EU Directive 2023/970 and Pay Transparency

A complete guide to 2026 obligations  

What is the EU Pay Transparency Directive (2023/970) 

Directive (EU) 2023/970 on pay transparency is a European regulation adopted in 2023 with the aim of strengthening the principle of equal pay between men and women through a series of binding obligations on pay transparency. Member States must transpose it by 7 June 2026. 

Objectives and definitions: the principle of “Equal Pay” (Article 157 TFEU) 

The principle of equal pay provides that women and men must receive the same remuneration for the same work or for work of equal value. This right is enshrined in Article 157 of the Treaty on the Functioning of the European Union (TFEU) and reaffirmed in Directive 2006/54/EC, both explicitly referred to in EU Directive 2023/970. 

The objective pursued by the Directive is precisely to make this principle effective by reducing the information asymmetry that hinders the emergence and proof of discrimination.  

Who it applies to: public and private employers and candidates 

The Directive applies to both public and private employers. It provides specific rights for: 
• candidates (pay information before recruitment; prohibition on requesting salary history); 
• workers (right of access to information on their individual pay and on average pay levels of comparable categories; safeguards regarding the criteria for determining and progressing remuneration; reporting obligations and specific remedies). 

The Gender Pay Gap: causes and the European context 

In the European Union, despite decades of rules on the principle of equal pay, the gender pay gap continues to persist. This is due to a combination of structural, cultural and economic factors, such as: 

• Information asymmetry (lack of transparency on pay ranges, criteria and comparisons); 

• Direct and indirect discrimination and non-neutral use of job classification and evaluation systems; 

• Occupational segregation and undervaluation of typically female skills and roles (with an explicit reference to the risk of stereotypes in job evaluation and classification systems). 

New Obligations for Companies: What Changes in Practice 

Pre-Recruitment transparency: indication of annual gross salary in job offers 

Candidates are entitled to receive from the employer: 

• the starting salary or the pay range for the position, based on objective and gender-neutral criteria; 

• where applicable, the provisions of the applicable CCNL/national collective agreement relevant to the position. 

The information must be provided in such a way as to allow for informed negotiation (e.g. in the job posting). In addition, job advertisements/titles must be gender-neutral and the selection process must be non-discriminatory.  

Right of access to data: knowing colleagues’ average pay 

Each worker has the right to request and receive in writing: 

• their own individual pay level; and 

• the average pay levels, broken down by sex, for categories of workers performing the same work or work of equal value. 

The request may also be submitted through workers’ representatives or an equality body; the employer must inform workers annually of the existence of this right and of the procedures for exercising it. 

Prohibition of pay secrecy and neutral progression criteria 

1. Prohibition of pay secrecy: The Directive prohibits Member States from allowing contractual clauses that prevent workers from disclosing information about their own pay, as such clauses hinder the exercise of the right to equal pay. It is also provided that information obtained regarding the pay of others, other than that relating to one’s own position, may not be used for purposes unrelated to the protection of the principle of equal pay. 

2. Progression criteria: Career and pay progression must follow defined and documented, non-discretionary processes. They must be based on: periodic performance evaluations, experience and length of service, acquisition of new skills and responsibilities, and educational or professional requirements. These criteria must be “objective and gender-neutral”, as required by the Directive. 

Reversal of the burden of proof: new litigation risks for employers 

The Directive introduces a significant change in the handling of alleged pay discrimination cases: the burden of proof shifts to the employer, rather than remaining with the female or male worker. Accordingly, the employer will be required to demonstrate that no discrimination has occurred, on the basis of a simple indication provided by the person who claims to have been discriminated against (with a consequent potential increase in litigation risk for companies). 

Deadlines and reporting: how to prepare for 2026 

Periodic reporting obligations (companies with more than 100 and 250 employees) 

The Directive introduces an obligation for employers with at least 100 workers to periodically report data on the gender pay gap.  

The applicable deadlines depend on the number of employees: 

• companies with more than 250 employees: by 7 June 2027 and annually thereafter; 

• companies with 150 to 249 employees: by 7 June 2027 and every three years thereafter; 

•  companies with 100 to 149 employees: by 7 June 2031 and every three years thereafter. 

The minimum content of the reports includes, among other things, the average and median pay gap between men and women, the gap in variable pay components, the distribution of workers across different pay bands, and the gap relating to comparable categories of workers, distinguishing between fixed and variable components. 

The Directive allows Member States to extend the reporting obligation to employers with fewer than 100 employees, without prejudice to the possibility of voluntary reporting in the absence of a statutory obligation.  

The 5% pay gap threshold and the “joint assessment” with trade unions 

The “joint assessment” (joint pay assessment, Article 10) is triggered only if all of the following conditions are met: 

a) the reporting shows an average difference of at least 5% within a category;; 

b) the employer does not justify it on the basis of objective and gender-neutral criteria; 

c) the employer does not remedy it within 6 months from the date of submission of the report..  

The assessment must be carried out in cooperation with workers’ representatives (in this respect, the reference to “trade unions” is substantially accurate in the Italian context, as in practice such cooperation will typically take place through employee representative bodies).  

Preventive analysis: how to address pay gaps before the deadline  

From an operational perspective, in order to be ready by the transposition deadline and for the first reporting obligations (2027/2031), companies should carry out, as soon as possible, a preliminary assessment of their internal situation, which should at least: 

• reconstruct the job grading and classification system, identifying comparable groups of workers on the basis of the tasks performed, responsibilities, required skills and level of autonomy, for the purpose of correctly applying the “work of equal value” criterion; 

• map the components of remuneration, including fixed and variable pay, bonuses, incentives, benefits and any other economically relevant element;  

• verify the criteria for determining and progressing remuneration, by assessing their formalisation, objectivity, transparency and gender neutrality, as well as the absence of unjustified discretionary margins;  

• prepare a corrective compliance plan (targeted adjustments, realignments, review of criteria and evaluation systems) in order to prevent exceeding the 5% pay gap threshold, which may trigger the joint pay assessment procedure. 

National framework and certification 

The Equal Opportunities Code (Legislative Decree No. 198/2006) and current legislation 

In Italy, the prohibition of pay discrimination (direct and indirect) and the right to equal pay for the same work or for work of equal value are already governed by Legislative Decree No. 198/2006 (Article 28).  

In addition, current legislation provides for national reporting obligations, including the biennial report on the situation of male and female employees for companies with more than 50 employees (Article 46 of Legislative Decree No. 198/2006, as amended), to be submitted electronically through the Ministry’s online portal and within the applicable deadlines.  

Gender equality certification: contribution and reputational benefits 

The national gender equality certification allows private employers to benefit from a social security contribution exemption of up to 1%, subject to a maximum annual cap of EUR 50,000, in accordance with the implementing rules issued by INPS. 

From a reputational perspective, the certification is generally valued within ESG frameworks, in public tender procedures and in relations with stakeholders and investors; moreover, it may facilitate the structuring of internal processes and performance indicators consistent with governance models oriented towards equality. 

How to integrate national certification with the new EU Directive 

The certification may constitute a useful tool to prepare for European obligations, as it: 

• requires the adoption of indicators and organisational safeguards in key HR areas (recruitment, professional development, pay equity, corporate culture and governance);  

• promotes the structured and documented collection of pay data, evaluation criteria and decision-making processes relating to recruitment, classification, pay increases and career progression, making such information verifiable and consistent with the transparency obligations set out in the Directive.  

In practical terms, integration is achieved by aligning employee classification and grading systems, evaluation mechanisms and pay information bases (including variable components and benefits) with the indicators and information and reporting obligations provided for under EU legislation. 

Support by De Luca & Partners: from compliance check to full compliance 

360° workforce audit: contractual and pay analysis 

De Luca & Partners supports companies through a legal workforce audit aimed at verifying the consistency of contracts, job classifications and remuneration schemes with the principle of equal pay. The analysis makes it possible to identify any unjustified pay gaps, assess the legal sustainability of existing differences, and build a solid documentary basis to support corporate decisions, in view of the transparency, reporting and litigation management obligations introduced by EU Directive 2023/970. 

Implementation plan: policy review, training and industrial relations 

De Luca & Partners assists companies in designing and implementing a structured compliance plan aimed at aligning internal policies and procedures with the new pay transparency obligations. The support includes the review of policies and remuneration determination and progression systems, the establishment of processes for handling employees’ information requests, and assistance with training activities for HR and management. Particular attention is also devoted to managing trade union relations, especially in view of the possible activation of joint pay assessments provided for under the Directive. 

Alignment with GDPR and Legislative Decree 231 models: managing new risks 

De Luca & Partners assists companies in coordinating pay transparency obligations with personal data protection regulations and with organisational, management and control models pursuant to Legislative Decree No. 231/2001. The activity is aimed at ensuring that information flows and the processing of pay data comply with the GDPR and that new risk profiles linked to discrimination and litigation are adequately addressed within internal control systems, thereby strengthening corporate governance and prevention capabilities. 

Frequently Asked Questions (FAQ) 

By when is compliance with the pay transparency directive mandatory? 

Member States must transpose the Directive by 7 June 2026. From that date, the national implementing rules will apply, and employers will be required to comply with them. 

Can employees know how much their colleagues earn? 

Employees may obtain information on average pay levels (disaggregated by sex) for comparable categories of workers (same work or work of equal value), as well as on their own individual remuneration, by submitting a written request. However, this does not amount to a general right of access to the named individual salaries of colleagues. 

What risks does a company face if it fails to comply with equal pay rules? 

The Directive requires Member States to provide for effective remedies and dissuasive sanctions. As the Directive has not yet been formally transposed in Italy, the applicable sanctions have not yet been regulated. 

Does the Directive also apply to small businesses? 

Yes. The Directive applies to both public and private employers, including SMEs, although with differentiated obligations depending on company size: 

• the obligation to carry out periodic reporting is provided for by the Directive, as a minimum standard, for employers with at least 100 employees, without prejudice to the power of Member States to extend it to smaller companies; 

• as regards pay progression criteria, Member States may exempt employers with fewer than 50 employees from the specific obligation relating to progression, without prejudice to the obligation to determine initial remuneration on the basis of objective criteria;  

The rights of candidates during the recruitment process (information on pay and the prohibition on requesting pay history), as well as employees’ information rights, are conceived as general rights and are not limited only to employers subject to reporting obligations. 

Case law and insights

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