The EU Pay Transparency Directive is to be implemented in Austrian law by June 7, 2026. There is currently no Austrian implementation law and it remains to be seen whether it will be implemented in Austria on time. However, employers must take precautions now to be able to meet the extensive reporting and information requirements. If they are not implemented on time, the provisions of the Directive are expected to be immediately applicable from June 7, 2026. This overview summarizes the most important aspects of employment law.
EU Pay Transparency Directive: What employers in Austria need to know now
From June 7, 2026, a new chapter in employment law begins in Austria. The EU Pay Transparency Directive (Directive (EU) 2023/970) is taking effect and fundamentally changes the rules relating to salaries, equal pay and internal transparency. For employers, this means new information, information and reporting requirements, increased legal protection for employees and procedural simplifications with potentially serious consequences in the event of a dispute. Anyone who hesitates now risks time pressure, compliance problems and severe sanctions.
This article provides a clear overview of the most important new features, their practical significance and why a timely discussion of the topic is highly recommended.
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 that came into force on June 6, 2023. Its central goal is to finally effectively implement the principle of “equal pay for equal work or work of equal value”, which has been enshrined since the founding of the EU. Despite this principle, women in the EU still earn 11.1 percent less than men on average, according to recent data from eurostat. In Austria, the unadjusted gender pay gap is even around 17.7 percent (as of 2024; Statistics Austria).
The Directive focuses on two key levers: transparency and enforcement. Transparency means that compensation systems must be designed in a comprehensible manner free from discrimination. Employees should be able to understand how their salary is made up and whether it complies with the principle of “equal pay for equal work or work of equal value” compared to colleagues. The stricter enforcement mechanisms ensure that violations are consistently sanctioned. These include in particular the new reversal of the burden of proof and dissuasive sanctions.
The Directive applies to all employers in the private and public sectors and includes all workers and applicants. The term “remuneration” is broadly defined: In addition to the basic salary, it includes all compensation components such as variable shares, benefits in kind and bonuses, etc.
State of implementation in Austria
EU Member States have until June 7, 2026 to transpose the Directive into national law. There is currently no final draft law in Austria. If the Directive is not transposed into national law as of the cut-off date, many of the provisions of the Directive will be immediately applicable.
For companies, this means that there is room for manoeuvre, but time is running out. The first formal reporting requirements apply in stages from 2027, but the required data must be carefully collected as early as January 2026.
Austria is therefore not one of the pioneers. Countries such as the Netherlands and Sweden have already presented draft legislation. The pressure to act is increasing. The final implementation is expected primarily through adjustments to the Equal Treatment Act (GlBG) and the Labor Constitution Act (ArbVG).
An overview of the new obligations for employers
The Directive entails obligations in three key areas: before the employment contract is concluded, during the current employment relationship and at company level in the form of reporting obligations.
1. Before the interview: transparency in recruiting
New obligations will apply as early as the application process in the future. Employers must provide information on the starting salary or salary range and 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 future.
In addition, it is no longer allowed to ask applicants about their current or previous salary. This practice often helps to perpetuate salary disparities, as people who have been underpaid so far continue to receive lower offers for new jobs.
For Austrian companies, this represents a significant change. Salary negotiations must be based on transparent criteria and may no longer be based on individual salary histories.
2. Right to information for existing employees
In future, all employees will have the right to request information about their individual pay and the average pay of people in a comparable position and qualification, broken down by gender. Companies must proactively inform their employees about this right to information every year. The requested information must be provided within two months at the latest.
The Directive also provides for the right of employees to information about pay developments in the company. Contract clauses that prevent employees from talking about their salary lose their validity. Employers should therefore check existing employment contracts for such clauses.
The criteria for setting salaries and salary ranges must be presented openly and comprehensibly. The compensation system should be objective, transparent and gender-neutral.
3. Reporting requirements depending on company size
The Directive provides for phased reporting requirements:
- Companies with at least 250 employees prepare a report annually, for the first time 2027 (based on data from 2026)
- Companies with 150 to 249 employees report every three years, for the first time in 2027 (based on data from 2026)
- Companies with 100 to 149 employees report every three years, but for the first time only in 2031
- According to the Directive, companies with fewer than 100 employees are exempted from the comprehensive reporting requirement (whether Austria will also standardize reporting requirements for companies with less than 100 employees remains to be seen)
The reports must document and publish the general gender pay gap and differences in variable salary components. In contrast to previous internal income reports under the GlBG, most of the new salary reports are publicly available.
The 5 percent rule: When the pay gap becomes mandatory
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 required to implement appropriate corrective measures within six months to eliminate the entire pay gap (and not just reduce the difference to less than 5 percent).
If the difference cannot be abolished or objectively justified within this period, a pay assessment must be carried out together with the employee representatives. For companies with works councils, this means direct involvement of employees in salary decisions. Passivity is therefore no longer an option.
Important: The principle applies both ways. In future, it must also be possible to explain a difference in favour of a man compared with a woman in a comparable position.
Significant simplifications in law enforcement
Until now, workers suspected of pay discrimination had to make this credible, which often failed due to a lack of information. If you don't know how much your colleagues earn, you can barely defend yourself effectively.
In future, however, employers must provide precisely this information that enables the employee to substantiate the claim. The reversal of the burden of proof applies when 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 regarded as a presumption of discrimination. A significant increase in the number of processes is therefore expected.
Courts may also order relevant evidence to be presented, even if it contains confidential information. In addition — at the discretion of the courts — legal costs can be charged to employers even if employees lose a lawsuit. The costs borne by losing workers can be limited even if they had legitimate reasons to assume that their claims existed. For companies without documented, objective remuneration systems, this creates significant legal risks.
Sanctions: What is imminent in the event of violations
The Directive requires Member States to introduce effective, proportionate and dissuasive penalties. How these are drafted in Austrian law is left to the national legislator. The Directive provides for severe fines, the withdrawal of public funding and the exclusion of procurement procedures as sanction options.
Employees who prove pay discrimination are entitled to compensation for the full pay difference in the period of underpay and the personal impairment they have suffered. The limitation period is at least three years from when the infringement becomes known and is suspended if the employee complains about his pay
It should be noted that Austrian implementation for the benefit of workers may go beyond the minimum standards of the Directive. In view of the gender paygap and political pressure, this cannot be ruled out.
What does this mean specifically for Austrian companies?
Austrian employers must already formulate job advertisements in a gender-neutral manner and state the minimum salary under the collective agreement. Companies with 150 or more employees prepare income reports every two years. The new directive goes much further than that.
Action is needed in particular in the following areas:
- Analysis of the compensation structure: Which positions are considered equivalent? Are there salary differences by gender that need to be explained?
- Development of a systematic job architecture with clearly defined salary ranges and objective, gender-neutral evaluation criteria
- Review of employment contracts for salary confidentiality clauses that will become ineffective in the future
- Adjustment of recruiting processes: job advertisements, preparation of interviews and guidelines for salary negotiations
- Introduction of pay reporting: The first report for companies with 150 employees or more must be presented in 2027 based on data from 2026
- Internal communication: Employees must be proactively informed about their right to information every year.
Experience has shown that merging, cleaning and analyzing relevant data is one of the biggest challenges.
Questions often arise: Which groups are comparable? How are overtime, individual pay components or parental leave periods taken into account? An early discussion protects against time pressure and sources of error just before the deadline.
Conclusion: Waiting is no longer an option
The EU Pay Transparency Directive is not an abstract Brussels issue, but a clearly defined compliance standard with immediate employment law consequences for every company in Austria. In particular, the impending sanctions and the reversal of the burden of proof that occurs when employers violate their transparency obligations make it clear that anyone who does not systematically document and objectively design their remuneration structures is entering into a significant area of legal risk.
At the same time, the Directive offers the opportunity to fundamentally modernize compensation systems, increase employer attractiveness and strengthen trust within the company. Fair, transparent and comprehensible salary structures are no longer a competitive disadvantage, but an argument in the competition for skilled workers — especially for the generation that sees fairness as a minimum standard.
Do you have any questions about the employment law implementation of the EU Pay Transparency Directive in your company?
Engelbrecht Employment Law provides you with comprehensive advice — from the analysis of your existing compensation structures to the legally compliant design of pay evaluation systems and employment contracts.
EU Pay Transparency Directive — The most important questions for employers
When does the EU Pay Transparency Directive apply in Austria?
National implementation must take place by June 7, 2026. Work is currently being done on the draft law, which is expected to supplement the Equal Treatment Act (GlBG) and the Labor Constitution Act (ArbVG). Important: Even though Austrian legislators are late in implementing the Directive, the majority of the provisions will have binding effect as early as June 7, 2026 due to the immediate applicability of the Directive. Companies must therefore start preparations now and not wait for the final draft law.
Does the Directive also apply to small businesses?
According to the requirements of the Directive, companies with fewer than 100 employees are generally not required to report. However, the obligations to provide salary information in job advertisements, the prohibition to ask questions about previous salaries, and the right to information for employees apply to all employers regardless of size. Whether Austria will extend a reporting requirement to smaller companies remains to be seen. If you want to be on the safe side, you should closely follow the development of the law.
Will companies have to disclose all salaries from now on?
No, the Directive does not require the disclosure of all individual salaries. Workers have the right to receive information about their individual pay and average pay from comparable people. Companies of a certain size must publish aggregate data on the gender pay gap, but not individual salaries. In recruiting, from the implementation deadline, job advertisements must include a specific salary range or a starting salary. A mere reference to the collective agreement is no longer sufficient.
What happens if a company does not comply with the requirements?
Employers face severe fines for violations. There is also a risk of being excluded from public tenders and funding. The reversal of the burden of proof is particularly serious: If an employer does not comply with an obligation to provide information, he must prove that there is no discrimination in pay in the event of a dispute. For companies without a documented compensation system, this represents a significant challenge.
What is meant by “work of equal value”?
Work of equal value includes activities that are different but have comparable requirements. The evaluation is based on criteria such as competencies, responsibility, workload and working conditions. In practice, differentiation is often the decisive challenge: Which positions are comparable? It is important to answer questions such as: “Which groups can I compare? ” or “How do I take into account overtime, individual pay components, admissions during the year or waiting periods? “Companies must carefully document this analysis.
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