The Employment Law Minute: A Practical Guide for HR

The Pay Transparency Directive

Legislative framework

Equal pay between women and men

– Directive (EU) 2023/970 –

According to Eurostat data, the average gender pay gap in the European Union stood at 11.1% in 2024. However, this gap varies significantly from one Member State to another.

In order to ensure compliance with the right to equal pay, Directive (EU) 2023/970 provides that employers must have pay structures ensuring that there are no differences in pay based on sex between workers performing the same work or work of equal value, unless such differences are justified by objective, gender-neutral criteria.

The principle of equal pay is already enshrined in Article 157 of the Treaty on the Functioning of the European Union (TFEU), as well as Article 23 of the Charter of Fundamental Rights of the European Union.

A broader scope of application of the Directive

Ratione personae

Article 2 provides that the Directive applies to both the private and public sectors. It therefore covers all workers who have an employment contract or employment relationship as defined by national law, collective agreements or practices in force in each Member State.

Accordingly, the Directive applies to all employees, including part-time employees, employees on fixed-term contracts, persons with an employment contract or employment relationship with a temporary employment agency, domestic workers, intermittent workers, trainees and apprentices, etc.

A broader scope of application of the Directive

Ratione materiae

The Directive adopts a broad concept of pay, which includes basic salary or wages as well as “any other consideration” paid directly or indirectly by the employer by reason of employment.

“Complementary or variable components of pay”, whether paid in cash or in kind, also fall within the scope of the Directive, such as bonuses, overtime compensation, travel allowances, housing allowances and meal allowances.

Employers’ obligations

Implementing the necessary measures

Article 4 requires Member States to take “the necessary measures to ensure that employers have pay structures ensuring equal pay for the same work or work of equal value.”

According to the case law of the Court of Justice of the European Union, assessing whether professional situations are comparable is not limited to workers employed by the same employer or to workers who carried out their work during the same period. The existence of a comparable situation must be assessed in light of all relevant circumstances enabling an evaluation of whether the employees concerned perform the same work or work of equal value.

However, the principle of equal pay does not prevent employees performing the same work or work of equal value from receiving different remuneration, provided that such differences are based on objective criteria unrelated to discrimination on grounds of sex. This may be the case, for example, where pay differences are justified by skills, professional experience, individual performance or the level of responsibility assumed.

Prohibition of pay secrecy clauses

The Directive prohibits contractual clauses preventing employees from disclosing information about their pay.

Transparency during recruitment

One of the key tools for combating pay discrimination is strengthening pay transparency from the recruitment stage onwards.

In this respect, the Directive requires employers to provide candidates, before recruitment, with information regarding the initial pay level or the pay range envisaged for the relevant position. Employers are also prohibited from asking candidates about their salary history.

These measures are intended to prevent the perpetuation of existing pay inequalities and to ensure that the proposed remuneration is based on objective criteria linked to the role and the skills required. They are also designed to preserve candidates’ bargaining power by ensuring that negotiations are not influenced by their previous pay.

Reporting obligations

Employers with at least 100 employees must provide the following information:

• The average and median gender pay gap, including in relation to variable or complementary components of pay;
• Pay gaps by category of employees;
• The proportion of female and male employees in each category, including those receiving variable or complementary components of pay.

This information must be provided every 1, 2 or 3 years, depending on the size of the company.

Where a pay gap of at least 5% is identified within a category of employees and cannot be justified on the basis of objective, gender-neutral and non-discriminatory criteria, the employer must carry out a joint pay assessment with employee representatives.

Employees’ right to information and accessibility of pay criteria

Employees are entitled to obtain – every 2 months – information on their individual pay level as well as on average pay levels, broken down by sex, for categories of employees performing the same work or work of equal value.

Employers must also make accessible the criteria used to determine pay, pay levels and pay progression. These criteria must be objective and gender-neutral.

Current situation in Luxembourg

Luxembourg stands out with a gender pay gap of -0.8%, according to Eurostat data for 2024.

Although the Directive was required to be transposed by the Member States by 7 June 2026, no draft implementing law has, at this stage, been submitted in Luxembourg.

Conclusion

In light of the obligations laid down by the Directive, employers would benefit from anticipating the review of their pay policies now, particularly with regard to the criteria used to award variable remuneration and the documentation of pay differences.

 

➡️ For any questions relating to employment law, please contact Marie Bena, Elodie Rousseau or Ilaria Cendret.