EU Pay Transparency Directive

EU Pay Transparency Directive: what employers in Austria need to know now

7 June 2026 should have marked the start of a new chapter in Austrian employment law. The EU Pay Transparency Directive (Directive (EU) 2023/970), due to be transposed by that date, fundamentally changes the rules on pay, pay equity and internal transparency. For employers, this means new information, disclosure and reporting obligations, strengthened legal protection for employees, and procedural changes with potentially serious consequences in the event of a dispute.

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This article provides a clear overview of the key changes, their practical significance, and why addressing the topic promptly is strongly advisable. It also examines the consequences of the transposition deadline missed by the legislator.

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What is the EU Pay Transparency Directive? A definition

The EU Pay Transparency Directive (Directive (EU) 2023/970) is a legal act of the European Union which entered into force on 6 June 2023. Its central aim is to finally give effect to the principle of “equal pay for equal work or work of equal value”, enshrined since the founding of the EU. Despite this principle, women in the EU still earn on average 11.1 percent less than men, according to current data from Eurostat. In Austria, the unadjusted gender pay gap stands at around 17.7 percent (as of 2024; Statistics Austria).

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The Directive relies on two central levers: transparency and enforcement. Transparency means that pay systems must be designed in a comprehensible manner and free from discrimination. Employees should be able to understand how their pay is composed and whether it complies with the principle of “equal pay for equal work or work of equal value” in comparison with colleagues. The stricter enforcement mechanisms are intended to ensure that infringements are consistently sanctioned. These include, in particular, the new reversal of the burden of proof and dissuasive sanctions.

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The Directive applies to all employers in the private and public sector and covers all employees as well as applicants. The term “pay” is defined broadly: in addition to basic salary, it covers all components of remuneration such as variable elements, benefits in kind and bonuses.

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State of transposition in Austria – consequences of the default

EU Member States had until 7 June 2026 to transpose the Directive into national law. That deadline has now expired without an implementing act having been adopted in Austria. After the government and the social partners were unable to agree on a common line, the Federal Ministry of Labour, Social Affairs, Health, Care and Consumer Protection (BMASGPK) presented a draft for review prepared on its own initiative at the end of the deadline. That draft has not been made publicly available to date.

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The reactions of the interest groups are, as expected, contradictory. On the employer side, criticism is directed at a transposition that goes beyond the minimum requirements of the Directive and creates additional administrative burden. On the employee side, transposition is seen as an opportunity to enforce pay equality effectively for the first time. For companies, this dispute means above all one thing: a transposition of the Pay Transparency Directive will have to happen, but its final shape remains open.

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That the legislator failed to transpose this socio-politically important Directive on time is undoubtedly not a distinction. The legal position during this “transitional period” until a national implementing act enters into force is open to question. A directive that has not been transposed can have direct effect for individuals to the extent that it is formulated with sufficient precision. According to the European Court of Justice (ECJ), this direct effect exists in any event “vertically”, that is, in relation to the state and to state-related entities such as the ORF or the Chamber of Commerce in their capacity as employers. In principle, there is no direct effect “horizontally” between private parties, for example in the relationship between a private employer and its employees. The Pay Transparency Directive, however, presents particular features: the principle of equal pay for men and women is enshrined directly in the founding treaties of the EU (Article 157 TFEU) and, according to case law, has direct effect between private parties as well. The Pay Transparency Directive serves to implement and give effect to that principle. Voices in legal literature, as well as employee interest groups, therefore take the view that some provisions of the Pay Transparency Directive became directly applicable between private parties as of 8 June 2026. These obligations would therefore already have to be complied with by all employers. Which obligations these are is explained below.

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In any event, time pressure on implementation remains. The first reporting obligation for companies with 150 or more employees is scheduled for 7 June 2027 and is based on the data of the preceding calendar year. Those who only begin collecting data once the implementing act has entered into force may no longer be able to establish a legally compliant basis at all.

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The new obligations for employers at a glance

The Directive brings obligations in three central areas: before the employment contract is concluded, during the ongoing employment relationship, and at company level in the form of reporting obligations.

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1. Before the job interview: transparency in recruiting

New obligations will apply as early as the application process. Employers must provide information on the starting salary or the pay range as well as on the relevant collective agreement provisions, at the latest before the first job interview. A mere reference to the applicable collective agreement will no longer be sufficient.

In addition, it is no longer permitted to ask applicants about their current or previous pay. This practice often contributes to perpetuating pay differences, since people who have been underpaid to date continue to receive lower offers in new positions.

For Austrian companies, this represents a significant change. Pay negotiations must be based on transparent criteria and may no longer be oriented towards the individual salary history. It is argued that these provisions are also directly applicable between private parties.

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2. Right to information for existing employees

Under the Directive, all employees receive the right to request information on their individual pay as well as on the average pay of persons in a comparable position and with comparable qualifications, broken down by gender. Companies must proactively inform their employees about this right to information each year. The requested information must be provided within two months at the latest.

The Directive also provides for a right of the workforce to information on pay developments within the company. Contractual clauses preventing employees from discussing their pay lose their validity. Employers should therefore review existing employment contracts for such clauses.

The criteria used to determine salaries and pay ranges must be presented openly and comprehensibly. The pay system should be objective, transparent and gender-neutral.

It is argued that the employees’ right to information, the prohibition of pay secrecy clauses and the requirement of open and comprehensible criteria for pay have become directly applicable.

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3. Reporting obligations depending on company size

The Directive provides for staggered reporting obligations:

• Companies with at least 250 employees prepare a report annually, for the first time in 2027 (based on 2026 data)
• Companies with 150 to 249 employees report every three years, for the first time in 2027 (based on 2026 data)
• Companies with 100 to 149 employees report every three years, but for the first time only in 2031
• Companies with fewer than 100 employees are exempt from the comprehensive reporting obligation under the Directive (whether Austria will also impose reporting obligations on companies with fewer than 100 employees remains to be seen)

The reports must document and publish the general gender pay gap and differences in variable pay components. In contrast to the previous internal income reports under the Equal Treatment Act (GlBG), the new pay reports are largely publicly accessible.

Whether these reporting obligations have also become directly applicable – and employers are therefore obliged to prepare a report for 2026 by 7 June 2027 – is disputed and, in our view, questionable. The Directive provides, among other things, for the involvement of employee representatives (such as works councils) as well as for a state body as recipient of the reports, neither of which can exist without a national implementing act. Nevertheless, all employers are advised to take the necessary precautions now so as to be able to fulfil the reporting obligation once the expected national implementing act is in place.

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The 5 percent rule: when the pay gap triggers obligations

If the pay report shows a gap of at least 5 percent within a comparison group that cannot be justified by objective, gender-neutral reasons, the company must take action. Employers are then obliged to implement appropriate corrective measures within six months in order to eliminate the entire pay gap (and not merely to reduce the difference to below 5 percent).

If the difference cannot be eliminated or objectively justified within this period, a joint pay assessment must be carried out together with the employee representatives. For businesses with a works council, this means direct involvement of the employee side in pay decisions. Passivity is therefore no longer an option. Whether this provision, like the reporting obligation, has become directly applicable is disputed.

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Important: the principle applies in both directions. A gap in favour of a man compared with a woman in a comparable position must also be capable of objective explanation.

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Significant changes in enforcement

Until now, employees suspecting pay discrimination had to substantiate it, which often failed due to a lack of information. Those who do not know what colleagues earn can hardly defend themselves effectively.

In future, however, employers must provide precisely the information that enables the employee to substantiate the claim. The reversal of the burden of proof applies where employers fail to comply with their obligation to provide information or transparency. A request for information not answered within two months can therefore automatically be treated as giving rise to a presumption of discrimination. A significant increase in proceedings is therefore to be expected.

Courts may also order the production of relevant evidence, even where it contains confidential information. In addition – at the discretion of the courts – legal costs may be imposed on employers even where employees lose the case. The costs borne by unsuccessful employees may be limited where they had legitimate grounds to assume that their claims existed. For companies without documented, objective pay systems, this creates considerable legal risks.

Independently of any transposition of the Pay Transparency Directive, Austrian procedural law already allows the court free assessment of evidence and the possibility of ordering the opposing party to produce evidence. Non-transparent systems and a refusal to provide information by employers can therefore already today have a considerably adverse effect on them in proceedings.

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Sanctions: what infringements entail

The Directive requires Member States to introduce effective, proportionate and dissuasive sanctions. How these are shaped in Austrian law is left to the national legislator – here, the missed transposition deadline does not give rise to direct effect. The Directive provides for substantial fines, the withdrawal of public funding and exclusion from procurement procedures as possible sanctions.

Employees who establish pay discrimination are entitled to compensation for the full pay difference over the period of underpayment as well as for the personal detriment suffered. The limitation period is at least three years from the date the infringement becomes known and is suspended where the employee lodges a complaint regarding their pay.

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What does this mean in concrete terms for Austrian companies?

Austrian employers must already formulate job advertisements in a gender-neutral manner and state the minimum pay under the collective agreement. Companies with 150 or more employees prepare income reports every two years. The new Directive goes considerably further.

The need for action lies in particular in the following areas:

• Analysis of the pay structure: which positions are to be assessed as being of equal value? Are there pay differences by gender that require explanation?
• Development of a systematic job architecture with clearly defined pay ranges and objective, gender-neutral evaluation criteria
• Review of employment contracts for pay secrecy clauses that will become ineffective
• Adaptation of recruiting processes: job advertisements, interview preparation and guidelines for pay negotiations
• Introduction of pay reporting: the first report for companies with 150 or more employees must be submitted in 2027 on the basis of 2026 data
• Internal communication: employees must be informed proactively and annually about their right to information

Experience shows that consolidating, cleaning and analysing the relevant data is among the greatest challenges.

Questions frequently arise in this context: which groups are comparable? How are overtime, individual pay components or periods of parental leave taken into account? Addressing these matters early protects against time pressure and sources of error shortly before the cut-off date.

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Conclusion: waiting is no longer an option

The EU Pay Transparency Directive is not an abstract Brussels topic, but a compliance standard with clear deadlines and material employment law consequences for every company in Austria. The impending sanctions in particular, and the reversal of the burden of proof that applies where employers breach their transparency obligations, make one thing clear: anyone who does not systematically document and objectively design their pay structures enters a considerable area of legal risk.

At the same time, the Directive offers the opportunity to fundamentally modernise pay systems, increase employer attractiveness and strengthen trust within the company. Fair, transparent and comprehensible pay structures are long since no longer a competitive disadvantage, but an argument in the competition for skilled staff – especially for the generation that regards fairness as a minimum standard.

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Do you have questions about the employment law implementation of the EU Pay Transparency Directive in your company?

Engelbrecht Arbeitsrecht advises you comprehensively – from the analysis of your existing pay structures to the legally compliant design of pay evaluation systems and employment contracts.

Find out more from our experts