EU Pay Transparency – Why UK companies should be preparing for enhanced gender pay gap reporting

Although no longer a member of the EU, the EU Pay Transparency Directive (the Directive) will have significant practical implications for UK employers, particularly multinational companies who are trading, or who have workers based across EU member states. 

Employers across both the public and private sector would be wise to start preparing as companies with 150 workers or more will be obliged to produce their first report on their gender pay gap by 7 June 2027 (and annually thereafter). As the reported data will relate to the previous calendar year, companies will need to begin collecting and analysing their data from 1 January 2026.

Mind the gap - what is the EU Pay Transparency Directive?

The Directive, adopted in 2023, aims to address wage disparities, promote pay transparency, and to detect and eliminate gender pay gaps across the EU. EU Member States have until 7 June 2026 to implement the Directive into national legislation. 

The Directive lays down minimum requirements to strengthen equality of pay between men and women and introduces strict pay transparency measures, such as:

• Pay audits and reporting, with member states required to establish gender pay gap reporting regimes that include results such as mean and median gaps in pay, the gender split in each quartile pay band and results broken down by categories of worker;
• Pay disclosure requirement in job adverts;
• Right to request pay information, such as pay levels broken down by gender;
• Prohibition on asking job applicants about their pay history;
• Ban on secrecy, with employers limited on the extent to which they can prevent workers discussing rates of pay; and
• Increased transparency when setting pay, for example determining pay levels and pay progression.

Will the Directive impact your business?

Multinational employers operating in the EU will be impacted by the Directive and may wish to consider implementing a company-wide coordinated approach to pay transparency and reporting. 

Although UK employers may already have gender pay gap reporting obligations under the Gender Pay Gap Regulations 2017 (GPG Regulations), the Directive goes further. For example, employers do not currently have to report by categories of worker under the GPG Regulations whereas the Directive does meaning a greater scrutiny on equal pay and gender gaps across more demographics. 

Unlike the GPG Regulations, employers face stricter consequences for non-compliance with the Directive such as fines and an entitlement for workers to recover unlimited compensation for losses in connection with breach of their equal pay rights.

The Directive has a lower headcount threshold for reporting, meaning more employers will be caught by the reporting obligations. More specifically, as a minimum the Directive requires all employers with 100 or more workers to report on prescribed gender pay gap information as follows:

• Companies with 250 employees or more must report by 7 June 2027 and every other year thereafter;
• Companies with 150-249 employees must report by 7 June 2027 and every three years thereafter; and
• Companies with 100-149 employees must report by 7 June 2031 and every three years thereafter.

Members states can choose to implement more onerous requirements, for example bringing forward the reporting date for companies with fewer than 150 employees, or mandating that companies with fewer than 100 employees will also be required to report on their gender pay gaps. 

But that’s not all…

With the Directive becoming a hot employment topic globally, it would be easy to overlook the current EU wide reporting obligations under the Corporate Social Responsibility Directive (CSRD). EU members states had to implement the CSRD by 6 July 2024. 50,000 companies are estimated to fall within the scope of the CSRD rules both inside and outside of the EU, in particular large and listed companies which meet certain criteria. 

Employers working globally therefore need to be aware of their concurrent gender pay gap obligations and take some time to put robust mechanisms in place which ensure a streamlined and coordinated approach across the business. 

With the Labour Government’s pledge to close not only the gender pay gap but other pay disparities, such as for ethnic minority workers and disabled workers, the focus on equal pay and pay transparency is only going to get stronger. 

We can help you

UK employers should start planning for this upcoming reporting obligation so that they can hit the ground running and ensure not only compliance but that they are doing the best to promote diversity and equality amongst their workforce. The Bristows employment team have extensive knowledge and expertise in coordinating multi-national projects. We support employers to implement positive change across multiple jurisdictions and take a tailored approach to help you to help your workers. 

If you would like further information on the Directive or gender pay gap reporting obligations, please do not hesitate to contact a member of our team. We would be happy to help.