EU Pay Transparency Directive 2023/970: Key Obligations

EU Pay Transparency Directive 2023/970 marks a significant step forward in the European regulatory framework on equal pay. It does not merely reaffirm the existing principle set out in Article 157 of the TFEU (Treaty on the Functioning of the European Union), according to which:

Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.
Article 157(1), TFEU

While this principle has been in force for decades, Directive 2023/970 introduces concrete mechanisms designed to make pay equality measurable, transparent, and enforceable. Equal pay between men and women performing the same work or for work of equal value is therefore no longer a purely declaratory objective. It becomes a verifiable outcome, supported by enhanced transparency requirements that directly affect job evaluation systems, pay policies, and HR processes throughout the employment lifecycle.

Entry into Force of EU Pay Transparency Directive and Its Transposition in Italy

EU Directive 2023/970 was adopted in May 2023 and will become directly applicable to companies from 7 June 2026, by which date Member States are required to transpose it. By that deadline, national legislation must be introduced or existing provisions amended in order to:

Define accessible tools or methodologies enabling employers and social partners to establish and use gender-neutral job evaluation, comparison, and classification systems
Regulate employers’ information obligations
Set out roles, responsibilities, and controls
Establish sanctions
Coordinate the interaction with existing legislation (e.g. equal opportunities law, transparency and privacy rules)

Key Innovations Introduced by EU Pay Transparency Directive

The regulatory framework is structured around three main areas.

1. Pay Transparency at Recruitment Stage and Throughout the Employment Lifecycle

The Directive applies both at the access-to-employment stage and during the management of the employment relationship, defining employers’ information obligations regarding pay and the criteria used to determine it.

Key elements include:

Disclosure of the pay level or pay range during the recruitment process
Prohibition on requesting a candidate’s pay history
The employee’s right to know the pay criteria applied and those governing pay progression
The employee’s right to access average pay levels for men and women performing the same work or work of equal value

Within the Directive, the concept of work of equal value plays a central role. Employers are therefore required to implement pay structures that allow the value of different jobs within the organisation to be determined in a gender-neutral manner.

This assessment must be based on non-discriminatory job classification and evaluation systems, enabling comparison of roles using objective criteria such as skills, effort, responsibility, and working conditions.

This requirement entails a thorough review—and potentially a revision—at company level of existing job evaluation systems and pay policies, with possible impacts on internal organisation, career paths, and reward systems.

2. Gender Pay Gap Reporting: Frequency, Content, and Thresholds

Companies with ≥ 250 employees: annual reporting starting from 7 June 2026
Companies with 150–249 employees: reporting every three years starting from 7 June 2027
Companies with 100–149 employees: reporting every three years starting from 7 June 2031

This reporting goes beyond the communication of aggregated data and requires segmentation by comparable job categories and analysis of pay components. In particular, reports must include:

The gender pay gap and the median gender pay gap
The distribution of workers across pay quartiles
The gender pay gap in variable pay components
The gender pay gap—with reference to fixed, variable, and complementary components—for categories of workers performing the same work or work of equal value

Joint Pay Assessment

Where, within the same job category (under the Directive’s definition, workers performing the same work or work of equal value), a gender pay gap of 5% or more emerges that is not justified by objective, gender-neutral criteria and is not corrected within six months of publication of the report, the company must carry out a joint pay assessment with employee representatives.

This process involves an analysis aimed at:

Examining the gender composition of the category
Comparing average pay levels of male and female workers, for both fixed and variable components
Identifying and clearly explaining the causes of the discrepancies
Assessing any impact on career progression and bonuses following return from leave
Defining corrective measures
Monitoring the effectiveness of the measures over time

The outcome of the assessment must be communicated to employees and their representatives. It may also be transmitted to the national monitoring body and, if requested, made available to the Labor Inspectorate and the equality body.

Corrective measures may also include revising job classification systems and job evaluation and weighting criteria, ensuring they are gender-neutral and capable of preventing direct or indirect discrimination.

Gender Pay Gap Reporting thus becomes not only an information tool, but also a trigger for internal dialogue and structured management of potential issues.

3. Strengthened Safeguards and Resulting Liabilities

Compared with the framework already set out in the Italian Equal Opportunities Code (Legislative Decree No. 198/2006), Directive 2023/970 introduces a significant strengthening of judicial and administrative protections safeguarding the principle of equal pay between men and women, expanding procedural enforcement mechanisms.

The Directive requires Member States to ensure effective and facilitated access to justice for workers who consider themselves harmed by a breach of the equal pay principle, even after termination of the employment relationship, including exemption from legal costs, even in the event of an unsuccessful claim.

Key Enforcement Tools and Strengthened Guarantees

The Directive:

Strengthens the reversal of the burden of proof, placing on the employer the obligation to demonstrate the absence of direct or indirect pay discrimination where:
– the worker(s) alleging a breach of equal pay have submitted facts before a competent authority or national court giving rise to a presumption of discrimination; or
– the employer has failed to comply with the pay transparency obligations set out in the Directive (Articles 5, 6, 7, 9, and 10).
This provision significantly expands and reinforces the current evidentiary regime under national law, with a substantial impact on employers’ defence strategies.
Extends standing to bring actions, granting the right to initiate or support administrative or judicial proceedings not only to individual workers, but also to trade unions, equality bodies, and workplace union representatives, as holders of a legitimate interest in protecting pay equality. These bodies may act on behalf of or in support of workers, in accordance with national law.
Introduces a strengthened sanctions regime, requiring Member States to adopt effective, proportionate, and dissuasive sanctions, as well as measures ensuring full compensation for damage suffered. Compensation must cover both material and non-material damage, loss of opportunity, and recovery of back pay, including bonuses and benefits.
Enhances the investigative powers of competent authorities and national courts, which may order the disclosure of any relevant evidence in the employer’s possession, including confidential information, subject to appropriate safeguards for confidentiality.
Affects public procurement, introducing measures to ensure compliance with the equal pay principle, including the exclusion from tender procedures of economic operators that fail to meet the obligations laid down by the legislation.

Implications for Companies

EU Pay Transparency Directive represents a transformation in how pay equity is understood and applied. It entails a revision of the criteria, processes, and documentation underpinning pay management. Transparency, reporting, evaluation, and shared accountability with employee representatives define a model oriented towards fairness, dialogue, and measurability.

For companies, this scenario presents challenges but also opportunities: fully integrating pay management with organisational strategy, thereby helping to enhance skills, trust, and sustainability in workforce management. Moreover, the Directive requires less structured organisations to systematise pay policies, moving away from a collection of individual decisions.

How to Prepare for the Transposition of EU Pay Transparency Directive 2023/970

Understanding the implications of the Directive today means being ready for its national transposition. Companies can make effective use of the lead-in time by starting to analyse their workforce, with particular attention to job classifications and pay structures.

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