Remuneration and Retention · Priority topic
Implementing pay transparency
By Redaktion techport.ai, HR-Beratung · Last updated on
The EU Pay Transparency Directive (EU-Entgelttransparenzrichtlinie) should have been transposed into German law by 7 June 2026. This has not happened. The responsible federal ministry announced in June 2026 that the implementation law will not come until 2027, and no draft was available by summer. Many companies interpret this as a postponement. This is a misconception, for three reasons.
Firstly, on 23 October 2025, the Federal Labour Court (Bundesarbeitsgericht) ruled that for the presumption of pay discrimination, it is sufficient if a single person of the opposite sex earns more for equal or equivalent work. The employer must then explain the difference with objective criteria; otherwise, they owe the salary of the comparator person, not the median. Secondly, since 8 June 2026, German courts must interpret national law in light of the Directive, even without an implementation law. Thirdly, a remuneration structure that meets these requirements takes twelve to eighteen months to build.
What the Directive requires
- Applicants will be informed of the starting salary or salary range before the interview. Questions about previous salaries are inadmissible.
- Employees are entitled to information about their own pay and the average pay, broken down by gender, for groups performing equal or equivalent work. The answer must be provided within two months.
- Employers must make the criteria for pay and pay progression easily accessible. They must be objective and gender-neutral.
- Employers with 250 or more employees report annually on the pay gap; those with 150 report every three years; those with 100 or more will report from 2031. If the gap in a group is at least five percent and cannot be explained, a joint pay evaluation with the employee representative body will follow.
- The burden of proof lies with the employer. Confidentiality clauses regarding salary are ineffective.
How you can tell
- Salaries have evolved historically. For the same level, there are discrepancies of 30 percent without documented justification.
- No one within the company can answer the question of what constitutes equivalent work.
- A request for information under the existing Pay Transparency Act (Entgelttransparenzgesetz) takes weeks because data is manually compiled.
- Management assumes that collective bargaining agreements resolve the issue. They resolve it for basic salary, but not for allowances, bonuses and non-tariff employees.
Our approach
- Evaluate roles. Based on job architecture, we evaluate roles according to gender-neutral criteria: knowledge, responsibility, workload, working conditions. This forms the basis for groups of equivalent work.
- Calculate the actual analysis. We calculate the pay gap for each group, adjusted and unadjusted, for all pay components. This helps you identify areas requiring explanation before someone else calculates it.
- Define salary bands and criteria. For each level, a band is created with an entry, middle and end point. We document which criteria determine the position within the band: experience, performance, market conditions. These criteria are what you will publish and present in court in the future.
- Adjust and embed in the system. Unjustified differences are addressed with a plan and budget over one to three years. Bands, levels and criteria become master data in the HR system; information and reports are generated at the touch of a button.
What you gain
- You will understand your pay gap and its causes before a court or report discloses it.
- Salary decisions follow a structure that unburdens managers and no longer rewards negotiation skills.
- Information and reports are system functions, not projects.
From our Projects
In pay gap analyses, we rarely find the largest unexplained differences in basic salaries, but almost always in allowances, bonuses, and non-tariff remuneration. Therefore, companies bound by collective agreements are not automatically on the safe side. Our second finding: building a job architecture, job evaluation, and pay bands in a medium-sized company takes twelve to eighteen months. Those who need to report in 2027 should have started in 2026.
Good to know
The text of Directive (EU) 2023/970 is available on EUR-Lex. Until its implementation, the Entgelttransparenzgesetz von 2017 (Pay Transparency Act of 2017) applies, providing a right to information in companies with more than 200 employees and a reporting obligation for employers subject to reporting requirements with more than 500 employees. For public employers, employees have been able to invoke the Directive directly since the deadline expired. We keep the implementation status up-to-date in our regulatory radar.
Frequently asked questions
We are bound by collective agreements. Does this still affect us?
Yes. Collective agreements regulate job classification, but not the assignment of individual persons, not allowances, and not non-tariff salaries. It is precisely in these areas that the differences arise which the Bundesarbeitsgericht (Federal Labour Court) refers to.
Do we have to disclose individual salaries?
No. The Directive requires average values for groups, disaggregated by gender, and the criteria. Individual salaries remain confidential. However, employees are permitted to disclose their own salary, and this cannot be prohibited.
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Further reading
Back to the field Remuneration and Retention
Sources
- Directive (EU) 2023/970 on strengthening pay transparency, EUR-Lex
- Entgelttransparenzgesetz (EntgTranspG) (Pay Transparency Act)
- Bundesarbeitsgericht (Federal Labour Court), judgment of 23 October 2025, 8 AZR 300/24 (equal pay, comparative analysis)
- Haufe: Postponement of the implementation of the EU Pay Transparency Directive
- Legal Tribune Online: Consequences of the delayed implementation of the Pay Transparency Directive