The Pay Transparency Directive - what does it mean?

The EU Pay Transparency Directive must be implemented in all member states by 7 June 2026, including Denmark. The overall aim of the directive is to reduce the gender pay gap, but it will also have a large impact on employees' right to access salary information from their employer. 

The background to the directive

The explanatory memorandum of the proposal for the Directive states that, despite the already existing legal framework^[1], effective implementation and enforcement of the equal pay principle in practice remains a challenge in the EU and that lack of pay transparency has been identified as one of the main obstacles in this regard. The Directive therefore aims to tackle the persistent insufficient enforcement of the fundamental right to equal pay and ensure that this right is respected across the EU by introducing pay transparency standards to enable employees to assert their right to equal pay.

The proposed directive pursues these objectives by introducing pay transparency within organisations and promoting the use of key concepts related to equal pay, including 'pay' and 'work of equal value' - strengthening enforcement mechanisms.

What does the Pay Transparency Directive mean in concrete terms?

(i) Salary structures/categorisations

When the directive is implemented into Danish law, all companies, regardless of size, must be able to categorise their different positions into groups that perform the same work or work of equal value.

In addition, companies must describe the objective and gender-neutral criteria and other job-relevant factors that form the basis for wage formation at the company. 

(ii) Transparency and employee rights to salary information

The company must provide its employees with an easily accessible description of the criteria used to determine salary levels and career development for employees. The criteria must be gender-neutral.

Employees also have the right to receive information about their individual salary levels and the average salary levels, broken down by gender, of categories of employees doing the same work as them or work of similar value to theirs. The company must actively inform all employees each year of their right to receive this information. 

(iii) Payroll inspection

If the company report shows a pay gap of more than 5 per cent between men and women without the company being able to justify this difference in objective gender-neutral terms, a joint salary review with the company's employee representatives will be required.

(iv) Reverse burden of proof

If an employee raises a claim regarding equal pay, the directive introduces the so-called reverse burden of proof. This means that it is the employer who has the burden of proof that any difference in pay is not due to gender, if the employee proves facts that give reason to believe that there has been direct or indirect discrimination. It is also stated in the directive that any remaining doubt must be in favour of the employee.

(v) Pre-employment salary transparency

Applicants for a position have the right to receive information from the potential employer on the initial salary level or salary range, based on objective, gender-neutral criteria and relating to the position in question. Such information must be stated in a published job advertisement or otherwise provided to the applicant prior to the job interview without the applicant having to request it.

Additionally, an employer is not allowed to ask an applicant about the salary history of their previous employment(s). 

(vi) Special reporting rules for larger companies

Companies with more than 100 employees must report on the pay gap between men and women doing the same work or work of equal value. Companies with more than 250 employees must report this every year, while companies with between 100 and 249 employees must report the pay gap every three years. 

(vii) Compensation and sanctions

The member states are obliged to ensure that an employee who has been subject to discrimination in relation to the equal pay rules has the right to claim and obtain compensation. The compensation must provide real and effective compensation for the loss and damage suffered in a way which is dissuasive and proportionate to the damage suffered.

As for other remedies, the Directive states that the member states shall lay down rules on these but that the penalties must be effective, proportionate and dissuasive. 

Bird & Bird's comments 

Bird & Bird will follow the implementation of the directive closely and continuously update with corresponding newsletters. It is our expectation that the Danish government's implementation of the Pay Transparency Directive will be almost identical to the current wording of the directive. All employers should therefore already now consider the content of the directive, as there is a risk that the directive may cause significant administrative burdens when implemented under Danish law. 
 

^{[1] The right to equal pay for women and men for equal work or work of equal value and the requirement to ensure equal pay is one of the fundamental principles of the EU in the Treaty of Rome is set out in Directive 2006/54/EC (the "Recast Directive")1, as complemented in 2014 by a Commission Recommendation on pay transparency (the "2014 Recommendation").}