EU Directive 2023/970 on Pay Transparency: A Complete Guide

Key points in brief

• Directive 2023/970 moves the focus from a single pay decision to the pay system as a whole: employers must show that pay differences rest on objective, gender-neutral criteria.
• Employers with 100 or more workers will report their gender pay gap — the largest ones from 7 June 2027.
• A gap of 5% or more in any category of workers that is neither justified nor remedied within six months triggers a joint pay assessment with employee representatives.
• Poland missed the 7 June 2026 transposition deadline, but transparency in recruitment already applies and the directive’s reporting dates have not moved.

Recommendation: do not wait for the final Polish act. Measure the gap now, document your pay criteria and prepare managers to explain them.

The directive asks about the rule, not the decision

In May 2023, the European Union adopted Directive 2023/970 — the most important equal-pay regulation in decades. It sets minimum requirements that strengthen the principle of equal pay for equal work or work of equal value, enshrined in Art. 157 TFEU, and it targets the reasons the gap has persisted for so long: a lack of transparency, legal uncertainty and procedural obstacles.

The key shift is one of perspective. Until now, an employee had to show that a specific decision was unfair. The directive asks a different question: can the company demonstrate that the differences in its pay structure stem from objective, gender-neutral criteria — and not from gender? It also sets an explicit goal: a gap below 5% in every category of workers.

Transparency stops being a matter of company culture and becomes a legal requirement with real consequences.

Who is covered — and the terms that matter

The directive covers employers in both the public and private sectors and all workers, whether full-time, part-time or temporary. Before hiring, it also protects job applicants. Reporting obligations start at 100 employees, but the rules on pay criteria and the right to information apply to every employer.

A few definitions from Art. 3 shape everything that follows. Pay means basic salary plus any other monetary or in-kind benefits, including complementary and variable components. The gender pay gap is the difference in average pay levels between women and men, expressed as a percentage of men’s average pay; the median pay gap shows the same for the “typical” worker. A category of workers groups people doing the same work or work of equal value in a non-arbitrary way, and work of equal value is assessed with non-discriminatory, gender-neutral criteria (Art. 4). Discrimination covers direct, indirect and intersectional forms, including less favourable treatment linked to pregnancy and family leave.

How the gap is measured and reported

The directive defines “pay level” as gross annual pay and the corresponding gross hourly pay. The gap is expressed as a percentage so it can be compared with the 5% goal: women earning 97% of men’s pay means a 3% gap. The analysis must be systematic, documented and based solely on objective data.

Two measures should not be confused. The unadjusted gap is the raw difference in average pay, and it is the one reported against the 5% threshold. The adjusted gap accounts for objective factors and reveals the unexplained portion — the part that signals discrimination risk. A company needs both: the first for the report, the second to understand where the risk lies.

The pay-gap report (Art. 9) covers seven elements:

1. the gender pay gap;
2. the gender pay gap in complementary or variable components;
3. the median gender pay gap;
4. the median gap in complementary or variable components;
5. the proportion of women and men receiving complementary or variable components;
6. the proportion of women and men in each pay quartile;
7. the gap by category of workers — for basic salary and for complementary or variable components.

The joint pay assessment (Art. 10) adds one more measure: the proportion of workers who received a pay rise after returning from maternity, paternity, parental or carers’ leave.

Who reports and when

The obligation depends on the size of the organisation. Employers with 250 or more workers report every year, starting by 7 June 2027. Those with 150–249 workers report every three years, also from 7 June 2027. Employers with 100–149 workers join every three years from 7 June 2031. Below 100 workers, reporting is voluntary.

For the largest companies, this is not a distant horizon. The pay decisions being made now will shape the data in the first reports.

The 5% threshold: when a gap becomes a legal problem

Art. 10 turns the report into an obligation to act. If the gap in any category of workers is at least 5%, and the employer neither justifies it with objective, gender-neutral criteria nor remedies it within six months of reporting, it must carry out a joint pay assessment with employee representatives.

That is why the threshold cannot be managed with a spreadsheet alone. To make the gap measurable and defensible, a company needs a pay structure that compares the value of work against the four criteria of Art. 4: skills (including soft skills), effort, responsibility and working conditions. Without it, the categories of workers — and therefore the gap itself — can be challenged.

A gap that cannot be explained with objective criteria is no longer a statistic. It is a legal risk.

Transparency starts with the job ad

Articles 5–8 extend transparency to the whole employment cycle. Before employment, applicants are entitled to information on the starting pay or its range, based on objective, gender-neutral criteria. Employers may not ask about pay history, and job ads and job titles must be gender-neutral.

During employment, the employer must give workers easy access to the criteria used to set pay and pay progression; companies with fewer than 50 employees may be exempt from the progression part. Workers may request information on their own pay level and on average pay levels, broken down by gender, for workers doing the same work or work of equal value. The employer must answer within two months and remind workers of this right every year. Clauses that prevent workers from disclosing their own pay are prohibited.

For HR, three effects are immediate:

1. pay ranges become the standard in recruitment;
2. the question about previous earnings disappears;
3. the company must be able to answer, within two months, a request about average pay levels in a category of workers.

What happens when the gap cannot be justified

The directive gives the equal-pay principle real enforcement. In a dispute, the burden of proof is reversed: it is the employer who must prove there was no breach of the equal-pay principle. Workers who suffered discrimination are entitled to full compensation, including back pay, related bonuses and lost opportunities for promotion and progression.

Penalties must be effective, proportionate and dissuasive, and may be based on the employer’s turnover or total payroll. Compliance with equal-pay obligations also counts in public procurement, so missing documentation may cost contracts. At the same time, pay data must be processed in line with the GDPR and used solely to apply the equal-pay principle (Art. 12).

Poland: the deadline has passed, the obligations have not

The transposition deadline passed on 7 June 2026, and Poland has not yet fully implemented the directive. Part of it already applies: since 24 December 2025, the Labour Code has required employers to give candidates information on the starting pay or its range, has banned questions about pay history and has required gender-neutral job ads and job titles.

The main bill — on strengthening the right to equal pay for equal work or work of equal value — is on the government’s legislative agenda, with adoption by the Council of Ministers planned for Q4 2026. The directive still points to 7 June 2027 for the first pay-gap reports, and the Labour Code already prohibits pay discrimination. Companies that wait for the final rules lose their most valuable resource — time to prepare.

What to do now: 30 days to diagnose, 12 months to fix the system

Preparation does not have to start with a large project. It starts with knowing where you stand.

• First 30 days — measure and see where you stand: audit data, documentation and criteria, and measure both the adjusted and the unadjusted gap.
• Next 12 months — fix the system: tidy up decision criteria, prepare managers, build communication and measure perception regularly.

Levelly.ai supports each of these steps: an automated report covering the seven elements of Art. 9, Oaxaca–Blinder decomposition to justify differences with objective criteria, a compliance dashboard that flags categories above the 5% threshold, an employee view for the right to information, and analysis by job level and department — with data processed under a data processing agreement on EU-based servers.

About the data and sources

• Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023 to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms.
• Treaty on the Functioning of the European Union, Art. 157.
• Act of 4 June 2025 amending the Labour Code (Journal of Laws 2025, item 807) — pay transparency in recruitment, in force since 24 December 2025.
• Draft act UC127 on strengthening the right to equal pay for men and women for equal work or work of equal value — list of legislative work of the Council of Ministers.

Prepare your organisation for Directive 2023/970 — create a free Levelly.ai account and calculate your pay gap.