Pay Transparency Directive: Key Obligations for Employers

Directive (EU) 2023/970 (the “Pay Transparency Directive”) introduces, at the European Union level, a strengthened framework for the implementation of the principle of equal pay for equal work or work of equal value between men and women, while also establishing obligations regarding greater pay transparency and enforcement mechanisms. Its purpose is to reduce the gender pay gap through increased transparency of pay structures and processes.

EU Member States, including Slovenia, are required to transpose the Directive into national legislation by 7 June 2026. According to currently available information, a delay in implementation is expected in Slovenia, with transposition likely to be completed by the end of 2026.

As the key obligations under the Directive are already known, irrespective of any delay in national implementation, we recommend that employers begin reviewing and updating their pay structures, job classification frameworks, and criteria for evaluating job complexity, determining pay, and career progression as soon as possible.

1.     Employer Obligations Regarding Pay Transparency

a)    Transparent Pay Structures

The Directive requires all employers to establish transparent and gender-neutral pay structures based on objective criteria such as job complexity, responsibility, skills, competencies, and working conditions, with the aim of ensuring equal pay for equal work or work of equal value.

In practice, this means that every employer will need to implement a pay structure regulating base salary levels based on an evaluation of job complexity. Employers with 50 or more employees will also be required to ensure transparency regarding promotion criteria.

In addition, contractual clauses preventing employees from disclosing information about their pay will be prohibited and unenforceable.

b)    Pay Transparency Prior to Employment

Employers will be required to provide candidates, either in the job advertisement or during the recruitment process, with information regarding the initial salary or salary range for the position concerned, as well as the applicable collective agreement.

Even where exceptions to job posting requirements apply, candidates must still receive this information sufficiently in advance of the interview process (e.g., in the interview invitation or by email).

2.     Right to Information

Employees will have the right, at any time, to request information regarding their individual pay level and the average pay levels, broken down by gender, for comparable positions or categories of employees performing the same work or work of equal value. The right to information will therefore not include general or unrestricted access to data relating to all employees or categories within the employer’s organisation, but only to information relating to comparable positions or to the category in which the individual employee is classified.

Employers will not be permitted to disclose information where doing so would enable the identification of an individual employee (e.g., where there are 3 or fewer employees of one gender within the same employee category). In such cases, access to the information will generally be limited to supervisory authorities and employee representatives advising employees, without disclosing the actual pay levels of individual employees. Where there is only one employee within a particular category, the comparison must nevertheless be ensured using other relevant data (e.g., former employees, affiliated companies within the same corporate group, statistical data).

Employers will also be required to regularly inform employees of this right to information, at least once per year. In practice, it is therefore advisable for employers to prepare a standardised notification in advance.

3.     Gender Pay Gap Reporting

Employers with 100 or more employees (as of 31. December) will be required to regularly report on the gender pay gap. The gap will be calculated based on average pay levels by gender within categories of employees performing the same work or work of equal value, with the aim of identifying potential systemic pay disparities:

·         Employers with 250 or more employees will have to submit their first report by 7 June 2027 and annually thereafter;

·         Employers with 150 to 249 employees will have to submit their first report by 7 June 2027 and every three years thereafter;

·         Employers with 100 to 149 employees will have to submit their first report by 7 June 2031 and every three years thereafter.

The calculation of the gender pay gap is performed using the following formula:

((average male salary – average female salary) / average male salary) × 100

Example: If the average salary for men in a given category is EUR 2,600.00 and the average salary for women is EUR 2,400.00, the gender pay gap amounts to 7.69%.

Information regarding the gender pay gap will also have to be provided to employees and employee representatives, and, upon request, to supervisory authorities.

Where differences are identified, employers will need to justify them based on objective, gender-neutral criteria; otherwise, the pay gap will need to be remedied.

The calculation of the gender pay gap and the obligation to justify or eliminate identified differences apply regardless of the number of employees employed by the employer and independently of reporting obligations.

4.     Joint Pay Assessment

If an employer will identify a gender pay gap of at least 5% within a category of employees, which cannot be justified by objective and gender-neutral criteria and is not remedied within 6 months, the employer will be required to carry out a joint pay assessment together with employee representatives.

A joint pay assessment is a corrective measure intended to enable a detailed analysis of the causes of pay disparities and the adoption of measures to eliminate and prevent such disparities in the future.

5.     Enforcement of Employees’ Rights

The Directive strengthens the procedural position of employees by introducing a reversal of the burden of proof. Consequently, in any potential dispute, the employer will bear the burden of proving that it has not violated the rules on equal pay and pay transparency.

Employees who have suffered gender-based pay discrimination will be entitled to claim full compensation, including the pay difference to which they would have been entitled had the discrimination not occurred, together with default interest.

Member States are required to provide for effective, proportionate, and dissuasive penalties, including administrative fines and other sanctions, for breaches of the Directive. Given the expected short period between the publication and entry into force of the national implementing legislation, timely preparation for practical implementation is strongly recommended.

For further information, a review of existing arrangements, or test analyses of pay structures and potential pay gaps, please feel free to contact us.

Your KM Consulting team