Buyer's Guide
The Complete Guide to Gender Pay Gap Reporting in the EU
Last updated 2025-09-23
Introduction to Gender Pay Gap Reporting
Gender Pay Gap Reporting is now one of the hottest compliance and workplace equity topics in Europe. With the EU Pay Transparency Directive in place, companies across the Union must openly share how pay differs between men and women in a structured, transparent, and verifiable way. This is no longer just about ticking a compliance box. It has become a major factor in how employees, unions, investors, and even the public judge whether a company is fair and trustworthy.
Starting in June 2026, medium and large employers will have to publish their pay gap data, share pay ranges with candidates, and explain any pay differences that go above a set limit. Those who ignore these rules risk fines, reputational damage, and even employee backlash.
For HR teams, this shift is both a challenge and an opportunity. On one hand, pulling together accurate reports across different entities and countries feels like a huge task. On the other hand, businesses that embrace transparency early gain an edge in employer branding, talent retention, and ESG reporting.
Why Gender Pay Gap Reporting Matters for European Businesses
The gender pay gap is often confused with unequal pay for the same role. In reality, it measures the average difference in earnings between men and women across an entire company or country. These gaps usually appear because of factors such as fewer women in leadership positions, different working patterns, or occupational segregation.
By asking companies to measure, publish, and take action on these differences, the EU is pushing hard for progress toward equality. Reporting obligations do more than make hidden patterns visible. They also create accountability. In today’s world, where transparency is demanded by every stakeholder, ignoring the issue can lead to lost trust and lost talent.
Sysarb as the All-in-One Solution for Compliance
Many HR teams still try to manage this through messy spreadsheets, ad-hoc analyses, and expensive consultants. Sysarb has built the only SaaS platform designed directly for the EU Pay Transparency Directive. It automates every requirement and cuts down the workload dramatically.
With modules for job architecture, pay equity analysis, compliance reporting, and employee dashboards, Sysarb reduces HR’s workload by more than half and saves up to seventy percent of consultancy costs. Instead of being a headache, gender pay gap reporting becomes a repeatable, audit-ready process that strengthens both compliance and company culture.
In short, gender pay gap reporting is not just another legal duty. It is an opportunity to build trust, transparency, and long-term business value.
The Legal Foundation of Gender Pay Gap Reporting in the EU
Gender Pay Gap Reporting is not a brand-new idea that suddenly appeared out of nowhere. It is built on decades of European laws and promises around equality. To understand today’s obligations, we need to look at how the legal framework has developed over time.
The Equal Pay Principle in EU Treaties
The story starts with the Treaty of Rome back in 1957. That treaty introduced the principle of equal pay for equal work into European law. Today, this principle lives on in Article 157 of the Treaty on the Functioning of the European Union.
Article 157 makes it clear that men and women must receive equal pay for the same or equivalent work. But here is the problem. Even though this rule has been around for more than sixty years, pay gaps have continued to exist across industries and countries. Voluntary measures were not enough to close them.
In 2014 the European Commission tried again with a recommendation on pay transparency. Progress was still slow. By 2020 the average gender pay gap in the EU was stuck at around thirteen percent. That figure had barely moved in a decade. As part of the EU Gender Equality Strategy 2020 to 2025, the Commission decided stronger action was needed.
The EU Pay Transparency Directive
In 2023 the EU adopted the Pay Transparency Directive. This was a historic step because it turned the principle of equal pay into a set of rules that companies cannot ignore.
The Directive requires employers to share pay ranges with job applicants, explain how pay and career progression are determined, allow employees to ask for average pay data, publish gender pay gap reports, and carry out joint pay assessments if unexplained gaps are bigger than five percent.
Every EU country must translate this Directive into national law by June 2026. That means the overall rules are the same across Europe, but each country decides the exact penalties and enforcement details.
The most important shift is this. It is no longer up to individual employees to prove they are being discriminated against. The burden has moved to employers. Companies must now be able to prove they are fair.
Key Requirements of the EU Pay Transparency Directive
The EU Pay Transparency Directive sets out clear rules that mid-sized and large employers across Europe must follow. These rules are meant to make pay-setting open and fair, reporting consistent, and unjustified pay gaps impossible to ignore.
Pay Transparency for Job Seekers
Employers now have to tell candidates the starting pay level or the pay range before an interview takes place. Job ads must use gender-neutral language, and recruiters are not allowed to ask applicants about their salary history. This prevents past inequalities from following people into new roles and helps candidates negotiate based on fair and transparent information.
Transparency of Pay and Career Progression
Employees must have access to the criteria that determine pay levels and career progression. These rules must be objective, gender-neutral, and easy to understand. For instance, workers should know exactly which skills, responsibilities, or performance levels lead to higher pay or promotion. This removes hidden bias from pay decisions and makes progression paths visible.
The Right to Pay Information
Employees are now legally entitled to ask about their own pay and also about the average pay levels of colleagues doing the same or equivalent work. This information must be provided within two months of the request. Companies are not allowed to punish or penalise anyone for asking or for sharing pay details. This gives employees evidence rather than just suspicion if they want to challenge unfair differences.
Gender Pay Gap Reporting
Employers must regularly publish data on their gender pay gaps. This includes the average and median pay differences, gaps in bonuses and other variable pay, how men and women are distributed across different pay bands, and what share of men and women receive extra pay or benefits.
The frequency of reporting depends on company size. Companies with more than 250 employees must report every year. Companies with between 150 and 249 employees must report every three years. Companies with 100 to 149 employees will also report every three years, but only from 2031.
Reports must be shared with workers and their representatives, and in many cases also made public.
Joint Pay Assessments
If the reported data shows a gap of five percent or more in any group of workers, and the company cannot justify that difference with clear and objective reasons, the employer must carry out a joint pay assessment. This is a structured process where the company works together with employee representatives to identify the unfair differences, explain the causes, and agree on corrective actions.
By making these assessments mandatory, the Directive ensures that pay gaps are not only revealed but actually fixed.
Which Companies Must Report
Not every business in the EU is affected right away. The Pay Transparency Directive sets thresholds based on the number of employees and uses a phased timeline so that the largest employers go first.
Employee Thresholds and Reporting Cycles
The biggest companies, those with more than 250 employees, must start reporting gender pay gap data every year beginning in June 2027. Employers with 150 to 249 employees must report every three years starting in 2027 as well. Companies with 100 to 149 employees are also required to report every three years, but their obligation begins later in 2031. For smaller businesses with fewer than 100 employees, reporting is voluntary unless a country decides to introduce stricter rules locally.
This tiered approach means large organisations, which have the greatest impact on the labour market, take the lead. Smaller companies are given more time to prepare.
For multinationals, the picture is more complex. Each subsidiary within the EU must report separately if it meets the thresholds. This means one global company may end up producing several reports across different countries, each subject to national variations.
Differences Across EU Member States
The Directive creates a common standard, but each country still has freedom in how it applies the rules. This leads to differences that employers need to track carefully.
Some governments may require reports to be submitted online, while others accept templates in PDF or Excel. Some may insist that reports are published on company websites, while others only require submissions to authorities. Penalties will also differ. In some countries, fines may go as high as four percent of annual turnover for non-compliance.
For HR teams working across borders, this patchwork adds complexity. The smartest approach is to build a harmonised system that works everywhere and then adapt only where local law demands it.
This is exactly where Sysarb shows its strength. By using a directive-native compliance platform, companies can generate valid reports for each country from a single system. Instead of juggling multiple formats and deadlines, everything is centralised, consistent, and audit-ready.
What Data Must Be Reported
The Directive is very specific about the type of information employers must share. It is not enough to give a simple average or a headline number. The goal is to create a full picture of how pay is distributed and whether men and women are treated fairly across an organisation.
Average and Median Gender Pay Gaps
Companies must calculate both the average gap and the median gap. The average gap shows the overall difference in pay between men and women, but it can be distorted by very high or very low salaries. The median gap looks at the midpoint of the pay distribution, which often provides a clearer sense of what a typical employee earns. Both perspectives are needed to understand the true scale of inequality.
Distribution Across Pay Quartiles
Employers must split their workforce into four pay groups, from the lowest paid to the highest paid, and then show how men and women are distributed within those groups. This exposes whether women are concentrated in lower-paying roles or missing from top positions. It highlights structural issues, not just numerical ones.
Variable Pay and Benefits
Bonuses, commissions, and other types of variable pay often make a big difference in overall earnings. Companies must report on gaps in these payments and also disclose how many men and women actually receive them. The same goes for allowances, perks, or other complementary benefits. Without this information, hidden inequalities could remain out of sight.
Data by Worker Categories
Employers are also required to break down pay gaps by job category or job family. These categories must be based on a gender-neutral framework. This way, comparisons are meaningful and differences cannot be hidden behind vague groupings.
Where the Data Goes
All this information must be submitted to national authorities. It must also be shared with employees and their representatives, and in many cases published for the public to see. This ensures that the reporting is not a closed exercise but something visible and open to scrutiny.
The level of detail may feel overwhelming, especially for companies with scattered HR systems. That is why many employers are choosing automated platforms like Sysarb. The system pulls data from payroll and HR software, applies the Directive’s exact formulas, and produces reports that regulators can accept instantly. Instead of weeks of manual work, companies get accurate and audit-ready results in minutes.
The Challenges of Gender Pay Gap Reporting
On paper, the Directive sounds clear. In practice, meeting its requirements can feel like a huge uphill climb. Many HR and compensation teams already have their hands full, and now they face strict obligations that must be repeated every year or every three years depending on company size. The real challenge is not just producing numbers, but producing numbers that are consistent, transparent, and defensible.
Data Fragmentation and Heavy Workloads
Most organisations do not keep their pay-related information in one clean system. Instead, data is scattered across HR software, payroll providers, applicant tracking systems, and endless local spreadsheets. Bringing all of this together in a consistent format is slow, frustrating, and prone to errors.
Job evaluations may not follow a clear or gender-neutral method. Payroll data often looks different across countries or subsidiaries. And when everything is manually consolidated in Excel, version conflicts and mistakes are almost guaranteed. Without a unified process, companies risk late reporting, inconsistent results, and lost trust from both regulators and employees.
Financial and Reputational Risks
The cost of failing to comply can be severe. Member States have the power to impose financial penalties that reach up to four percent of a company’s annual turnover. But fines are only part of the picture. When pay gaps are made public, unions and works councils gain leverage in negotiations, employees may lose trust, and negative media coverage can quickly damage an employer brand. In today’s ESG-driven world, transparency failures are not seen as minor mistakes. They are seen as proof of poor governance.
Scrutiny from Employees and Unions
The Directive gives employees and their representatives concrete rights. Workers can demand pay information, and companies must respond within two months. If unexplained gaps above five percent appear, businesses are legally required to work with employee representatives on a joint pay assessment. That means HR teams must be prepared to defend pay structures with objective, gender-neutral evidence.
For companies that lack a structured approach, this level of scrutiny can turn into conflict. Disputes with unions, stalled negotiations, or even legal claims are all possible outcomes if transparency obligations are handled poorly.
The Core Takeaway
The challenge is not only producing the numbers but also proving that those numbers are backed by solid systems, clear logic, and defensible pay structures. Companies that wait until the last moment will be forced into reactive reporting. Companies that prepare early can use transparency to build trust, reduce risks, and even strengthen their reputation as fair employers.
How Sysarb Automates Gender Pay Gap Reporting
For many organisations, reporting on the gender pay gap feels like an impossible task. Collecting data from scattered systems, running complex analyses, and then creating regulator-ready reports usually means weeks of manual work and heavy consultancy fees. This is exactly the pain Sysarb is built to remove.
Solving the Structure Problem
One of the biggest issues is that companies often lack a clear and gender-neutral way of grouping jobs. Sysarb fixes this with its Structure module. It creates a transparent job evaluation system, builds a job architecture that shows how roles connect, and defines fair salary ranges. This gives companies defensible worker categories from the very start and makes compliance with Articles 5 and 6 straightforward.
Solving the Analysis Problem
Even when data is gathered, most HR teams struggle to interpret it. Sysarb’s Analyze module does the heavy lifting. It runs pay equity analyses that reveal unexplained gaps, calculates the exact cost needed to close them, and generates full compliance reports ready for submission. These reports cover quartile distributions, variable pay breakdowns, and explanatory notes, cutting up to sixty percent of the manual workload.
Solving the Transparency Problem
Employees now have the legal right to ask for pay data, and managers need tools to make fair decisions. Sysarb’s Involve module puts the right information into the right hands. Managers get dashboards that show salary bands, comparisons, and compliance alerts. Employees see their own pay, the range for their role, and the average pay in their category. This means Article 7 requests can be met instantly, and trust is built into the system.
Solving the Compliance Problem
Even with good systems, companies still worry about audits and data security. Sysarb removes this risk by being audit-ready out of the box. It is ISO 27001 certified, fully aligned with GDPR, and integrates with more than seventy HRIS and payroll systems. That means reporting is reliable, secure, and consistent across every country where the company operates.
The End Result
Instead of scrambling with spreadsheets and consultants, HR teams can turn gender pay gap reporting into a smooth, repeatable process. Sysarb automates every article of the Directive, from pay transparency in job ads to joint pay assessments, while saving time, reducing costs, and protecting the company’s reputation.
The Benefits of Accurate Gender Pay Gap Reporting
At first glance, gender pay gap reporting may look like a burden. In reality, companies that handle it well can unlock powerful advantages. By treating transparency as a strategy rather than a box-ticking exercise, businesses strengthen their reputation, culture, and resilience.
Stronger Employer Brand
Today’s workforce pays close attention to fairness. Candidates want to know whether an employer is serious about equality. When companies publish their data openly, they send a strong signal of accountability and progress. Certification or independent validation of results pushes credibility even further. Employers who act early position themselves as trustworthy and progressive, which makes it easier to attract the best talent.
Higher Trust and Retention
When employees understand how pay is determined and can see that the rules are gender-neutral, confidence in leadership grows. The Directive’s requirement to provide average pay information on request gives workers concrete proof that the organisation values fairness. This reduces turnover, encourages people to develop their careers internally, and builds a culture of openness instead of secrecy. Transparency is not just compliance. It is a loyalty-building tool.
Lower Risk of Legal and Financial Damage
Accurate reporting is also a shield against disputes and penalties. Companies that use proper systems can identify and fix unjustified gaps before they become legal problems. With a full audit trail of pay-setting decisions, organisations are better prepared for challenges from regulators, unions, or employees. This helps avoid fines that in some Member States can reach up to four percent of annual turnover. Stability and resilience are built by being proactive, not reactive.
Long-Term Business Value
Gender pay gap reporting ties directly into ESG, investor trust, and corporate reputation. Stakeholders see transparent employers as lower-risk, better governed, and more sustainable. In other words, compliance is not just about avoiding problems. It becomes a driver of long-term value creation.
Practical Steps for Businesses Preparing for Reporting
The deadlines of the EU Pay Transparency Directive may feel far away, but waiting until 2026 is risky. Early preparation means smoother compliance, fewer disputes, and more trust from employees. Here is how companies can start building a solid foundation now.
Step One - Assess Current Pay Structures
Begin with a clear picture of where you stand today. Review existing salary data across all roles, countries, and entities. Identify potential gaps or inconsistencies in how pay is set. Check whether job families and career paths are clearly defined or if they are still informal. A baseline audit prevents unpleasant surprises later and shows where improvements are needed.
Step Two - Create Gender-Neutral Job Evaluations
The Directive requires that employees are grouped into objective and gender-neutral categories. Standardised job evaluation systems help achieve this. With clear and consistent categories, pay comparisons become fair, and employees can understand the logic behind salary differences. This also makes responding to employee requests for pay data straightforward and defensible.
Step Three - Build Transparent Pay Structures
Define salary bands that align with the market and apply them consistently across departments and countries. Document what leads to pay increases or promotions, and make those criteria accessible to employees. This reduces hidden bias, increases trust, and helps managers make fairer decisions.
Step Four - Use Technology to Automate Compliance
Manual spreadsheets and ad hoc reports will not scale across multiple entities. Automated solutions like Sysarb can map requirements directly to the Directive, run pay equity analyses, calculate the cost to close gaps, and generate regulator-ready reports. They also provide dashboards for managers and employees, making transparency a daily reality rather than an annual headache.
Step Five - Communicate and Engage Early
Transparency is not only about numbers. Employees and unions will want explanations and action plans. Companies that engage early with their workforce avoid conflict later. Clear communication builds trust and demonstrates leadership, especially when gaps are identified and openly addressed.
Step Six - Treat Reporting as a Continuous Process
Gender pay gap reporting is not a one-time project. It will repeat every year or every three years depending on company size. The smartest approach is to build a process that can be repeated smoothly, with audit-ready data, clear documentation, and proactive analysis that goes beyond compliance.
The Future of Pay Transparency in Europe
Gender pay gap reporting is not the end of the journey. It is the starting line of a wider transformation in how companies think about fairness, trust, and accountability. The Directive forces organisations to confront uncomfortable truths, but it also creates a once-in-a-generation opportunity to lead.
In the coming years, pay transparency will move beyond compliance and become a core part of business strategy. Investors are already weaving pay equity into ESG reporting, and they expect reliable metrics from the companies they back. HR teams will go further than publishing data. They will use advanced analytics to uncover structural causes of pay gaps, model different scenarios, and design strategies that improve fairness while strengthening performance.
Employees will also play a more active role. With dashboards and rights to information, they will no longer rely on rumours or assumptions. They will be able to see for themselves whether pay is fair and whether their employer lives up to its promises. This shift will put pressure on leadership, but it will also create stronger trust and loyalty when done right.
For forward-looking companies, the Directive is not a cost of doing business. It is a strategic advantage. Transparency builds credibility with regulators, strengthens relationships with employees, reassures investors, and makes the company more attractive to top talent. Those who act early will be seen as leaders in equality and governance. Those who drag their feet risk fines, reputational damage, and lost opportunities.
The conclusion is simple. Gender pay gap reporting is not just about compliance. It is about turning fairness into a competitive edge. With the right mindset and the right tools, such as directive-native platforms like Sysarb, companies can transform a legal obligation into long-term business value.
The future belongs to organisations that understand this. Transparency is no longer optional. It is the new foundation of trust in European business.
About the Author
Carl Pettersson is a compensation and pay equity expert and a recognized authority on EU pay transparency. He advises HR leaders across Europe on how to transform compliance into a strategic advantage through robust job architecture, advanced pay equity analytics, and transparent communication. With extensive knowledge of the directive and years of experience guiding organizations through audits and union negotiations, Timmy helps companies move beyond spreadsheets and heavy reliance on consultants to build lasting trust in their pay practices. His focus is on turning complex legislation into practical and people centered solutions that drive compliance and cultural change.
