The transition period for the Pay Transparency Directive ends at the beginning of June. With the first flow blog of the year, we prepare you for what is to come: legal and financial matters and a whole lot of change.
What changes will the Pay Transparency Directive bring?
For most people, the first Tuesday in June this year will be a weekday like any other. But for some in Brussels and Berlin – and perhaps also in many companies – it will be a special day. 7 June 2026 marks the end of the transition period for the Pay Transparency Directive (hereinafter: ETRL, download here). Never heard of it? Then it’s high time you did, if this ETRL is to be incorporated into national law by the beginning of June. Given the pace of government work so far, this is to be expected (see below for more information). In this blog, I would like to introduce you to the three main areas in which companies will face challenges, and at the end I will give you a tip for some spring reading.
1. The legal framework
From 2027 onwards, companies with more than 250 employees will be required to report annually on gender pay equality in the previous year (i.e. for the first time in 2026!), referred to as the “pay gap”. This reporting will be done internally within the company and to a national authority. The national authority will forward the data to a European authority, which will publish it. A company’s reputation could suffer if the pay gap is too large. Companies with 150 to 249 employees will only have to report every three years, and those with 100 to 149 employees will also only have to report every three years, starting in 2031. Companies with fewer than 100 employees will likely be exempt from the reporting requirement.
The obligation to provide information applies to all companies.
Furthermore, there is a duty to provide information to employees, regardless of the size of the company: each and every one of them can request written information about the pay gap among those who perform the same or equivalent work. If the person who has received the information suspects gender-based discrimination, the employer bears the burden of proving that this is not the case. If they are unable to do so, they may face claims for damages and sanctions.
These and many other provisions will be transposed into national law. This is because, on the one hand, the ETRL is very clear and decisive in this regard and, on the other hand, the responsible minister, Karin Prien, has made it clear that the Pay Transparency Directive is to be implemented 1:1.
Companies can therefore already prepare themselves for the fact that they will have to provide reliable remuneration statistics for each group of employees performing the same or equivalent work in order to comply with their reporting and disclosure obligations. Without such statistics, the burden of proof is likely to be overwhelming.
2. The salary is determined solely on the basis of the evaluated position.
The phrase “equal or equivalent work” appeared twice in the previous paragraph. This leads to the next challenge, namely answering the question: “What is equivalent work?” This question is more interesting because it encompasses the question of equal work. The answer is: jobs are equivalent if the result of the job evaluation is the same or very close. The ETRL now stipulates that job evaluation must not be carried out arbitrarily, but must be based on at least the following four criteria:
- Competencies,
- workloads,
- responsibilities and
- working conditions.
Further criteria may be added; social skills should not be underestimated.
With this requirement, existing job evaluation systems, whether self-made, specified by collective agreements or purchased from one of the providers, are at risk of not complying with the ETRL. This means that, in addition to the legal obligations set out in the first paragraph, many companies will have to adjust their job evaluation procedures, if not completely revamp them.
3. Many effects + many interfaces = a lot of change
Reliable, legally compliant and well-founded remuneration data as well as job evaluations that comply with the ETRL – even one of these two tasks was enough to bring about real change. And now companies are facing two major challenges within a short period of time. Anyone who thinks that internal or external legal advice on the one hand and a few rounds of discussions with HR and financial accounting on the other will be enough to get the job done is overlooking the waves of fear, greed, outrage and fairness debates that the ETRL will trigger. Surfing these waves and not being caught up and dragged down by them is the feasible art of change management, which queries, bundles and balances the many different expectations and translates them into measures.
A tip for spring reading on the topic of pay transparency
This is where flow consulting comes in, or more precisely: a publication in March 2026. That is when my book will be released, in which I highlight the legal, valuation and change-related aspects of the ETRL. Because we at flow have prepared ourselves for the directive so that we can support you. Click here to view the book (in german language): „Klares Grading-System – Transparentes Gehalt. Erfolgreiches Change-Management zur Umsetzung der Entgelttransparenz“ to buy.
If you don’t want to let the time until March pass by unused (for which there are many good reasons), please contact me. I can tell you now what you will only be able to read in March.
Best regards and a good start to the “ETRL year” 2026
Featured image generated with: https://chat.mistral.ai/chat
