EU Pay Transparency Directive & Data Protection: What Companies Need to Know Now

EU Pay Transparency Directive & Data Protection: What Companies Need to Know Now

With the EU Pay Transparency Directive (EU) 2023/970 (Pay Transparency Directive), companies will be required to be significantly more transparent about their remuneration systems from 2026 onwards. The aim is to make existing gender pay gaps for equal or equivalent work visible through increased transparency and clearly regulated information rights, and to reduce them effectively. The transposition of the Directive into German law is still pending and must be completed by 7 June 2026. For companies, this entails substantial new obligations – also with regard to data protection and compliance. Employers should therefore address the new requirements at an early stage in order to avoid liability risks.

Current Status: What is the situation in Germany?

In Germany the Pay Transparency Act (Entgelttransparenzgesetz, EntgTranspG) from 2017 already exists. However, its impact to date has been limited. According to the Federal Statistical Office, the unadjusted gender pay gap in 2025 was still around 16%, while the adjusted gap was approximately 6%. The EU Directive therefore sets significantly stricter standards for transparency, enforcement, and sanctions.

Key Elements of the EU Pay Transparency Directive

The Directive obliges Member States to introduce comprehensive transparency rules. The following aspects are particularly relevant for companies:

Transparency Already in the Recruitment Process (Art. 5 Pay Transparency Directive)
Employers must provide applicants with information on the starting salary or the salary range. Questions about previous salary history are not permitted.

Individual Rights of Access to Information (Art. 7 Pay Transparency Directive)
Employees are granted a right to obtain information about their individual pay as well as about average remuneration levels for comparable work, broken down by gender. The information must be provided within a fixed timeframe. It must be ensured that no conclusions can be drawn about individual colleagues—an issue of central importance from a data protection perspective.

Reporting Obligations for Companies (Art. 9 Pay Transparency Directive)
Additional reporting obligations apply depending on the number of employees. Companies with 250 or more employees must comply with the reporting obligation annually from 2027 onwards. For companies with 150 to 249 employees, a three-year reporting cycle applies starting in 2027; for companies with 100 to 149 employees, a three-year reporting obligation applies from 2031. For companies with fewer than 100 employees, reporting is currently voluntary, although national legislators may also provide for more extensive obligations in this area. How the German legislator will implement these requirements remains to be seen.

Joint Pay Assessment (Art. 10 Pay Transparency Directive)
If a gender pay gap of at least 5% exists that cannot be justified by objective, gender-neutral criteria and is not corrected within six months, companies must implement corrective measures jointly with employee representatives.

Data Protection Challenges

The implementation of pay transparency inevitably involves the processing of particularly sensitive personal data. Remuneration data is subject to the requirements of the GDPR. Companies should take action at an early stage in order to minimize legal and economic risks.

Potential Consequences of Violations and Sanctions

Violations may result in claims for damages, including back pay, as well as administrative fines. In addition, a reversal of the burden of proof in favor of employees applies. Exclusion from public procurement procedures is also possible.

Need for Legal Advice

The Pay Transparency Directive is a key compliance and data protection issue. Implementing pay transparency requires the lawful, structured, and GDPR-compliant processing of personal remuneration data. Early legal advice can help minimize liability risks and implement the new obligations efficiently. We would be pleased to support you in the preparation and design of transparent processes.

January 27, 2026