The European Pay Transparency Directive has a clear objective: work that is the same or of equal value should, as a general rule, be compensated equally. A particular focus is placed on preventing gender-based discrimination. Employee compensation should be based on objective and gender-neutral criteria and should not depend on whether a job is performed by a woman or a man.
The directive was supposed to be transposed into German law by June 7, 2026. However, full legal transposition has not yet been completed within this deadline. Employers should not conclude from this that the European requirements are, for the time being, irrelevant to their business practices. Existing regulations—in particular the Pay Transparency Act, which has been in effect since 2017—must be interpreted in light of the European requirements when applied. In addition, there are already existing prohibitions against discrimination and rights to information under labor law.
Employers therefore have good reason to address the requirements for transparent and comprehensible compensation structures at an early stage. This is not limited to existing employment relationships. Transparency in compensation is already becoming significantly more important during the application process. Applicants should receive information about the intended starting salary or a corresponding salary range so that compensation negotiations can be conducted on an objective and gender-neutral basis.
Even in existing employment relationships, pay differences increasingly require justification. Employees may, under the respective legal requirements, request information about their compensation and the compensation structures of comparable employee groups. For employers, this means they must be able to determine, in a transparent manner, which job duties are comparable to one another or should be considered equivalent.
The concept of “equivalent work” is of particular importance. It is not merely a matter of whether two employees have the same job title or work in the same department. Rather, what is decisive is an objective assessment of the requirements and demands of the respective job. Jobs from completely different areas of the company may therefore ultimately be considered equivalent.
Several criteria must be taken into account in this evaluation. These include, first and foremost, the required competencies and qualifications. For example, it must be examined whether a job requires a college degree, vocational training, specialized knowledge, or specific language skills. The higher the requirements for education, experience, or specialized skills, the greater the weight these aspects may carry in an objective job evaluation.
Another key criterion is the workload associated with a job. Both physical and mental demands may be relevant here. Work intensity, time constraints, or particularly stressful situations can also be taken into account in the evaluation. Job evaluation must therefore not be limited to formal qualifications but must capture the actual conditions of the job.
In addition, responsibility plays an important role. Personnel responsibility, financial decision-making authority, responsibility for key business processes, or specific liability risks can significantly influence the value of a position. Working conditions and specific work methods must also be taken into account. Shift work and night work, field work, or working under difficult external conditions can also be relevant factors.
An analytical approach is recommended to ensure the evaluation is as transparent as possible. In this process, the various criteria for individual jobs are systematically evaluated and, for example, assigned points. If different jobs achieve the same or comparable point values, this may indicate that the work is of equal value. An employee in accounting and an employee in IT may therefore, despite having completely different areas of responsibility, perform tasks that are to be classified as equivalent in terms of their requirements and value.
However, the determination of equivalent work does not automatically mean that any difference in compensation is impermissible. Differences in compensation may be justified if there are objective, gender-neutral reasons for them. Examples include differences in individual performance, professional experience, or length of service. Depending on the job, other justifiable criteria may also play a role.
This becomes particularly important when a potential pay disadvantage compared to employees of the opposite sex is identified. If, for example, information reveals that a female employee earns less than a relevant comparison group for the same or equivalent work, gender-based discrimination may be presumed. The employer must then be able to demonstrate—and, if necessary, prove—that the pay difference is based on objective criteria and is not related to the employee’s gender.
Early and careful documentation is therefore particularly important for companies. It should be clearly documented which criteria are used to evaluate jobs, determine salaries, grant pay raises, and justify pay differences. General explanations or those developed only after the fact pose significant risks in the event of a dispute. Rather, it is crucial that compensation decisions be based on transparent and verifiable criteria from the very moment they are made.
Employers should therefore not use the pending or incomplete implementation of the European Pay Transparency Directive as an excuse to wait and see how the situation develops. Instead, it makes sense to review existing compensation systems early on, identify comparison groups and equivalent jobs, and establish objective criteria for compensation decisions. Those who design and document their compensation structures in a transparent manner create a better foundation for fulfilling requests for information and for explaining potential compensation differences in a legally sound manner.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.