The EU Pay Transparency Directive presents many companies in Ireland with new challenges this year: They must comply with new legal regulations in a short period of time, while the specific interpretation remains unclear. Many companies are not yet ready.
We provide answers to the most frequently asked questions about the EU Pay Transparency Directive. Since the beginning of the year, we have been gathering key insights into the implementation of pay transparency requirements through webinars, studies, and discussions with experts from politics, law, and business. Here, we answer your questions about the Pay Transparency Act – clearly, practically, and always up to date. This gives you a concise overview of a legally complex, yet undeniably important, topic.
Currently, there is no official draft legislation. However, despite the pending national legislation, it is clear that companies need to prepare. They have a considerable amount of preparatory work to do, and this may take longer than if the law is only finalised in the first half of 2026 and then comes into effect and must be complied with virtually “overnight”.
What new transparency obligations does the EU Pay Transparency Directive bring with it?
The directive introduces several specific transparency obligations:
Communication of internal criteria: Employers must be able to explain the objective criteria used to determine salaries and make these criteria “easily accessible.” This includes, for example, the criteria used within the company to determine pay, salary levels, and subsequent salary development.
Right to individual information: From June 2026, employees will also have the right to request certain information from their employer regarding their salary, such as they own salary, their position within a salary band, and the average pay of colleagues in comparable positions. The directive also stipulates that this right can be exercised by employee representatives, but the details of the national interpretation are still pending.
Disclosure of pay: Employees must not be prevented from disclosing their own pay, i.e., discussing their earnings amongst themselves. Employers will no longer be able to effectively prohibit open communication about pay.
Transparency in recruiting: Companies must disclose the intended salary range at the very first contact with applicants (job advertisement, email, interview). Inquires about previous salaries are inadmissible.
“To prevent the persistence of the gender pay gap […] employers should ensure that job advertisements and job titles are gender-neutral and that recruitment procedures are conducted in a non-discriminatory manner so as not to undermine the right to equal pay. Employers should not be permitted to inquire about or proactively attempt to obtain information on a job applicant’s current pay pr previous pay history” – EU Directive 20223/970 (33)
Gender Pay Gap Reporting: Companies that will be required to report (according to the directive, companies with more than 200 employees, although it remains to be seen whether national legislators will implement this in the same way, or also require smaller employers to do so) must disclose the adjusted and unadjusted gender pay gap. Furthermore, the proportion of employees receiving supplementary and variable components must also be disclosed. Who is entitled to a bonus, for example, and who is not? Employees will have a right to know this in the future. The employer must then provide this information in writing, broken down by gender for the respective employee group.
Eliminating the Gender Pay Gap: If the analysis reveals an internal salary gap between men and women that “cannot be justified by objective and gender-neutral criteria if the employer fails to provide such justification or if the employers has not corrected such a difference in pay within six months of the date the pay report was submitted” – as stated in the directive – then a corresponding pay assessment must be carried out in conjunction with the employee representatives, presumably the works council, and appropriate measures must be taken.
The purpose is not only to identify pay gaps but also to provide the opportunity to correct them and prevent them from recurring in the future. This is the primary objective of the Pay Transparency Directive.
For work groups with only one gender; compare with similar activities or external benchmarks/ For a mono-gender workforce: the directive still applies, but the obligation to report wages logically does not apply. Note the minimum group size (usually 5+ people for meaningful comparisons).
Equal work means that employees can perform identical or similar tasks, regardless of whether they work at the same or different workstations. They can cover for each other if needed. For example, female and male automotive mechanics can cover for each other and thus perform the same work.
Equivalent work refers to tasks from similar requirements and demands, even if they differ in content. The comparison criteria include the type of work, the training requirements, and the working conditions.
Tasks that appear different at first glance can actually be equivalent, just as tasks that appear the same at first glance may not necessarily be equivalent. Less transparent characteristics, such as the individual value of employees to the company, can also play a role. For example, if a person has additional skills that enable them to take on further tasks, such as an automotive mechanic who ask has training as an accountant, they could also work in accounting. This can justify unequal pay, even if these additional assignments are not specifically intended.
Do employees need to be able to see the name of the group they have been assigned to for “equivalent work”? How specifically does the group need to be described?
Yes, employees need to know which group they are assigned to. The group description must be specific and comprehensible (job description, required skill level, area of responsibility).
Do employees need to see all average salaries or only those within their own group?
Employees have the right access the average salaries of their own job group and comparable groups for equivalent work. This does not include all salaries of the entire company.
How can gender-neutral criteria and processes for wage determination be created?
The company needs a transparent salary structure. This requires a job architecture with career stages, career levels (grades), and salary bands. These must be defined objectively and in a gender-neutral manner (Article 4, paragraphs 2 and 4, Directive (EU) 2023/970).
How can a transparent compensation structure be established within a company?
The process of setting up job grading ideally takes place in two steps:
Criteria Level: Analysis of jobs and their requirements, evaluation of jobs abased on defined criteria, and assignment of grades or levels based on the evaluation.
Typical evaluation criteria might include:
- Area of responsibility
- Required skills and experience
- Complexity of tasks
- Strategic importance
- Impact on the company’s bottom line
Process Level: Defining how the criteria are applied – e.g., who is involved in decisions (HR, management) and how these decisions are documented.
How can we get started if only job descriptions exist so far? Could we define these groups based on the job descriptions?
A pragmatic approach can be taken by systematically deriving the defining characteristics of the role from existing job postings (tasks, requirements, setup). This description is then translated into an evaluation system – for example, using points for qualifications, responsibilities, etc. However, the title or job description alone is insufficient. Objective criteria must be established that apply to everyone in this group, as their compensation will be based on these criteria in the future.
What might a simple job evaluation system look like?
An example of a simple evaluation system would be a 3-point system: Points are awarded for each role – e.g., for education (1 point for an apprenticeship, 3 points for a master’s degree), span of control, budget responsibility, etc. This creates objective benchmarks for comparison between positions (e.g,, IT engineer vs. marketing manager).
How detailed do compensation structures need to be?
The directive states: “To facilitate the application of the concept of equivalent work, particularly for micro, small and medium-sized enterprises, the objective criteria to be used should include four factors: skills, workload, responsibility, and working conditions. These factors have been identified in existing Union guidelines as essential and sufficient for assessing the tasks performed in an organisation, regardless of the economic sector to which the organisation belongs.” Remuneration structures can be meaningfully structured on this basis.
Should a higher level of commitment from individual employees performing the same task lead to a higher salary?
Yes, but only if the criterion of “engagement” is objectively verifiable, gender-neutral, and free of prejudice. It must not appear arbitrary. Companies must apply transparent and documented criteria to justify any differences.
Does transparency mean that everyone must be paid the same?
No. The directive requires transparency and comparability – not equal pay. Every company needs its own compensation strategy.
Should differences in pay based on years of service still be allowed?
Currently, yes – years of experience remain a relevant criterion. The directive doesn’t specify how this will be structured in the future but it’s conceivable that this could change in the future, for example, by placing greater emphasis on competencies or responsibilities.
Communication and internal implementation
Capacity: Smaller companies in particular, often lack the resources to implement complex systems.
Cultural shift: Salary is often a management decisions – a transparent process with HR involvement requires a change in mindset.
Historically grown salary gaps: Correcting these fairly takes time, budget, and sensitivity.
Must a salary increase for one employee automatically be passed on to others with the same job?
No, not automatically. However, if the increase isn’t based on objective differences, it can lead to unequal treatment. Therefore, well-documented decision-making criteria are essential. If the salary increase is based on objective criteria that also apply to other people in the company, then yes, it must also be granted to those who likewise meet those criteria. Pure negotiating skills should no longer be the basis for a higher salary.
How do I deal with historically grown salary differences – should individual employees be demoted or do I have to raise everyone else?
This needs to be clarified on a case-by-case basis and also depends on the specific employee’s contract. A salary reduction is generally not possible without further ado. A unilateral change to the employment contract by the employer is only possible in exceptional cases, such as termination with notice of change.
If a person in a group is earning significantly above the salary band (unjustifiably, due to historical reasons, etc.) – can I demote that person or must I raise everyone else’s salary? Is there a legal basis for downgrading the salary of individual employees?
No, organisations are not required to disclose their entire compensation system. However, they must disclose the criteria used to determine pay and salary progression. Employees will also have the right to access information about their individual pay and – broken down by gender – the average pay for employees performing the same or equivalent work. This means that, upon request, the average salary for comparable roles must be disclosed. However, individual salary bands or overall salary ranges within the organisation are not subject to this disclosure requirement.
Right to information, reporting obligation, and data protection
No, individual data points are not required. It is sufficient to show the employee’s position within the salary range compared to the average or median values of the respective group. Individual data points would violate data protection regulations.
What about data protection in very small comparison groups, for example, if only 2-3 people make up the group?
These companies are not exempt either. The directive states that member states may decide that in cases where disclosing salary levels would lead to the direct or indirect disclosure of an identifiable employee’s salary, only employee representatives, the labour inspectorate, or the equal treatment body may have access to the relevant information.
These bodies can then advise employees about potential claims under this directive without disclosing the actual salary levels of individual employees.
In principle, the directive states that all information related to the processing of personal data must be provided in accordance with the General Data Protection Regulation (GDPR) and may not be used for any purpose other than applying the principle of equal pay.
How should companies handle employees’ right to information?
Employees can request information about the average pay of people of the opposite sec in a comparable position. Companies have two months from the date the request is made to provide the written information. (See DIRECTIVE (EU) 2023/970 Article 7/Right to access).
Important: The information must also include variable components and must not disclose any personal data.
What rules apply to variable pay? Do bonuses, etc., have to be disclosed?
Yes. The information must include all components of remuneration – i.e., fixed salary, bonuses, commissions, benefits in kind, etc. A variable component also counts towards the average remuneration and must be taken into account in information requests and reports.
Are night work allowances also included in the remuneration?
Yes, all regular allowances (including night shift work, shift work, overtime) are included in the total pay. Only irregular special payments can be excluded.
Do benefits in kind also count as remuneration?
Yes, regular benefits in kind (company car, mobile phone, etc.) are included in the total remuneration – valued at the monetary benefit.
If the annual gross salary is used for salary analysis because monthly salaries are less meaningful due to variable allowances and fluctuations, how should one proceed in cases where a full annual gross salary is not available due to a mid-year start date?
Extrapolation to full-time equivalent or pro-rata calculation. Important: Use comparable reference periods and document the calculation method transparently.
Is reporting only required if a gender pay gap exceeding 5% is identified?
No. Every company – likely starting at 100 employees, although the national interpretation is still pending – will be required to report, regardless of the size of the pay gap. The directive stipulates that employers with 150+ employees must submit the following information about their organisation by June 7, 2027, and companies with between 100 and 149 employees by June 7, 2031 (referring to the preceding calendar year):
- The gender pay gap
- The gender pay gap with supplementary or variable components
- The average gender pay gap
- The average gender pay gap with supplementary or variable components
- The proportion of employees receiving supplementary or variable components
- The proportion of employees in each pay quartile
- The gender pay gap between employees within groups of employees, broken down by the standard base wage or salary and by supplementary or variable components
If the difference of at least 5% in pay is found, a “joint pay assessment” (DIRECTIVE (EU) 2023/970 Article 10) is required.
Should the average salary be used as a guideline (which can fluctuate significantly due to outliers above or below) or the median (a more stable value, a salary that lies exactly in the middle)?
The guideline allows both, but the median is usually more meaningful (less prone to distortion). Many experts recommend the median for fairer comparisons.
Are there templates for a pay gap report?
Currently, there is no official template available.
Basis and scope of the Directive
Who is covered by the new Pay Transparency Act?
The EU Pay Transparency Directive applies in principle to every company within the EU. This means that by June 2026, every employer must transparently communicate the criteria for determining and developing salaries, fulfill individual requests for information, and offer pay transparency in recruitment. However, certain obligations will not apply equally to all companies, such as the reporting requirement – the specific interpretation of this requirement in national law has not yet been defined by the Irish legislature. (CHECK)
Regarding the reporting requirement, different provisions apply depending on company size. The Directive states: “Employers with at least 100 employees should report on pay regularly, as provided for in this Directive. […] In order to maximise pay transparency for employees, Member States may increase the reporting frequency or require employers with fewer than 100 employees to report on pay regularly.” The EU legislator has therefore left it to the member states to define whether employers with fewer than 100 employees are still requires to do so. It is possible that EU member states will handle this differently in some cases.
Even if smaller companies are not directly affected by the reporting requirements, the increasing transparency of large companies is creating growing pressure to also disclose verifiable criteria. It is reasonable to assume that employees will ask about this – even without a legal obligation.
Furthermore, the directive also mentions quality labels as a positive incentive: “Member States may offer recognition to employers who are not subject to the reporting requirements under this Directive and who voluntarily report on pay, for example by means of a pay transparency label, with a view to promoting best practices in relation to the right and obligations laid down in this Directive.”
Is there already a draft law that companies can use as a guideline?
Regarding the issue of eliminating the pay gap: With whom should the salary evaluation be carried out with if there is no employee representation (works council) in the company?
The salary evaluation is then carried out directly with the employees or their legal or voluntary representatives. Alternatively, external experts can be consulted. The employer must make the process transparent and document it.
What should I do if some groups consist only of women, meaning I can’t compare their salaries with those of men? Or if a company employs only women or only men? Does the employer then fall under the EU directive?
For group companies: Is the number of employees counted per company or group-wide?
The directive basically leaves both options open; it is conceivable that the group comparison must be made via the group company, but it is also possible that the comparison is only made within individual companies.
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Comparable activities and remuneration structure
What exactly is meant by “comparable activity”?
Comparability does not mean identical tasks, but rather comparable requirements. The decisive factor is the knowledge, responsibility, or workload associated with the position. The directive explicitly refers to “equivalent work” – this can refer to different roles, such as sales and customer service.
What is the difference between equal work and work of equal value?
Do I need to actively communicate internally, or can I wait to see if employees contact me?
In the future, there will be an obligation to inform employees about their right to information: To ensure that this regulation is actively implemented and not silently ignored, the EU legislator has included an important obligation in the directive: Employers must proactively inform their employees annually about their right to salary transparency. This measure aims to maintain awareness of the regulation and promote its practical application in everyday business.
What challenges do companies see in the implementation?
Dismissal is difficult to impossible with existing employment contracts. It is usually only possible in cases of demonstrably unjustified overpayment or with new contracts/negotiations (termination with notice of change). This must be clarified on a case-by-case basis and also depends on the specific contract of the individual employee. A salary reduction is generally not possible without further ado. A unilateral change to the employment contract by the employer is only possible in exceptional cases, such as termination with notice of change. Legal advice is recommended in these situations.
Do I have to disclose my entire salary grading system?
Will we have the right in the future to know what our colleagues earn?
The new EU Directive stipulates that all employees have a legally binding right to individual information about the average pay for their work within the company. This applies regardless of company size and even if the comparison group consists of fewer than six people performing the same or equivalent work. Companies must inform their employees of this right annually (Article 7, Directive (EU) 2023/970). However, this does not refer to providing individual information about the pay of specific colleagues. If the comparison group is too small and a request for information would reveal individual salaries, member states can also regulate indirect disclosure in a data protection-friendly manner. How this will be implemented is still to be determined.
Do I really have to provide the data of individual employees listed and anonymised in a group?