

250+ employees: annual reporting
150–249 employees: first report no later than 7 June 2028 covering calendar year 2027, thereafter once every three years
100–149 employees: first report no later than 7 June 2031 covering calendar year 2030, thereafter once every three years

The reporting will form part of a broader monitoring system. The data will be submitted to a monitoring body and will partly be made accessible via a Ministry website.

Mandatory evaluation in case of differences If a pay difference of 5 per cent or more is identified that cannot be objectively explained? Then a joint pay assessment must take place.

This assessment is conducted together with employee representation, such as the works council. Organisations must not only identify pay differences but also substantiate them using objective and gender-neutral criteria.

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Enforcement and risk

The directive not only strengthens the position of employees but also the enforcement of pay transparency obligations. In the Netherlands, the Dutch Labour Authority is expected to assume a supervisory role. It can verify whether employers comply with obligations regarding pay transparency, reporting, job evaluation, and pay assessment.

In case of non-compliance, administrative measures may follow, such as a warning, an order subject to a penalty, or an administrative fine. The exact application of these measures will depend on the final legislation and future supervision policy.

Role of governance and employee representation

The works council is given a more important role in reporting on pay differences, assessing remuneration structures and conducting joint pay assessments. This means that the topic affects not only HR and legal, but also governance and risk management.

Timeline and urgency

The directive must be transposed into national legislation by 7 June 2026 at the latest. From that moment, the first obligations will apply. Organisations that only start acting at that point risk falling behind. The required insights into data, structure and substantiation require preparation. The core message is therefore simple: waiting increases complexity. Starting on time provides control.