Pay Transparency Directive (EntgTranspRL): Need for Action for Companies

The legislative process for implementing the EntgTranspRL into German law has not yet been officially initiated. It is currently assumed that the existing Pay Transparency Act (EntgTranspG) will be amended.

Comprehensive Obligations for Employers

Employers already face a need for action: They are well-advised to review their remuneration systems with sufficient lead time and align them with the requirements of the EntgTranspRL.

Obligations in the application process

By 07.06.2026, employers must adapt their recruitment processes to the requirements contained in Art. 5 of the EntgTranspRL. Accordingly, applicants are entitled to information about the starting salary for the respective position or its range, or, if applicable, about the relevant provisions of the applicable collective agreement.

Employers should therefore define the objective, gender-neutral criteria for the salary or salary range and their weighting in relation to each other before the recruitment process begins. This should enable well-founded and transparent salary negotiations. This information can, for example, be provided in the job advertisement or before the job interview. To prevent competitors from accessing the information, it is recommended to communicate the salary, for instance, in the invitation to the job interview.

Note: These requirements do not restrict the parties' freedom to negotiate, meaning that a salary outside this range can also be negotiated. However, employers should document the objective reasons justifying the payment of a higher salary. Such reasons may include the level of education, acute staff shortages, or a lack of comparability of tasks.

Applicants must not be asked about the development of their salary in previous or current employment relationships.

Information obligations for employees

Employers with more than 50 employees are required, as of 07.06.2026, to provide their employees with easily accessible information about their individual pay, the salary structure, and the remuneration criteria, Art. 6 EntgTranspRL. This includes both the average salaries for certain positions and the criteria used to determine salaries. These criteria must be objective and gender-neutral. The directive does not specify how and at what intervals the information must be provided. Here, the implementation by the German legislator remains to be seen.

Note: Companies with fewer than 50 employees are not currently required to provide information on the criteria for salary determination.

The EntgTranspG already establishes a right to information for employees in companies with more than 200 employees to ensure compliance with the principle of equal pay. Under the Entg Transp RL, this right to information will be significantly expanded as of 07.06.2026—at least for companies with more than 50 employees.

Individual right to information of employees

Employees will have the right to request information about their individual pay levels and average pay levels, broken down by gender and for groups of employees performing the same or equivalent work, and to receive this information in written form.

Note: While the EntgTranspG is based on the statistical median as the reference point for pay determination, the EntgTranspRL uses the average pay level: the sum of all individual values is divided by the number of individual values. This requires the inclusion of all comparable employees - and thus a broader group. Consequently, employees will receive information not only about the pay levels of comparable employees of the other gender but also of their own gender. A breakdown by pay components may also be required.

Furthermore, the EntgTranspG stipulates that comparison groups must consist of six or more individuals of the opposite gender performing the same or equivalent work. The EntgTranspRL does not include such a provision, so smaller comparison groups would also need to be formed.

Employees should have easier access to the information, as it can also be requested through the relevant employee representation or equality body. For informal requests for information, it will no longer be necessary to specify the same or equivalent work.

Employers must inform their employees annually about their right to information. Corresponding information must be provided within two months of the request.

Note: This right to information is accompanied by a prohibition on confidentiality clauses in employment contracts, whose validity is already being questioned by some courts. Employers may no longer contractually oblige their employees to keep their salary confidential.

Employer reporting obligations

Unlike before, where only employers with more than 500 employees were generally required to prepare a management report, the EntgTranspRL now requires employers with at least 100 employees to report.

The EntgTranspRL requires significantly more comprehensive information. While previously the obligation was limited to outlining measures to promote equality and ensure pay equality and providing information on the average total number of employees as well as full-time and part-time employees, the following information must now be provided:

• The gender pay gap
• The gender pay gap in supplementary or variable pay components
• The average gender pay gap
• The average gender pay gap in supplementary or variable pay components
• The proportion of employees receiving supplementary or variable pay components
• The proportion of employees in each pay quartile
• The gender pay gap among employees, broken down by basic pay or salary and supplementary or variable pay components.

The accuracy of the information must be confirmed by the employer's management level after consultation with employee representatives, Art. 9 (6) EntgTranspRL.

The deadlines and intervals for reporting depend on the company's size:

Member states may also require companies with fewer than 100 employees to provide pay information, Art. 9(5) EntgTranspRL.

Note: There may be overlaps with ESG reporting obligations under the Corporate Sustainability Reporting Directive (“CSRD”) and the European Sustainability Reporting Standards (“ESRS”), which require companies to disclose the percentage pay gap between female and male employees. Employers should standardize the processes for data collection and reporting on pay transparency.

Common pay assessment

Employers with 100 or more employees must, following their report, conduct a joint pay assessment with the employee representation if a pay gap of at least 5% is identified within an employee group and the gap is not justified or eliminated within six months, Art. 10 Entg Transp RL. This is likely to expand the co-determination rights of the works council. The directive thus goes beyond Sec. 17(1) EntgTranspG, which previously only required operational reviews for companies with more than 500 employees.

After completing a joint pay assessment, employers, together with employee representatives, are obliged to take corrective action in the case of unjustified pay differences. This can involve raising pay levels or lowering them, provided this is compatible with the rights of the previously favored employees.

Note: To prevent a joint pay assessment, employers should already examine whether differences of at least 5% in average pay levels between genders exist within at least one employee group performing equivalent work and reduce these differences as quickly as possible.

Increased Legal Consequences

Non-compliance with the EntgTranspRL can lead to significant legal consequences. Employers may face fines or an increase in compensation claims due to unequal pay. The shift in the burden of proof to the employer, who must demonstrate that no direct or indirect pay discrimination exists (Art. 18 EntgTranspRL), represents an additional hurdle in legal disputes. Limitation periods for asserting claims for equal pay must not be shorter than three years (Art. 21 EntgTranspRL). Thus, these claims would not be covered by any contractual or collective agreement limitation clauses. Expiry clauses in employment contracts should be adjusted accordingly to avoid invalidity.

Adjustment of Internal Processes

To comply with the new requirements, employers must review and, if necessary, adjust their internal processes. Where no pay structures exist, standardized criteria for salary development must be established. To do this, remuneration structures must first be analyzed. Due to the broad interpretation of the term “pay,” numerous remuneration components must be considered, which are often not systematically retrievable but have developed historically. Collective or company-specific remuneration systems must also be adapted to the directive's requirements and comply with the specifications of a discrimination-free pay structure. If applicable, the works council must be involved in defining these criteria, as it has co-determination rights in matters of company wage design, particularly in the establishment of remuneration principles.

Additionally, managers and HR personnel must be trained on fair and discrimination-free pay structures.