Pay transparency 2026: How employers can position themselves at an early stage

Overview
For employers, pay transparency is becoming a key issue in sound HR compliance. Under current German law, employees already have rights to equal pay and, in certain cases, to information under the German Pay Transparency Act (Entgelttransparenzgesetz, “EntgTranspG”). With a view to the EU Pay Transparency Directive, which must be implemented by 7 June 2026, companies benefit from reviewing their remuneration systems, recruitment processes and documentation standards for any necessary adjustments at an early stage.

The current position under applicable law

Under Article 157(1) TFEU and sections 3(1) and 7 EntgTranspG, men and women are entitled to equal pay for equal or equivalent work. This applies to every individual component of remuneration, including bonus payments and benefits in kind.

To verify compliance with the equal pay requirement, employees in companies that generally employ more than 200 individuals have an individual right to information against the employer (section 10 et seq. EntgTranspG). To exercise this right, employees must first identify the same or an equivalent role (so-called comparator role). The employer’s obligation to provide information covers the remuneration for the comparator role and the criteria and procedures used to determine remuneration.

According to a recent Federal Labour Court decision, a single higher-paid employee of the opposite sex within the comparison group may be sufficient to trigger a presumption of discrimination (BAG, judgment of 23 October 2025 — 8 AZR 300/24). In that case, employers must prove that the pay difference is based on objective, gender-neutral criteria.

If that proof cannot be provided, the disadvantaged employee’s pay must generally be increased to the level of the better-paid comparator (“upward adjustment”).

Employers that generally employ more than 500 people and are required to prepare a management report under sections 264 and 289 German Commercial code (“HGB”) must also prepare a report on equality and equal pay (section 21 EntgTranspG). That report must set out the measures taken to ensure equal pay for women and men. If no such measures have been taken, that absence must be explained.

What additional impetus the EU Pay TransparencyDirective provides

The EU Pay Transparency Directive of 10 May 2023 (Directive (EU) 2023/970) tightens the requirements for employers. The Directive, which must be transposed into national law by 7 June 2026, focuses on five key points:

1. Greater transparency even during the application process

Applicants should receive information about the starting salary or salary range for the advertised position as early as the application process. In addition, employers will generally not be permitted to ask applicants about their current or previous remuneration.

2. Objective and gender-neutral remuneration criteria

Remuneration structures must be designed so that direct and indirect gender-based disadvantages are excluded. Clear criteria such as qualifications, workload, responsibility and working conditions are decisive. Proper documentation of these criteria not only increases legal certainty, but also provides a better basis for development discussions and pay decisions.

3. Expanded employee information rights

Employees should be able to obtain information about their own pay level and average pay levels, broken down by gender and based on groups of employees performing the same or equivalent work. In principle, the obligation to provide information shall apply regardless of the size of the undertaking.

4. New reporting requirements depending on company size

For employers with more than 100 employees, the Directive gradually introduces equality and equal-pay reporting requirements: annually from 7 June 2027 for companies with 250 or more employees, every three years from 7 June 2027 for companies with 150 to 249 employees, and from 7 June 2031 for companies with 100 to 149 employees.

5. Joint pay assessment in the event of notable gaps

If there is a gender-specific pay gap of at least five per cent that is not objectively justified and is not remedied within six months, the Directive requires employers to carry out a joint pay assessment together with the relevant employee representative body.

How employers can shape implementation

Implementation of the EU Directive in Germany, most likely by way of an amendment to the Pay Transparency Act, is still pending. Nevertheless, it is worthwhile for employers to prepare early for the imminent change in the legal framework.

These adjustments also offer advantages in recruitment: anyone who works with salary ranges, sharpens job profiles and standardises interview guidelines already improves the candidate experience while also making internal coordination between HR and the specialist departments easier.

Specific steps to adapt to the new legal framework
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1. Map remuneration structures. Record base salary, variable pay, allowances, benefits and special payments not only formally, but by reference to actual decision-making practice.
2. Define comparison groups. Check which activities within the company are considered the same or equivalent. A robust job architecture creates transparency and makes it easier to provide information later on.
3. Eliminate unjustified pay disparities. If unjustified gender pay gaps are identified, they should be addressed proactively.
4. Adapt recruitment processes. Job advertisements, interview guidelines and approval processes for salary offers should be reviewed for transparency, documentation and non-discrimination.
5. Train managers and HR. Shared standards create certainty and ease operational decision-making.
6. Prepare documentation. The better the criteria and decisions are documented, the easier it is to explain, review and, where necessary, correct differences.

Conclusion

Many companies primarily associate pay transparency with additional regulation. However, early preparation also brings tangible benefits: clear remuneration structures reduce legal risks, facilitate recruitment and support transparent internal communication about performance and development.

Would you like to future-proof your remuneration structures?

We help employers to structure remuneration systems in a legally robust and practical way, to deal with information requests and Equal Pay questions, and to align HR processes with future legal requirements at an early stage.