EU Pay Transparency Directive: Key Implications And Next Steps For Employers

Directive (EU) 2023/970 of 10 May 2023 (the “Directive”) aims to make the principle of equal pay for equal work operational through transparency duties and stronger enforcement mechanisms.

Following the transposition deadline of 7 June 2026, progress on transposing the Directive remains uneven across Europe, with most Member States still in the drafting or consultation phase. To date, only a few have presented draft legislation with an effective date.

In Luxembourg, no draft bill has been published yet. According to the Ministry of Labour, draft legislation is not expected before the second half of 2026.

The scope of the Directive

The Directive has a broad scope. It applies to public and private sector employers, all workers with an employment contract or relationship under national law, and job applicants for pre-employment transparency purposes.

“Pay” must be interpreted broadly to include not only basic salary but also any consideration received directly or indirectly, in cash or in kind, such as bonuses or benefits.

“Work of equal value” is not confined to identical jobs but must be assessed through objective, gender-neutral criteria: skills, effort, responsibility and working conditions. Relevant soft skills must not be undervalued.

Certain obligations vary by employer size. Pre-employment transparency rules apply generally, but Member States may exempt employers with fewer than 50 workers from pay progression disclosure. Employers with at least 100 workers will be subject to pay gap reporting, with timetables depending on workforce size.

Practical implications for employers

Employers must review transparency and equal pay compliance across recruitment and the full workforce. They must also assess total remuneration, not just base salary, and be able to justify pay differences with objective, gender-neutral criteria supported by adequate data and documentation.

Recommended next steps for employers

Although no draft bill has yet been published in Luxembourg, employers should already be preparing for compliance in anticipation of the Directive’s transposition into national law.

In practice, employers can begin aligning internal processes with the Directive’s core requirements. As a first step, they should categorise roles using objective, gender‑neutral criteria and conduct a structured review of salary architectures and compensation policies, with appropriate documentation, to identify any existing disparities. Pay gaps of 5% or more warrant particular attention and should be carefully analysed, objectively justified, and corrected where necessary.

Employers should also establish a robust documentation process for pay-setting and progression decisions. Clear justification for pay decisions within each job category will be key to demonstrating compliance.

Finally, employers should assess whether their HR, compensation and reporting systems can support data monitoring, internal audits, employee requests and, where applicable, joint pay assessments.

Frequently asked questions from employers

• Can an employer ask a job applicant about their previous salary?

No. The Directive stipulates that an employer cannot ask candidates about their salary during their current or previous employment.

• What should be done if the group of employees is too small, to the point that it would be possible to identify the salary of a specific employee?

Information must be provided in accordance with the GDPR, so disclosing an identifiable employee’s salary is not permitted. In such cases, only employee representatives, the Labor and Mines Inspectorate (Inspection du travail et des mines), or the competent equality body may access actual salary data and advise employeeson filing complaints without disclosing individual pay levels.

• How can employers justify pay differences in practice and retain the evidence needed in the event of a dispute?

Employers should justify pay differences using objective, gender-neutral criteria (skills, effort, responsibility, working conditions) applied consistently across roles.

They should maintain contemporaneous records showing how pay was set, including fixed and variable components, comparators used, and outcomes of internal reviews or audits.

Employers can use the period before national transposition for a focused readiness exercise: review recruitment processes, ensure pay criteria are objective and gender-neutral, document reasons for pay differences, and confirm that HR systems can handle employee requests and future reporting obligations.

Taking these steps at this stage will make it easier to identify and correct unjustified pay gaps before the Directive is implemented in Luxembourg.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.