The principle of equal pay for equal work or work of equal value between men and women has long been a fundamental principle of European Union law. Despite this, gender-based pay disparities continue to exist across the European Union, prompting legislators to introduce a more robust framework aimed at increasing transparency and strengthening enforcement of equal pay rights.
In this context, the European Union adopted Directive (EU) 2023/970 on Pay Transparency and Equal Pay (the “Directive”), introducing a series of obligations designed to promote greater transparency in remuneration practices and facilitate the identification and correction of unjustified pay disparities between men and women. The Directive entered into force on 6 June 2023, and Member States were required to transpose its provisions into national legislation by 7 June 2026.
Whilst the principle of equal pay is not new, the obligations introduced by the Directive represent a significant shift in the way employers approach recruitment, remuneration, promotions and workforce reporting. Employers are no longer expected merely to avoid discriminatory practices; they will increasingly be required to demonstrate that their remuneration structures are transparent, objective and gender-neutral.
Increased Transparency at the Recruitment Stage
One of the most significant changes introduced by the Directive concerns the recruitment process.
Historically, salary negotiations often took place without candidates having any meaningful indication of the remuneration attached to a position. In many cases, employers also relied upon information concerning a candidate’s previous salary when determining remuneration offers. The European legislator identified these practices as factors contributing to the perpetuation of historical pay inequalities.
Under the new framework, employers must provide applicants with information regarding the initial salary level or salary range applicable to the position before the employment relationship is concluded. In addition, employers will be prohibited from requesting information concerning a candidate’s salary history. Recruitment procedures and vacancy notices must also be gender-neutral and designed so as not to undermine the principle of equal pay.
These measures are intended to ensure that applicants enter salary negotiations on a more equal footing and that remuneration decisions are based on objective criteria rather than historical earnings.
Employees’ Right to Access Pay Information
The Directive also introduces extensive rights enabling employees to obtain information concerning remuneration practices within their organisation.
Employees will be entitled to request information regarding their individual pay level as well as the average pay levels, broken down by gender, of workers performing the same work or work of equal value. Employers will also be required to provide information regarding the criteria used to determine remuneration, pay levels and pay progression, provided that such criteria are objective and gender-neutral. Employers must further inform employees annually of their right to request such information.
For many employers, these obligations will require the implementation of new internal procedures and reporting mechanisms to ensure that requests can be addressed efficiently and consistently.
The End of Traditional Pay Secrecy
Another notable feature of the Directive is its approach to pay confidentiality.
Many employers have historically sought to discourage employees from discussing remuneration by including confidentiality provisions in employment contracts or workplace policies. The Directive takes a different approach by recognising that transparency is essential for the effective enforcement of equal pay rights.
Accordingly, employees must be free to disclose and discuss their remuneration where necessary for the purpose of assessing compliance with the principle of equal pay. Restrictions that prevent employees from obtaining or sharing such information are inconsistent with the objectives of the Directive.
Employers should therefore review existing employment contracts, employee handbooks and internal policies to ensure compatibility with the forthcoming framework.
Gender Pay Gap Reporting: Transparency Through Accountability
The Directive introduces mandatory gender pay gap reporting obligations for larger employers.
In particular, employers with at least 250 workers will be required to submit annual reports concerning gender pay gap data. Employers employing between 150 and 249 workers will be subject to reporting obligations every three years, with the first reports due by 7 June 2027. Employers employing between 100 and 149 workers will also be required to report every three years, with the first reporting deadline falling on 7 June 2031. Although employers with fewer than 100 workers are not currently subject to mandatory reporting requirements under the Directive, they remain fully bound by the principle of equal pay and may still be required to demonstrate compliance in the event of employee complaints or legal proceedings.
The reports will include detailed information relating to gender pay gaps, bonus disparities, variable remuneration and the distribution of male and female employees across various pay categories. The objective is not merely statistical transparency but the identification of structural inequalities that may require corrective action.
Joint Pay Assessments and Corrective Measures
The reporting obligations are accompanied by a more substantive compliance mechanism.
Where reporting identifies a gender pay gap of at least 5% that cannot be justified by objective and gender-neutral criteria, employers may be required to conduct a joint pay assessment together with employee representatives. The purpose of the assessment is to identify the causes of the disparity and determine appropriate corrective measures.
This represents a significant departure from traditional equal pay enforcement mechanisms, placing greater emphasis on proactive identification and remediation of pay inequalities before disputes escalate into litigation.
Accountability enforced: The High Cost of Non-Compliance
The Directive significantly strengthens the enforcement of equal pay rights and increases potential liability exposure for employers.
Employees who have suffered pay discrimination must have access to full compensation, including recovery of unpaid remuneration and related benefits. The Directive also strengthens procedural protections by facilitating access to evidence and shifting the burden of proof to employers in certain circumstances. In practice, this means that employers may be required to demonstrate that remuneration differences are objectively justified and unrelated to gender. The Directive further requires Member States to introduce effective, proportionate and dissuasive penalties for non-compliance.
As a result, employers should expect increased scrutiny of remuneration practices and a greater likelihood of pay-related claims where documentation and objective justification are lacking.
True Leadership is Always One Step Ahead
Although the precise implementation measures may differ from one Member State to another, the direction of travel is clear. Employers should not wait for enforcement action or employee complaints before assessing their preparedness.
Organisations should begin by reviewing remuneration structures, recruitment procedures and promotion practices. Particular attention should be given to the criteria used to determine pay, salary increases, bonuses and career progression. Employers should also consider conducting internal pay gap reviews and implementing objective job evaluation methodologies capable of demonstrating compliance with equal pay requirements.
The Directive represents more than a regulatory exercise. It reflects a broader shift towards transparency, accountability and evidence-based remuneration practices. Employers that proactively prepare for these changes will be better positioned to manage legal risk, maintain employee trust and demonstrate their commitment to workplace equality.
As Cyprus moves towards full implementation of the Directive, employers should carefully review their existing remuneration frameworks, recruitment practices and internal policies to ensure compliance with the new transparency obligations.
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Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Readers are advised to consult with legal professionals for advice specific to their individual circumstances.