The adoption of the EU Pay Transparency Directive across the European Union will take several years, so for employers, these are the major milestones they need to be aware of.
Did you know? TalentHub published the Baltic Startup Salary Report 2025, which showed not only evidence of a gender pay gap but also a statistical phenomenon observed over several decades, referred to as the paradox of the contented female worker.
Key Deadlines for the EU Pay Transparency Directive
On 17 May 2023, the Pay Transparency Directive was published and entered into force on 6 June 2023.
This officially kicked off the three-year countdown to a phased implementation of the pay salary directive, meaning by 7 June 2026, all member states should have transposed the directive into national law. After that, implementation continues up through to 2031 until it is fully rolled out across the EU. It’s important to know these dates because missing deadlines comes with consequences (not just for businesses but for the governments of the member states), which can lead to regulatory penalties or reputational damage if unaddressed pay gaps become public.
Another reason it’s important for businesses to understand the directive's timeline is that, going forward, when a company is involved in a pay discrimination case, the burden of proof falls on the employer to prove that discrimination did not occur.
Here is the timeline of the full rollout:
6 June 2023
The directive entered into force, initiating the three-year transposition clock, during which member states must enact the minimum requirements into law by 2026. If a country wishes to enact stricter rules than the minimum requirements, it is free to do so, as Sweden's Discrimination Act (enacted in 2008) legally requires Swedish businesses with 10 or more employees to conduct a documented pay survey.
7 June 2026
This was the transposition deadline.
At this point, all 27 member states were supposed to have enacted the pay transparency directive into national law, but as we now already know, many faced delays, with the only countries to have met the deadline being:
- Slovakia
- Italy
- Lithuania
- Malta
If more members had met the deadline, what we would have seen is more countries enacting laws that would have satisfied some of the minimum requirements of the directive, things like:
- Employers must share salary ranges with job candidates
- Employers can't ask about salary history
- Employees can ask what they and others are paid
- Companies above a certain size must report gender pay gaps
The first three requirements would apply to all employers.
7 June 2027
This is the deadline for the first gender pay reports for companies with 250+ employees, which will become an annual requirement. As for businesses employing 150-249 people, they have the same report deadline but will submit follow-up reports only every three years instead of annually.
7 June 2031
This is the due date for the first gender pay gap report for businesses employing 100-149 workers. And they too will have to submit a report every three years.
What happens if a report reveals a gender pay gap?
If a report reveals that an unjustified gender pay gap of more than 5% exists in any job title or role, the business must conduct a Joint Pay Assessment with representatives and resolve it within 6 months.
An unjustified gender pay gap is one that can't be explained by objective, gender-neutral criteria such as:
- Skills
- Qualifications
- Effort
- Responsibility
- Working conditions
If the employer cannot point to one of these factors as the reason for the difference, the gap is considered unjustified.
What Employers Must Report: Pay Gap Data, Scope, and Joint Assessments
Now that you know what the EU pay transparency directive is and its rollout window, let's delve into how (when all the member states start to finally enact it into national law) it’s going to change the way employers will have to operate in the future and their obligations.
Who the Directive Applies To
This directive applies to any organisation, regardless of whether it is in the private or public sector, that is operating in an EU member state.
So, if your HQ is based outside of the EU, but your employees are based in the EU, these new laws are going to affect your business, regardless of whether you’re hiring:
- Through subsidiaries
- Branches
- Remote workers
The reports you need to submit, and the frequency of those submissions, depend on the size of your business (essentially, companies with 100-plus employees are affected). But, regardless of whether you’re hiring one or 100 employees, most of the transparency rules will apply, like having to respond to employee requests for pay information.
What a Pay Gap Report Must Include
If you are a company with 100 or more employees, then you will need to submit a recurring pay gap report, which will need to cover all of the following:
- The mean and median gender pay gap in basic salary
- The mean and median gender pay gap in variable or complementary components, such as bonuses and allowances
- The proportion of male and female workers receiving variable pay components
- The proportion of male and female workers in each pay quartile
- The gender pay gap between categories of workers performing equal work or work of equal value
With these reports submitted, all the information becomes publicly available, allowing employees and job seekers to look into the salaries your company pays.
But ultimately, these reports are designed to determine whether gender pay inequality is occurring, with 5% as the tolerance threshold. Keep in mind that this percentage isn’t calculated across the entire organisation, but rather by job categories. So, if your average is 2% but one job category is 5% or higher, then you will be in breach of the directive.
What a Joint Pay Assessment Involves
So, let’s imagine that you’ve been naughty and a report reveals that you have a gender pay gap of 5% — what happens now?
At this stage, you have six months to address this problem, and after the six-month period, if the problem is unresolved, then you will need to do a Joint Pay Assessment. What this involves, with the cooperation of an employee representative, is performing an:
- Analysis of the pay differences identified in the report
- Examination of the reasons behind those differences
- Implementation of measures to address them
And the report must be made available to workers, their representatives, and the relevant monitoring body
The outcome is essentially one of two things:
- Either the employer adjusts pay to close the gap
- They produce documented, objective evidence proving the difference is genuinely justified and not the result of gender-based discrimination
How to Prepare Your Organisation for Pay Transparency
With most member states behind the June 2026 deadline, this gives you and your company a bit more time to prepare and establish best practices to ensure your business is compliant with the EU Pay Transparency Directive.
And not only do you want to do this early to avoid regulatory repercussions later down the line, but it also allows you to identify and close any gaps you may have behind closed doors, meaning you don’t get exposed to:
- Regulators
- Employees
- Job candidates
Most importantly: It's just the morally right thing to do. If you’re a startup and want to get started with DEI, check out our guide on Diversity, Equity, and Inclusion in Startups: How to Get Started (Including Best Practices).
Reet advises companies planning to have conversations around pay transparency is to be open and honest, "Don't pretend you have an answer when you don't. Explain what you've found, what you understand so far, what you are going to change, and what will take longer. People can handle an imperfect situation much better than they can handle vague or evasive communication."
Phase 1: Assessment
To begin getting your business ready for the transparency directive, you’re going to want to calculate gender pay gaps at both the organisational level and the role-category level, by mapping your entire workforce by:
- Job category
- Function
- Level
Once you have everything broken down into these three categories, you can start calculating the gap with the following formulas:
Mean gender pay gap
(Average male pay − Average female pay) ÷ Average male pay × 100
Median gender pay gap
(Median male pay − Median female pay) ÷ Median male pay × 100
With both of these calculated, you can see whether any categories have exceeded the 5% threshold and investigate whether this is justifiable using objective, gender-neutral criteria.
You should also be reviewing your existing pay-setting and progression criteria, as well as auditing your recruitment process to identify where salary questions are arising, and whether your job descriptions meet the gender-neutral standard already required under the directive.
Phase 2: Foundation Building
With gaps identified, define objective, gender-neutral criteria for pay decisions and translate them into documented salary bands for each role category, applied consistently across the organisation.
On the recruitment side, remove salary history questions, add realistic salary ranges to job postings, and train recruiters and hiring managers on the new requirements. Because employees can request their own pay data and the average pay levels for their category, this phase should also include building a clear internal process for responding to those requests within the required window, and equipping managers to explain the reasoning behind individual pay decisions.
Phase 3: Reporting Readiness
Confirm that HR and payroll systems can actually capture the data a gender pay gap report requires, then run a test report using current data to surface any gaps in the underlying data itself before they become gaps in compliance.
Establish clear ownership for the reporting process going forward. This phase is also the point to bring in employee representatives or works councils, where they are needed. Involving them early builds the collaborative relationship that a Joint Pay Assessment would later depend on, should one become necessary.
Phase 4: Remediation
Where the assessment phase identified unjustified pay gaps, develop a remediation plan and prioritise closing those gaps before the first reporting deadline, rather than after it.
Remediation options range from direct pay adjustments to broader structural changes in job architecture or reward design, and the approach taken (along with the progress made) should be documented as evidence of good-faith compliance.
Getting Your Pay Data Reporting-Ready
Much of what makes the first report difficult isn't the analysis itself but the state of the underlying records.
A few structural changes make pay data usable for reporting rather than requiring manual reconstruction later. Base pay should sit in its own structured field rather than be buried in prose within a contract, and the same applies to variable pay like bonuses, commission, and incentive pay, which should be recorded as distinct, structured figures rather than referenced only by pointing to a separate policy document.
Role data matters too: a job title alone doesn’t reflect "equal work or work of equal value" as the directive defines it, so each role needs a level or internal grouping attached to it, even if that system starts as simple as junior, mid, and senior.
Working time and workplace arrangements should also be made explicit, since a full-time employee and one working 0.75 FTE aren't directly comparable for pay-gap purposes, even if their titles match.
Finally, maintain clear version control and a signed audit trail for contracts and pay changes. A salary increase confirmed only by email is insufficient documentation if the decision is later questioned.
Linking Pay to Performance Data
Reporting on the existence of a pay gap is only half the requirement — employers also need to be able to justify it.
The directive's criteria for assessing equal value include skills, effort, responsibility, and working conditions, and performance can factor in as well, provided it's assessed and documented objectively. This is difficult to demonstrate if performance data lives in a separate system from compensation data — a standalone pay audit can show that a gap exists, but it can't show why.
Building a documented link between performance evaluations and pay decisions, as part of routine HR workflow rather than a one-off exercise, gives you the evidence trail needed to justify pay differences if they're ever challenged.
Strategic Questions Beyond Compliance
Beyond the mechanics of audits and reporting, the directive raises broader strategic questions.
Mandatory salary disclosure changes how recruitment conversations happen, and it's worth considering how much negotiating flexibility this removes and how the hiring strategy should adapt. Giving employees the right to request pay-comparison data will surface questions that HR and management haven't historically had to answer, with implications for both employee relations and retention.
And because pay structures and decision-making criteria can now be scrutinised more directly, it's worth assessing in advance how well your current framework would hold up against an equal pay claim, rather than finding out during one.
"Visibility itself doesn't create trust - explainability does. Employees don't necessarily expect everyone to earn the same, but they do expect differences to make sense. If a company can explain why two people are paid differently, transparency can strengthen trust. If it can't, transparency simply exposes a problem that was already there."
Reet Kaurit
TalentHub Co-founder
How It Changes Job Advertising and the Hiring Process
Beyond the recruitment rules already established, the directive gets more specific about how and what employers must disclose, and clarifies what remains fair game in a hiring conversation.
Employers have flexibility about when they share pay information, so long as it occurs before a job offer is negotiated:
- In the job advertisement itself
- Before the first interview
- Before the employment contract is signed
Disclosing the range in the advertisement is generally the most transparent and practical option, and where recruitment spans multiple levels of the same role, each level needs its own stated range rather than one broad band covering all of them, since an excessively wide range undermines the point of disclosure and invites scrutiny over whether it genuinely reflects the role.
What counts as "pay" here is broader than base salary.
It extends to bonuses, incentive payments, allowances, and non-monetary benefits, covering any component of the remuneration package regardless of what it's called internally, employee benefits such as:
- Company cars
- Vouchers
- Equity or share-based compensation
Where discretionary components are hard to quantify in advance, employers should still disclose their existence as part of the package, even without a firm figure attached.
The ban on salary history questions doesn't extend to salary expectations — employers can still ask what a candidate is hoping to earn, provided the conversation stays anchored to the pre-disclosed range for the role rather than drifting back into what they earned previously.
There's also a practical upside to this shift beyond compliance.
Transparent ranges take on much of the filtering that screening calls used to do, since candidates can self-select out of roles that don't match their expectations before ever applying, and recruiters spend less time on conversations that were never going to convert.
The result is fewer late-stage drop-offs and a hiring process that reaches the right candidates faster. Getting this right internally, though, means rebuilding job templates, retraining hiring managers, and rewriting interview scripts — on top of whatever hiring is already underway.
This is where a partner like TalentHub can take the operational load off an internal team or provide consultation to businesses that need to revamp their hiring processes to ensure compliance with the EU Pay Transparency Directive.
"One positive effect is that compensation becomes less dependent on how confidently someone negotiates. The best negotiator isn't necessarily the best person for the job. Clear salary ranges give candidates a fairer starting point and allow the conversation to focus more on what they bring to the role"
Reet Kaurit
TalentHub Co-founder
How Estonia Is Implementing the Directive
Estonia missed the EU's 7 June 2026 transposition deadline outright.
Minister of Economic Affairs and Industry Erkki Keldo publicly called the directive's approach overly bureaucratic, and asked Brussels to delay entry into force by several years, and said Estonia would rather absorb fines than take on the administrative burden.
The Riigikogu ultimately passed a partial transposition on June 17, 2026, in force since July 13.
It covers only the core candidate-facing rights and a general equal-pay obligation already mirrored in the Gender Equality Act since 2004. Left out currently are:
- A mandatory documented pay structure
- Employees' right to request comparative pay data
- Gender pay gap reporting for larger employers
In the interim, Estonia offers a voluntary tool called Pay Mirror (Palgapeegel), letting employers track their gender pay gap quarterly — though it can't substitute for an eventual official report, since it doesn't capture working hours or pay type.
"From an employer perspective, I understand some of the frustration around additional administration. But I'd separate the bureaucracy from the principle. Clear salary ranges, objective pay criteria and not basing someone's future salary on their previous salary are good hiring practices regardless of whether regulation requires them"
Reet Kaurit
TalentHub Co-founder
How Lithuania Is Implementing the Directive
Lithuania was among the first member states to transpose the directive, enacting Labour Code amendments effective 7 June 2026, with two deadlines delayed:
- Compliant remuneration systems are due by December 31, 2026
- The employee right-to-information regime formally takes effect January 1, 2027
The law's most distinctive feature is its centralised data model.
Rather than employers calculating their own gender pay gap figures, companies submit monthly pay, working-time, and job-category data to Sodra, the State Social Insurance Fund Board, which calculates the indicators itself and returns them to employers and authorities. Reporting cadence follows the EU-standard size tiers, with the periodic public report first due in 2028 for larger employers.
Companies face administrative fines of €400–€6,000 for pay-transparency or reporting violations, while individual HR officers and other responsible staff face separate personal fines of €460–€1,400, which increase with repeat offences. Beyond fines, employees can pursue full back-pay recovery, lost-opportunity compensation, and damages for non-pecuniary and intersectional discrimination harms — with no cap on the amount awarded.
"What I like about transparency is that it doesn't make the hiring decision for you. It forces you to understand and explain the decisions you're already making. In recruitment, that's healthy: if you can't explain why one candidate is offered €4,000 and another €5,000 for comparable work, that's probably a question worth asking even without regulation"
Reet Kaurit
TalentHub Co-founder
