Reward teams across Europe are deep in the work of understanding what EU Pay Transparency Directive compliance looks like.
The Directive comes with a lot of genuinely hard questions – including some that don't have obvious answers yet.
Anita Lettink, a leading expert on pay transparency, is helping us make sense of it.
Below, she answers the most pressing questions that Reward professionals are grappling with right now, from defining equal value to employee rights and equity pay gap reporting.
Note: Anita's answers reflect the current understanding of the Directive as of March 2026. We can expect interpretations and guidance to continue to develop, so some details may vary over time. Each EU member state will also publish its own transposition of the Directive into national laws, introducing some local variance too. Always check national laws and seek advice as needed from local legal counsel.
Under the EUPTD, "work of equal value" must be determined using objective, gender-neutral criteria. The Directive does not dictate the exact criteria you must use – that is for you to decide based on what "value" means to your organisation. However, to be compliant, those criteria must be applied consistently across all functions, from Finance to HR to Engineering.
You’ll need to decide on your job evaluation criteria – with common examples including skills, effort, responsibility, working conditions – and then apply a consistent job evaluation method to evaluate each role against those same criteria. It is important to note that factors like job title, job function, and market rates are explicitly not accepted as criteria for evaluating value.
Naturally, different job levels within a group of workers (P3, P4, etc) are seen as justifiable reasons for pay gaps – because those objective criteria like responsibility and skills always increase with seniority level.
I recommend using the point factor job evaluation method as your system. It breaks every job down into those defined criteria or “factors” and assigns a numerical point value to each.
By totalling the points, you can compare roles that look very different on the surface. If a Marketing Manager and a Software Engineer produce similar point scores, they must be considered to be in the same equal value worker category.
If your framework produces equivalences that don't feel right, that may mean it's not using the right factors to distinguish between job roles for your company’s context.
You are not required to compare Marketing and Engineering roles at the same grade if a job evaluation system treats them as different work.
IC5 Marketing and IC5 Engineering can legitimately be put into separate categories of worker under the EU Pay Transparency Directive if you can demonstrate that the discipline distinction is objective – against the standardised job evaluation criteria you use to evaluate every role in your company – and not a proxy for gender segregation.
However, if both score equivalently on objective evaluation criteria, they become "work of equal value" regardless of discipline – the Directive does not allow you to use discipline alone to justify a pay gap.
Executive compensation has the same requirements as all other roles.
So, if a CFO and CHRO are at the same job level with comparable scope and impact scores (according to the objective job evaluation system you choose to use) this is then "work of equal value," and pay differences must be justified on objective, gender-neutral grounds.
This could be a significant compliance risk for companies where, for instance, Finance leadership has been historically paid more than HR leadership.
If your job architecture is supported by objective, gender-neutral job evaluation (see question 1) then it’s a solid foundation for EUPTD compliance. Ensure you have clear documentation in place too, to support your decisions.
On the other hand, if your job architecture is only based on job functions and locations, then this is not enough to assess and justify your pay gaps – these are exactly the type of criterion the Directive targets as potentially discriminatory.
One of my recommendations is to not make job architectures too granular. I've seen some companies with more job descriptions than workers. Keep them sufficiently general – not only considering the Directive, but also to remain flexible in hiring and promoting.
Action point: Before reporting begins, document your job evaluation methodology clearly: the criteria used, the weighting of those criteria, and the resulting reasoning behind every grouping of equal value workers. It needs to be explainable to employees and defensible in court.
The Directive states that job evaluation and classification tools shall be developed in cooperation with worker representatives where they exist.
If worker representatives lack the technical skills, you can bring in outside expertise – but the co-development obligation remains, meaning employees must be involved in that external project.
Defining the framework unilaterally without any worker representative involvement would be non-compliant where representatives exist. In some countries, worker involvement is mandatory under existing labour laws independently of the Directive.
"Pay" under Article 3(1)(f) includes all elements of remuneration in cash or in kind that a worker receives directly or indirectly.
The EU Pay Transparency Directive states that companies must report on: the gender pay gap in average pay, the gender pay gap in median pay, the proportion of female and male workers in each quartile pay band, and gaps in complementary and variable pay.
In practice, this includes equity compensation, variable pay, and benefits with a monetary value – company cars, health insurance, housing allowances, meal vouchers. Recognition awards are included in "pay" if they have monetary value too – and if you have a peer nomination process this could be a particular risk, if men predominantly nominate men and women predominantly nominate women then structural bias can easily emerge.
Pure non-monetary perks with no cash equivalent are less clear, but check your local guidance. Some countries have announced they will provide lists of pay elements to be included.
Your national transposition will also explain how to report, what to include, and where to publish. First reports are due before 7 June 2027 (depending on company size).
Action point: Audit your full compensation stack and assume everything with monetary value is in scope. The Directive's definition of "pay" is broad and includes all elements of compensation – so it's safer to include and then confirm exclusions via your national transposition than to leave elements out and be caught short.
No. Each pay component must be justifiable independently on objective, gender-neutral grounds. The Directive requires that all components are free from discrimination, not just total compensation.
However, if a higher base and lower bonus structure is consistently applied using gender-neutral criteria (for example, based on role type) it may be defensible. Using it at the individual level to mask a gap would not be compliant.
Equity compensation is in scope for pay gap reporting under the EUPTD, but valuation is genuinely harder than other pay components – particularly for private companies.
The best advice at the moment is to check your local transposition once ready for more detailed guidance on how to handle different elements of reporting – the Directive offers guidance, but many of the details will come through the national legislation.
Here's a few common scenarios:
The threshold under Article 26 applies within a worker category, not as a company-wide average. If any single worker category shows an unexplained gap of 5% or more, a joint pay assessment is triggered for that category.
That means a company could have an overall gap lower than 5% and still be triggered at category level.
Action point: Don't rely on your company-wide pay gap figure as a proxy for compliance. Run the analysis at worker category level now to check where you’re at – that's where the 5% threshold will apply.
The 5% threshold triggers a ‘joint pay assessment’ if the gap is unexplained. This involves additional analysis into the reason for the gap, as well as an action plan – but not immediate remediation.
Member states will set the specific remediation timeline, but the Directive requires the assessment to begin promptly and action plans to follow within a ‘reasonable period’.
That said, this isn't only a legal question. It goes to company reputation and employee satisfaction too. In practice, many companies are already doing some remediation upfront, to avoid reporting larger than 5% gender pay gaps when reporting begins.
The Directive applies to workers and employees. EOR workers who are genuinely integrated into your workforce and perform work under your direction likely fall within scope, even if formally employed by a third party. Some national transpositions will specifically include temporary workers – so check your national law too.
No. Market pay and industry benchmarks are explicitly not acceptable justifications for pay gaps under the EU Pay Transparency Directive. Using them could lead to statements like "the market pays men more" which perpetuates rather than eliminates discrimination.
Objective factors must relate to the work itself: skills, effort, responsibility, working conditions.
Using industry sector as a factor – for example, finance roles paid more than marketing roles of equal value – would not be compliant.
Action point: Audit any pay difference currently only justified by market data or industry benchmarks. You will need a replacement rationale grounded in objective, work-related factors before reporting begins.
No. "The acquired company historically paid differently" is not an objective, gender-neutral justification, and therefore is not acceptable under the Directive.
However, the practical reality is that EU laws prohibiting pay reductions mean normalisation may take several years – so the best approach may be to document a remediation plan rather than use history as a standing justification.
Because of this, we might see national transpositions include specific treatment of transition periods for M&A scenarios.
No. The Directive (Article 7) gives employees the right to request information at any time and requires employers to respond within a reasonable timeframe. It does not permit limiting requests to specific windows. Member states will add rules on response timelines but cannot restrict when a request can be made.
You will need an operational process to handle on-demand requests – there are software solutions that will make this easier too.
Yes. Article 7 of the Directive confirms employees can request average “pay levels” by sex for their worker category, and "pay" covers all components of compensation.
The component-level breakdown is specified as follows: "The mean gender pay gap between workers by categories of workers broken down by ordinary basic wage or salary and complementary or variable components of pay." Expect more detailed guidance on this in national transpositions.
Actual pay received, not target. Using target earnings would not be compliant and could mask real gaps. You must use actual earned compensation in the reference period.
The GDPR's data minimisation and privacy principles apply. Where disclosure would effectively identify an individual's pay, you can invoke GDPR protection and decline to provide the breakdown. The Directive acknowledges that member states should ensure GDPR compliance.
In practice, most frameworks set a minimum group size (typically five to ten) below which individual-level data is not disclosed, to account for data privacy.
The exact floor is left to member state transposition. The Netherlands, for instance, has stated in their draft proposal that pay transparency requirements will override GDPR requirements. There is genuine tension between transparency and privacy obligations that national transpositions will need to resolve
Action point: Build the operational infrastructure for handling employee information requests, as an on-demand capability. That means having clean, current data by worker category, broken down by pay component, and a process for responding within a reasonable timeframe.
Harmonisation is unlikely in the short term. The Directive sets minimum standards but allows member states to be more specific – and it explicitly states that member states with more stringent pay gap reporting requirements already in place cannot lower those standards.
Beyond that, each country has its own labour laws, and those would need to be unified to create a truly common approach. That's a much larger undertaking than the Directive itself.
Action point: Check local labour law in each country you operate in before assuming what’s compliant for the EU Pay Transparency Directive. In several European markets, for instance, locally mandated works councils have separate, existing obligations that sit outside the Directive entirely.
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