EU Pay Transparency Directive: The Deadline for Transposition Has Passed—What Now?

On 7 June 2026, the deadline for EU member states to transpose the Pay Transparency Directive (the Directive) passed. With only a few member states having transposed the Directive into local law on time, many organisations are questioning what this means for compliance in member states that have not yet transposed the Directive.

In this LawFlash, we explore what employers should consider doing in light of the contrasting implementation status across the European Union.

WHAT DOES THE DIRECTIVE REQUIRE?

The Directive introduces significant changes in relation to pay transparency, imposing a plethora of duties on employers from the initial recruitment stage and throughout the full cycle of the employment relationship.

While the Directive’s requirements are subject to local implementation by each EU member state (the progress of which is fragmented, with certain member states confirming delays and others not having taken any substantive steps to implement the requirements), the overarching requirements imposed in the Directive raise the bar for pay transparency–related practices.

To comply with the Directive, employers should broadly be aware of the key obligations designed to promote pay transparency:

• Equal work and work of equal value: Member states must ensure that employers implement pay structures that guarantee equal pay for equal work or work of equal value, supported by accessible analytical tools, methodologies, and structures designed to help assess and objectively compare the value of work based on gender-neutral criteria.
• Rights to information: Employers of all sizes (regardless of headcount) must be prepared to provide all workers with written information, upon request, about their individual pay and the average pay levels, broken down by sex, for workers performing comparable work or work of equal value.
• Gender pay reporting: Employers must provide information regarding the mean and median gender pay gaps, including:

1. those based on complementary and variable pay components (such as bonuses);
2. the proportion of men and women receiving these pay components;
3. the gender distribution within each pay quartile; and
4. pay gaps across worker categories broken down by basic salary and complementary or variable pay.

Items 1 through 3 must be reported to the relevant authority and shall be made publicly available. Item 4 must be provided to workers and workers’ representatives as well as the labour inspectorate and the equality body upon request.

The thresholds are as follows:

1. Employers with 100–149 employees must publish the report by 7 June 2031 and every three years after;
2. Employers with 150–249 employees must publish the report by 7 June 2027 and every three years after; and
3. Employers with more than 250 employees must publish the report by 7 June 2027 and annually (and it should be noted that some individual countries propose to introduce lower headcount thresholds for reporting).

• Joint pay assessments: Employers subject to the reporting obligation must conduct a joint pay assessment if their report shows a gender pay gap of 5% or more in any worker category that cannot be justified by objective, gender-neutral criteria and remains unaddressed for six months after reporting. Employers are required to remedy unjustified pay differences promptly in cooperation with workers’ representatives, with possible involvement from the labour inspectorate and equality body.

Various other obligations are required under the Directive, including greater transparency relating to pay rates for candidates, a ban on asking candidates about their pay history, and a prohibition on the use of pay secrecy clauses.

WHAT SHOULD ORGANISATIONS CONSIDER DOING NOW?

As of 5 June 2026, the following is clear in relation to current implementation status:

• Countries that have implemented the Directive with an effective date of 7 June 2026: Italy, Slovakia, Lithuania
• Countries that have confirmed a delayed implementation date of 1 January 2027: Netherlands, Sweden, Czech Republic, Denmark

Employers should not underestimate the preparation required to comply with the Directive’s requirements and are encouraged to take steps in advance of local implementation in each country.

Generally speaking, private employers will not be required to comply with the Directive’s requirements absent local implementation. Unless a member state has transposed the Directive into national law, the Directive’s obligations will not specifically apply, meaning employees cannot bring claims against an employer in the country in which they work for failing to comply with the Directive—they would need to rely on the provisions of local implementing legislation to do so.

However, it is possible and increasingly likely that local courts could interpret existing national legislation in accordance with certain provisions of the Directive. This is likely to apply in particular in relation to the concept of “equal pay for work of equal value,” with many member states having similar legal concepts enshrined in existing law.

Against a backdrop of fragmented implementation, it is recommended that employers consider the basis on which they will assess work of equal value prior to legislation coming into force in each member state and prepare an overarching compliance plan that can be tailored according to the final legislation produced in each member state.

WHAT DOES THIS MEAN FOR COUNTRIES OUTSIDE THE EU?

The Directive only applies to countries within the EU and those marked as European Economic Area relevant. However, we have seen countries outside the EU adopt similar measures, with Montenegro having taken steps to broadly implement the Directive’s requirements and the United Kingdom indicating that similar measures are being considered.

Where different standards and competing obligations exist across an organisation’s global footprint, employers may wish to consider implementing greater standards of transparency across their global operations. As awareness of the Directive’s requirements grows across employee populations, employers may wish to prepare for employee’s pay transparency and pay equity–related expectations.

WHAT DOES THIS MEAN FOR EMPLOYERS IN THE UK?

While the Directive does not apply to employers in the UK, it is possible that similar measures are on the horizon. Recent calls for evidence and the UK government’s recent guidance on equality action plans include specific reference to greater pay transparency and mirror similar obligations to the Directive relating to transparency on hire and work of equal value. While the measures are not legal requirements, they demonstrate that the government’s focus is shifting this way.

The recent Tesco Court of Appeal equal pay ruling also provides a wake-up call on employer documentation for employers in the UK.

The decision was made in the context of litigation under existing UK equal pay legislation that requires men and women to be paid equally for performing the same work or work of equal value. In the Tesco case, predominantly female store workers are arguing that their work is of equal value to the work of predominantly male distribution centre workers, and this should be reflected in their pay. The recent ruling in particular relates to the appropriate approach for determining the content of roles being compared as part of the equal value assessment, including the extent to which Tesco’s own documentation (such as training materials) could be used as evidence of what the roles entailed.

While the litigation itself remains highly fact specific, the judgment is an important reminder of the increasing scrutiny being applied to not only pay structures and job evaluation methodologies but also employers’ own documents that describe how roles are to be performed.

Equal pay claims in the UK have often been more heavily focused on whether claimants can identify valid comparators and establish that different roles are of equal value. In large-scale claims, employers have frequently relied on distinctions in job function, location, market rates, or historical pay arrangements to justify differences in pay.

The recent Tesco litigation illustrates the increasing willingness of courts to interrogate the robustness of job evaluation methodologies and the evidential basis for pay differentiation. The decision also highlights the approach tribunals may take to proportionality in large-scale equal pay litigation.

Where roles are performed by large numbers of employees and are governed by standardised processes, training materials, and operational requirements, tribunals may be prepared to use generic evidence to assess the content of those roles rather than requiring granular evidence from each individual claimant.

In practice, this means employers in the UK may face greater scrutiny over:

• how roles are benchmarked and evaluated;
• whether job architecture remains consistent across the organisation;
• the extent to which historical pay practices can still be justified; and
• whether there is sufficient documentation evidencing legitimate, nondiscriminatory reasons for pay differences.

The implications extend beyond the retail sector. Equal pay and pay transparency risks are increasingly relevant across a broad range of industries, particularly where organisations have large workforces, legacy pay arrangements, inconsistent grading structures, and decentralised decision-making in relation to pay.

While the Directive does not apply in the UK, there are many aspects that employers in the UK may want to consider for compliance with existing UK legal requirements. Employers operating in the EU may wish to consider the factors in this case when assessing the value attributed to different roles within their organisations.

HOW WE CAN HELP

Morgan Lewis lawyers stand ready to assist employers in keeping abreast of these changes and any applicable implementation timelines to appropriately plan for the impacts such changes could have on their workforce.