What Employers Must Know About Pay Transparency in 2026

What Employers Must Know About Pay Transparency in 2026

EU member states must implement the European Pay Transparency Directive (referred to hereinafter as EU directive) into national law no later than June 7, 2026 (effective date). Even though the German government has not yet presented a draft bill, it is already foreseeable that the new transparency and reporting obligations will have a significant operational impact on almost all Employers in Germany.

Starting with the effective date, Public Employers may be subject to the EU Directive’s requirements immediately. However, even Private Employers cannot rely on waiting until the national implementation: starting from the effective date, German courts will generally be obliged to interpret German Law in accordance with the mandatory requirements of the EU Directive. The key provisions of the EU Directive will therefore be applicable from June 2026 at the latest.

1. Pay Transparency During Recruitment

In accordance with the EU Directive, Employers shall provide applicants with transparent information on remuneration early in the application process, for example by specifying a specific entry-level salary or salary range.

At the same time, it is expressly clarified that questions about an applicant’s previous salary are not permitted.

2. Expanded Employee Information Rights

In particular, Employees will have a comprehensive right to information about:

• their individual salary and
• the average or median salary earned by colleagues of the opposite sex with comparable activities.

Providing this information may involve considerable preparation and administrative work for Employers.

3. Staggered Reporting Obligations on the Gender Pay Gap

Companies shall also be required to regularly report on gender pay gaps in the future:

• 100–149 Employees: first by June 7, 2031, after that every three years
• 150–249 Employees: first by June 7, 2027, after that every three years
• 250 or more Employees: first by June 7, 2027, after that annually

4. Correction-measures and common evaluation of remuneration

If unjustified pay differences are ascertained, especially in the case of a pay gap of at least five percent, Employers are obliged to carry out a comprehensive evaluation of remuneration, if necessary, together with Employee Representatives, and to take appropriate corrective measures.

5. Increased Liability Exposure and Sanctions under the EU Pay Transparency Directive

The EU directive stipulates a reverse of the burden of proof in favour of Employees, comprehensive claims for damages, as well as significant sanctions. Therefore, insufficient preparation can result in considerable financial and reputational risks.

Conclusion: Early preparation is crucial

Therefore, Employers should start now by:

• reviewing and assessing the specific legal requirements that are expected to apply to them, including any participation rights of Employee Representatives,
• conducting a comprehensive analysis of their remuneration systems and pay structures,
• reviewing internal processes, IT systems, and allocation of responsibilities,
• evaluating existing works agreements or service agreements,
• establishing objective, transparent, and gender-neutral remuneration criteria,
• adapting HR, payroll, and reporting systems,
• providing specific training for HR and Managers, and
• engaging Employee Representatives at an early stage in the process.

We are happy to support with a legally compliant, practical, and business-specific implementation of the upcoming pay transparency requirements. Our services include, in particular, the review and assessment of remuneration systems and pay structures, coordination and consultation with Employee Representatives, and conflict prevention.