Large companies will soon face mandatory gender pay gap reporting under upcoming legislation implementing EU Directive 2023/970, requiring employers to ensure pay transparency and address systemic wage disparities by 2027.
Understanding the Legislative Framework
The duty to report on the gender pay gap stems from pending legislation designed to enforce equal pay for equal work or work of equal value. This law implements the European Parliament and Council Directive 2023/970, which aims to strengthen transparency and enforcement mechanisms across the EU.
While the implementation deadline is June 7, 2026, the national law will take effect six months after its formal announcement. Consequently, employers should expect these regulations to become fully operational starting in 2027.
Objective of the Directive
The directive is not merely about publicizing salaries; its primary purpose is to address the structural undervaluing of work performed by women. The COVID-19 pandemic highlighted how economic shifts disproportionately impacted female-dominated sectors, further exposing the need for immediate, standardized pay equality.
Defining and Calculating the Pay Gap
The legislation defines the gender pay gap as the difference between the average pay of female and male employees, expressed as a percentage of the average male earnings. Employers must account for both annual pay and hourly rates to provide a comprehensive analysis.
The directive attributes persistent pay gaps to gender stereotypes, the glass ceiling, occupational segregation, and direct or indirect discrimination in the workplace.
Reporting Thresholds and Data Requirements
Employers with at least 100 staff members must submit annual pay gap reports to a monitoring authority by March 31. These reports will require calculating data on total earnings, including bonuses, awards, and variable components, alongside base salary.
Companies must also conduct job evaluations to categorize roles by value. Staff within the same category should receive similar compensation to ensure equity across the organization.
Corrective Actions and Joint Assessments
If a pay gap of 5% or more is identified in any employee category, employers must implement remedial measures by September 30 to close the divide. Employers may justify discrepancies through objective, gender-neutral criteria, such as significant overtime worked.
In certain cases, employers may be required to perform a joint pay assessment in consultation with trade unions to identify the underlying causes of the gap and adjust compensation structures accordingly.