Last Updated on February 27, 2025
With Directive 2023/970, also known as the Pay Transparency Directive, the European Union aims to bring about effective implementation, through pay transparency, of the principle of equal pay for men and women for equal work or work of equal value.
Why is this Directive necessary?
The urgency of this action by the EU was dictated by the awareness that the gender pay gap in the EU stands at 13% and is caused by various factors such as gender stereotypes and the shorter working life of women, which tends to be interrupted more frequently, also due to an unequal sharing of care and family responsibilities. Added to this is occupational segregation, in other words the greater presence of women in sectors with lower wages and where the role of collective bargaining also appears less relevant, such as domestic work and caring in the broadest sense, which represents a large share of women’s employment.
In this context, a general lack of transparency regarding pay levels within organisations leads to a situation where gender-based pay discrimination and prejudice risk going undetected or being difficult to prove.
This is why the EU legislator has chosen to focus on making the pay system and the real data regarding the gender pay gap more knowable, calling for the adoption of measures to improve pay transparency, encourage organisations to review pay structures and enable victims of discrimination to assert their right to equal pay.
When does the directive have to be transposed?
All European countries must have transposed the Directive by 7 June 2026.
Currently:
- no Member State has implemented the Directive and the map published by Ius Laboris shows that in most cases governments have not even presented draft laws, but are essentially brainstorming to assess the most appropriate action to take.
- Italy has no draft laws for implementation of the Directive, but it is in any case advisable for companies to adapt immediately to these new obligations, the fulfilment of which entails actions that will have a huge impact on company organisations, affecting both recruiting and the employment relationship.
The Directive’s main provisions
The Directive applies to employers in the public and private sectors, with no limits or minimum employee numbers, except in the case of reporting obligations, which will concern companies with more than 100 workers.
It also applies to all workers who have an employment contract or relationship defined by law, by collective agreements and/or by practices in force in each Member State. It will also apply to job applicants.
The aim of the measure is effective application of the principle of equal pay for women and men for equal work or work of equal value, already established in Article 157 of the Treaty on the Functioning of the European Union (TFEU).
This Directive therefore aims to combat all forms of gender-related discrimination including intersectional discrimination arising from a combination of different discrimination factors (e.g. gender and ethnic origin, gender and age, etc.).
In order for the principle of equal pay to be respected, it is necessary, as stipulated in Article 4, for employers to have pay systems that ensure equal pay for equal work or work of equal value and, therefore, allow for comparison of the value of different jobs within the same organisational structure. It is also necessary for Member States to ensure that organisations have easily accessible tools or methodologies to support and guide assessment and comparison of the value of work.
It seems obvious that the first step to be taken in order to fully understand the scope of the measure is to examine the two most problematic definitions introduced by the Directive, namely “work of equal value” and “category of workers”.
The Directive’s obligations in detail
For companies to fulfil the EU obligations, they must first check that their pay systems are based on non-discriminatory, objective and gender-neutral criteria.
This is just one of the many activities and verifications required by the Directive, which also imposes obligations of transparency both before hiring and during the employment relationship as well as obligations to report to a competent national authority set up for this purpose.
Reporting obligations for employers with more than 100 employees must not be overlooked, and the same goes for any subsequent joint assessment obligation with unions, necessary in the event of an unjustified average gender pay gap of at least 5%. The above-mentioned obligations will come into force the day after implementation of the Directive and their fulfilment will take time, given the important organisational changes required, meaning companies cannot afford to wait for publication of the transposing legislative decree. It is essential to start now.
