Final report on the Pay Transparency Directive published

The EU Pay Transparency Directive (EU) 2023/970 must be transposed into German law by 7 June 2026. The final report of the commission appointed by the German government now available offers valuable guidance on how the legislature can transpose the Directive in a manner consistent with European law. The commission is seeking to reconcile the strict requirements of the Directive with the aim of ensuring that it can be transposed without excessive bureaucracy.

Companies bound by collective bargaining agreements and those applying them

The commission's final report examines in detail the extent to which companies bound by collective bargaining agreements and those applying them should be given preferential treatment in the implementation of the Pay Transparency Directive. The commission concludes that collective bargaining agreements do not provide automatic protection against allegations of pay discrimination. Employers bound by collective bargaining agreements must also demonstrate that existing pay differences are gender-neutral and objectively justified.

In accordance with the requirements of the Pay Transparency Directive, collective bargaining agreement pay grades must also be assessed against the criteria laid down in EU law. Differences in pay for the same or equivalent work therefore require a systematic, objective and gender-neutral justification even in remuneration systems governed by collective bargaining agreements.

However, the commission proposes the statutory introduction of a presumption of reasonableness: Requests for information should therefore initially be limited to the pay grade assigned to the person seeking information under the applicable collective bargaining agreement. A correction should only be necessary if it is proven that the collective bargaining agreement pay grade assignment does not comply with the requirements of Article 4 (4) Pay Transparency Directive, meaning that it is not based on objective and gender-neutral criteria. Companies applying collective bargaining agreements should be treated in the same way as those bound by collective bargaining agreements.

Furthermore, the commission recommends granting employers bound by collective bargaining agreements and those applying them extended deadlines for responding to requests for information, in order to allow for consultation with the relevant employers' associations. Collective bargaining provisions that violate Article 157 (1) TFEU are to be repealed in future only in respect of the discriminatory clause, and not in respect of the entire collective bargaining agreement.

The commission therefore makes it clear that neither being bound by a collective bargaining agreement nor applying a collective bargaining agreement automatically guarantees compliance with the principle of equal pay. Companies must continue to apply transparent, systematic and gender-neutral assessment criteria when setting pay in order to ensure transparency, legal certainty and equal pay.

Reporting obligations and the relevance of actual salary
Companies with 100 or more employees are required to compile regular pay transparency reports that disclose gender-specific differences in pay. The commission emphasises that these reports should refer to the actual salary (not the target salary) of employees – that is, to remuneration actually paid, including basic salary, allowances and other regularly granted components. This creates transparency and enables an objective comparison to be made.

To reduce bureaucracy, the commission recommends an escape clause for variable and supplementary pay components. Employers should be able to report these either as a total or in suitably broken-down groups. Low-value benefits in kind or share options not granted by the employer should be excluded from the reporting obligation.

Automated calculations of key performance indicators are intended to minimise the workload and ensure objective comparison data. Consolidated reporting for groups of companies was discussed, but no final recommendation was made.

Right to information and redress procedure

The main objective of the Pay Transparency Directive is to strengthen the enforcement of the principle of "equal pay for equal work or work of equal value". To this end, employees are granted a comprehensive right to information, which is intended to create transparency regarding the pay structure within the company.

In particular, employees should be informed about:

• their individual pay,
• the average pay of colleagues in the same or equivalent roles, and
• the relevant pay components and criteria.

In order to effectively address identified pay gaps, the commission proposes a two-stage redress procedure:

• Involvement of employee representatives: The employer will inform the employee representatives of the results within six weeks and consult with them.
• Roadmap for eliminating disparities: If measures cannot be taken immediately, both parties will agree on a specific roadmap setting out deadlines for achieving equal pay.

Limiting the right to information to once per calendar year is considered to be in line with EU law and practical. Hypothetical or former comparable employees are generally excluded in order to limit the scope of application to existing employment relationships.

Justifications for pay gaps

The commission recommends that a comprehensive, though not exhaustive, list of justifications for pay gaps be enshrined in law – comparable to section 10  third sentence German General Act on Equal Treatment (AGG). This should also include existing entitlements, provided they arose before 7 June 2026. The aim is to define transparent criteria for differences in pay whilst allowing for practical flexibility.

Involvement of the employee representatives

A number of questions remain, particularly regarding the role of employee representatives within the framework of the information and redress procedure. Under the commission's proposals, employee representatives are to be involved in the review and, where necessary, the elimination of pay gaps. It is unclear, however, who is to take on this role in companies without a works council; this will need to be clarified during the further legislative process.

The question also arises as to whether, in companies bound by collective bargaining agreements, the relevant trade union could alternatively be involved in place of an establishment-level employee representative body. This, too, will need to be clarified during the further legislative process.

One positive point to note is that the commission expressly rejects the formation of new employee representative bodies in order to avoid additional bureaucracy and duplicate structures.

Commission attaches great importance to the practical feasibility of the Pay Transparency Directive

Deadlines, automated calculations, escape clauses and two-stage redress procedures are intended to enable companies to implement the Directive efficiently and transparently. Equal treatment is gender-neutral – all forms of discrimination must be prevented, regardless of whether they relate to women, men or other genders.

Outlook: legislation and implementation

The commission's statements are not legally binding, but provide clear guidance to the national legislature on transposing the Pay Transparency Directive.

The legislature plans to present a draft shortly. It is to be hoped that this will not only address the issues dealt with by the commission but also clarify further practical questions in order to avoid legal uncertainty for businesses. As recommended by the commission, the Ministry plans to develop online tools to assist with the classification of pay grades and to provide indicators of equivalent work. It remains to be seen what form these will take in practice and, in particular, how they will be applied to the specific circumstances within companies. Development is expected to be completed in the second half of 2026.

Conclusion: limited scope for discretion in implementing the Directive

The commission's final report makes it clear that the implementation of the Pay Transparency Directive leaves only limited scope for national discretion. Many requirements are derived directly from the text of the Directive, meaning that the commission – just like the national legislature – has been unable to, and will continue to be unable to, provide a solution to existing practical problems and the increase in bureaucratic burden on several points.
This is precisely why implementation at company level requires careful planning and a systematic approach. Companies should review their internal processes, consistently align remuneration systems with gender-neutral assessment, and automate redress procedures and key performance indicators as far as possible in order to prevent discrimination and ensure legal certainty.

CMS Pay Gap Compliance

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