Update – Implementation of the EU Pay Transparency Directive

Final report of the expert commission on a "low-bureaucracy implementation"

The EU Pay Transparency Directive (EUPTD) has to be implemented into German law by 7 June 2026. The expert commission aiming at "low-bureaucracy implementation" of the EUPTD presented its final report and recommended a 1:1 implementation. Although this report is not legally binding, it provides important guidance for the legislative process. We have summarised the most practically important points below:

Reporting obligation on pay differences

The reporting obligation on pay differences shall apply to employers with at least 100 employees and shall refer to the actually paid remuneration (so-called actual pay). In principle, all remuneration components shall be taken into account, with the following benefits being exempt in particular:

• Benefits provided by third parties other than the contractual employer (e.g. stock options granted by group companies)

• Severance payments

• Benefits in kind of low value (e.g. discounted canteen meals)

The formation of comparison groups for identifying pay differences shall be based on EUPTD criteria, namely skills, workload, responsibility, and working conditions. Separate documentation shall be possible for companies with multiple locations or pre-existing contracts.

The works council shall have a mandatory co-determination right when establishing criteria and determining comparison groups.

It shall be possible to fulfil the reporting obligation on a group-wide level, although the commission was unanimous on whether indicators may be aggregated across the group.

Employees' right to information

In future, for the first time on 7 June 2027, employees shall be able to request information on their individual and the average gross annual and gross hourly pay of the comparison group, but not more than once a year. It shall be possible to provide the information without breaking it down into specific remuneration components. The average value, rather than the median, shall be used as a benchmark. The use of fictional or hypothetical comparative persons is rejected by the majority of the commission.

It shall be possible to provide the information in text form, i.e. digitally. The competent federal ministry shall provide online forms. A three-year limitation period shall apply to the right to information. Employers with fewer than 50 employees shall be exempt from the obligation to provide information on pay development criteria.

Redress procedure

Pay differences shall be justifiable by a comprehensive but non-exhaustive list of objective, gender-neutral justification grounds. Such justification grounds may also be related or relatable to individuals (e.g. local differences, market conditions, preservation of acquired rights after restructuring).

If an unjustified gender-specific pay gap is identified in the company, the commission recommends implementing a two-stage redress procedure within a "reasonable period" (e.g., 6-12 months):

1. Initial discussion: The employer shall inform and consult with competent works council in a timely manner (e.g. within six weeks).

2. Action plan: If immediate remedial measures are not implemented, a concrete 'roadmap' with specific deadlines shall be agreed upon.

According to the majority of the commission, the employee representative body to be involved shall be the competent works council, even if the employer is bound by a collective bargaining agreement. However, the works council shall only be informed and consulted and shall not have any "full" co-determination rights, i.e., the works council's approval should not be required. In companies without a works council, there shall be no obligation to establish new employee representative bodies, and the involvement of external bodies (e.g. equal treatment offices) shall be voluntary.

The commission also considered whether a pay gap of less than 5% is sufficient to refute the presumption of gender-based pay discrimination.

Privileges for companies bound by collective agreements

The majority of the commission is in favour of granting privileges to employers bound by collective agreements, for example by presuming the appropriateness of collective agreements and allowing longer deadlines for information requests, redress procedures and reporting obligations.

Sanctions

The final report does not contain any specific statements on sanctions in case of violations. However, the EUPTD envisages compensation for affected employees and requires EU Member States to impose effective, proportionate and dissuasive sanctions. It remains to be seen how the legislator will address this issue in the further legislative process.

What happens next?

The legislative procedure is expected to be initiated in early 2026. The competent federal ministry has announced to present a draft bill in spring 2026. In the interest of a legally compliant implementation with actually as little administrative burden as possible, it is to be hoped that the legislator will clarify some of the controversial issues. This particularly includes the following points:

• The definition of the term "pay" and the requirements for forming comparison groups

• The competent employee representative body (particularly in the context of the redress procedure)

• The significance of pay reports for the burden of proof in court proceedings

Companies should address the requirements of the EUPTD as soon as possible and prepare their pay structures and HR systems for the upcoming implementation of the EUPTD.