As the date for the implementation of the European Union (EU) Pay Transparency Directive in June 2026 draws closer, there is much that employers can do now to prepare. By focusing on the principle of equal pay for equal work or work of equal value between men and women in advance of the national transposition deadline, employers can effectively manage risk, minimise disruption and ensure alignment of employees and their representatives.
Once in force, employers must provide information regarding the mean and median gender pay gaps if they meet the following thresholds: employers with 100-149 employees must publish a report by 7 June 2031 and every three years thereafter; employers with 150-249 employees must publish a report by 7 June 2027 and every three years thereafter; and employers with more than 250 employees must publish a report by 7 June 2027 and annually thereafter.
To prepare, it is recommended that employers run test analyses to establish whether there are significant pay gaps, and determine if these can be explained by objective, gender-neutral factors to calculate adjusted gaps. If employers are not able to do so, and there is a gender pay gap of 5% or more in any category of worker which remains unaddressed six months after reporting, they will be required to conduct a joint pay assessment.
Employers should establish categories of worker by reference to the same work, or work of equal value. This might start with a review of the existing job architecture to ascertain whether there are appropriate job levels across the business which can be utilised to create the requisite categories of workers performing the same work or work of equal value. Analysis of pay across these categories will inform pay gap reporting and other requirements under the directive.
For example, upon request, employers of all sizes will be required to provide workers with written information about their individual pay and average pay levels, broken down by sex, for comparable work or work of equal value. Workers can request clarification if the information is inaccurate or incomplete. This is a crucial aspect of the directive for all employers to address ahead of the implementation deadline in 2026.
The implementation of the directive is likely to result in an increase in pay equity litigation and will impact current best practice. It is recommended that employers act now to consider establishing a legally privileged framework to seek advice regarding their preparations, including those set out above.
Louise Skinner is a partner and Phoebe Fardell is an associate at Morgan Lewis
