What Companies Need to Know About Pay Transparency

The government-appointed commission responsible for implementing the EU directive into German law has defined the following key points:

1. Data basis for reporting
   Reports must be based on actual gross annual pay, including all fixed and variable components. Practical exceptions such as severance payments or minor non-cash benefits may apply. Companies may decide how precisely they present variable compensation.
2. Employee right to information
   The right to request salary information will become effective in 2027. Small comparison groups (< six men or women) are excluded for data protection reasons. The methodology for categorizing employees must be clearly defined and communicated.
3. Employee categories and collective agreements
   For employees covered by collective bargaining agreements, a distinction should be made between unionized and non-unionized employees to allocate pay differences more accurately. The optional use of scientifically validated job evaluation tools is recommended.
4. Report consolidation
   The commission proposes that reports may be consolidated at group level, i.e., across multiple legal entities within a parent company. It remains open whether data must be presented only in aggregated form or also broken down by legal entity.
5. Handling discrepancies and the gender pay gap
   If unjustified differences are identified, companies are expected to promptly agree on an action plan with employee representatives, including clear timelines. In practice, adjustments may take several years—for example, if collective agreements need to be amended. The commission recommends aligning these reporting obligations with other sustainability requirements, such as the CSRD.

For internationally operating companies, additional strategic adjustments are required, as regulations and reporting standards must be consolidated across countries.