Germany: An overview of the EU Pay Transparency Directive

The directive goes significantly beyond the current legal situation in Germany. It facilitates the enforcement of information rights, expands reporting obligations and requires effective sanction mechanisms to enforce regulatory requirements. Companies with operations in Germany should therefore not wait for details of national implementation, but should begin the necessary preparations at an early stage.

Rights to information without thresholds

Under current German law, employees can only request information about the pay of comparable employees of the opposite sex – and only in companies with more than 200 employees. In addition, this right does not apply if the comparable job is performed by fewer than six employees of the opposite sex. There is currently no provision for information about the pay of employees of the same sex.

This will have to change fundamentally: in future, employees will be able to request information about (1) their individual pay level, (2) the average pay levels of groups doing the same or equivalent work, and (3) the gender-specific breakdown of these groups. For the first time, this will enable a direct comparison of pay within one's own gender.

The previous thresholds, such as minimum company size and a comparison group of at least six people, are not reflected in the directive. In future, the right to information will apply from the first employee onwards, which will pose bureaucratic challenges for smaller companies in particular.

Employers' information obligations

It is already clear that employers will in future be obliged to inform their employees annually about their right to information and the steps required to exercise it.

In addition, employers with more than 50 employees must inform their workforce about the objective and gender-neutral criteria they use to determine pay, pay levels and pay development. The directive does not contain any specific requirements regarding the form and frequency of this information obligation. In this respect, it remains to be seen how the German legislature will shape the details.

Pay transparency in the application process

Unlike in the past, the regulations on pay transparency will now apply as early as the application process: employers will be obliged to inform applicants of the starting salary or a salary range and, where applicable, relevant collective agreement provisions in order to enable transparent salary negotiations. This information can be provided either in the job advertisement or in some other way before the interview, for example in the invitation.

In addition, a ban on questions will be introduced: in future, applicants may not be asked about their current salary or previous salary development, either in forms or in interviews.

New thresholds and intervals for reporting requirements

The expanded reporting requirements will also lead to additional internal work. Currently, under German law only employers with more than 500 employees are required to report on equal pay if they are required to prepare a management report for accounting purposes.

In future, all companies with at least 100 employees will be required to produce a regular report on equal pay. Among other things, this must contain information on the (average) gender pay gap, broken down by basic pay and supplementary and variable components. For companies with 100 to 249 employees, this reporting is required every three years, while companies with at least 250 employees must report annually. Companies with at least 150 employees must submit their first report by 7 June 2027.

If the report reveals an unjustified gender pay gap of at least 5 percent that is not corrected within six months, a joint pay assessment must be carried out with the employee representatives.

Consequences of non-compliance

The directive provides for employees to claim damages for financial losses and compensation for non-material damage. In cases of dispute, the burden of proof is reversed in favour of the employees: if employees can substantiate facts that indicate pay discrimination, it is up to the employer to prove that there has been no discrimination. Another new feature is that claims can also be enforced by means of representative action or class action.

Secondly, the Directive requires member states to introduce effective sanctions for infringements. Possible measures could include fines or exclusion from public contracts in the event of repeated infringements.

The specific form these claims and sanctions will take in German legislation remains to be seen.

Preparing for the new requirements

Given the complexity of the regulatory requirements and the scope of the necessary adjustments, companies with operations in Germany would be well advised not to wait for national implementation, but to act early. This is because it is unlikely that there will be sufficient time to comprehensively implement the directive's requirements in operational practice once the legislative process has been completed. Companies should therefore already be examining the extent to which they fall within the scope of the directive and what specific obligations they will face.

The recent ruling by the German Federal Labour Court on 23 October 2025 (8 AZR 300/24) also shows that issues of pay transparency should no longer be postponed. In this ruling, the Federal Labour Court clarified that the assertion that an individual colleague of the opposite sex receives higher pay for the same or equivalent work could give rise to a presumption of gender-based discrimination. If the employer is unable to refute this presumption, it is obliged to pay the higher remuneration of the comparable colleague – even if this is the salary of the top earner in the comparison group.

The explosive nature of this ruling is obvious. The extended rights to information under the directive will make it much easier for employees to access comparative data in future. The combination of easier access to information and a lower burden of proof for the presumption of gender-based discrimination carries the risk of an upward salary spiral. Employers should therefore not only keep an eye on median values in future, but also take into account direct comparisons of pay between individual employees.