Implementation of the Pay Transparency Directive: what the expert commission recommends

The EU Pay Transparency Directive has been in force since June 2023 and must now be transposed into German law. In the coalition agreement, the CDU/CSU and SPD agreed on “low-bureaucracy” implementation. The “Low-bureaucracy implementation of the Pay Transparency Directive” commission was founded in mid-July 2025. Its members are academics and experts from associations and trade unions. The national law must be in place by June 2026, as this is when the transposition deadline expires. The Commission has now presented its final report in October 2025, which contains key recommendations for the German transposition law. In this article, we look at the key points:

What are the relevant requirements of the Pay Transparency Directive?

• Applicants are entitled to receive information about the salary from their future employer. This includes the starting salary or its range based on objective, gender-neutral criteria and, if applicable, relevant collective bargaining provisions. This information must be provided in such a way that well-founded and transparent salary information can be obtained – for example, in a published job advertisement, before the interview or in another suitable manner.
• Employees have the right to request written information from the employer about their individual pay levels. In addition, they can request information on the average pay levels of employees who perform the same or equivalent work in the company. This information must be broken down by gender and provided in accordance with legal requirements.
• Employers above a certain size are obliged to report regularly on gender-specific pay differences (“gender pay gap”). Smaller employers with up to 250 employees only have to submit the report every three years. Only companies with up to 100 employees are exempt from the obligation.
• Companies are obliged to take action if the gender pay gap in average pay is more than five percent and cannot be objectively justified. If the employer has not corrected such an unjustified difference within six months of the date on which the pay was reported, there is an obligation to take action.

This is what the Commission recommends in its final report for the German implementation law

The Pay Transparency Directive contains numerous binding requirements. Nevertheless, it leaves national legislators room for maneuver, for example with regard to reporting obligations, the specific information procedure, the definition of comparable activities or possible relief for employers bound by collective agreements. Within the expert commission “Low-bureaucracy implementation of the Pay Transparency Directive”, opinions differed widely in some cases. The majority opinion set out in the final report of October 24, 2025 now offers initial indications of how the German implementation could probably be structured.

(Digital) Reporting obligation should only apply to employers with at least 100 employees

The majority of the Commission is in favor of initially limiting the obligation to report on pay structures under Art. 9 of the Directive to employers with at least 100 employees.
This would generally reduce the burden on significantly smaller companies. The reports should be able to be submitted in text form. The Commission is calling on the legislator to provide digital tools and templates to reduce bureaucracy and support small and medium-sized enterprises (SMEs) in particular. Companies should check at an early stage whether their HR or payroll systems have the necessary reporting capabilities and how the templates provided can be integrated.

The basis for the reports should be the actual remuneration

The Commission recommends the actual remuneration, i.e. the remuneration actually paid, rather than target or reference remuneration, as the relevant basis for the reports.

HR departments should therefore ensure that their payroll systems are able to accurately record and issue real pay.

Concept of remuneration: Only clearly readable and comprehensible components

The Expert Commission recommends that the reporting obligation should focus on actual pay and exclude voluntary benefits. Only those remuneration components should be included that are linked to work performance and are “clearly identifiable”, such as the basic salary and variable remuneration components. Voluntary additional, optional and non-cash benefits (such as gym offers, company bicycles or travel discounts) and benefits not linked to work performance, such as severance payments, should not be included.

Employers could already check which components are present in their remuneration system and how clearly these are documented.

Calculation of the hourly rate

The contractually agreed working hours should be used as the basis for calculating the hourly pay and not necessarily the hours actually worked. This would probably also be the simpler method for the HR department.

Interlocking with other reporting obligations

The Commission asks the legislator to examine how the topic of pay transparency can be harmonized with other HR/reporting obligations, for example sustainability reporting, in order to exploit synergies and avoid duplication.

Employees’ right to information

The recommendation on the right to information is that employees should be able to request information once a year on their gross annual pay or gross hourly pay for the previous calendar year or financial year. Many members of the commission also advocate that the claim may be asserted again at the earliest one year after the last disclosure.

The Commission also recommends dispensing with a detailed breakdown of pay components. Employees should receive information about their own pay and the average pay of those who perform the same or equivalent work. The right to information should also be based on the actual pay paid. The Commission recommends that information can also be provided in text form.

Concept of equivalent work

The Commission recommends that the German legislator does not introduce its own definition of “equivalent work” that goes beyond Art. 4 of the Directive. Accordingly, the relevant criteria are those for the respective activity

• the necessary skills,
• the associated burdens,
• the responsibility and
• the working conditions.

However, the Commission believes that any factors that are relevant to the specific job or position could be taken into account. In the Commission’s opinion, employers do not have to use science-based job evaluation tools.

No new co-determination rights are to be created under the Pay Transparency Directive

The Commission emphasizes the importance of cooperation with employee representatives when determining the criteria for pay evaluation and when carrying out the joint pay evaluation, considers the existing co-determination rights to be sufficient and is opposed to new rights. The majority of members are of the opinion that no new co-determination rights should be created under the Pay Transparency Directive. In companies bound by collective agreements, there should be no right of co-determination in the assessment of pay, provided that the collective agreement meets the requirements. In companies not bound by collective agreements, the works council only has a right of co-determination with regard to the pay system, but not with regard to the level of pay. The Commission members do not regard trade unions as employee representatives within the meaning of European law.

Whether being bound by collective agreements is privileged is an open question

There was a controversial discussion as to whether employers bound by collective agreements could be subject to simplified requirements. The commission members could not agree on whether and to what extent employers bound by collective agreements should be privileged in the future law, in particular with regard to a possible presumption of appropriateness for collectively agreed remuneration systems. The final report only recommends simplifications for employers who are directly bound by collective agreements when determining groups within the meaning of Art. 3 Para. 1 lit. h) Pay transparency directive. The Commission would also like to grant employers bound by collective agreements an extension of deadlines.

Remedy procedure & joint remuneration assessment in the event of anomalies

If reports show a gender pay gap that cannot be explained, a procedure for joint pay assessment with employee representatives should be carried out.
The majority of members were in favor of the works council always acting as the “employee representative” and not the trade union. Companies without a works council could dispense with a joint pay assessment.

Companies should define a process for assessing remuneration.

Conclusion

The implementation of the Pay Transparency Directive in Germany will bring relevant changes for HR and payroll departments. Employers who take action at an early stage can gain a competitive advantage and minimize risks.