The Pay Transparency Directive – what does it mean for Danish companies?

The Pay Transparency Directive – what does it mean for Danish companies?

The EU has adopted a new Pay Transparency Directive to ensure that women and men receive equal pay for equal work or work of equal value. The directive has not yet been implemented in Danish law, but it must be implemented by June 2026 at the latest. This will be of great importance to Danish companies – especially when it comes to salary transparency, documentation and reporting.

Objective of the Directive

The directive aims to promote effective gender pay and increase pay transparency. It is based on the principle of equal pay, which has been a cornerstone of EU law since the Treaty of Rome and is enshrined, inter alia, in Directive 2006/54/EC. With the new directive, it will be easier for employees to gain insight into salary data and to enforce the right to equal pay.

Key points of the Pay Transparency Directive

• Categorizing jobs and salary structure: All companies, regardless of size, must identify and group positions by work of equal value. They must describe the objective, gender-neutral criteria and other job-relevant factors that underpin the determination of pay and make this description available to employees.This may include requirements for education, experience, scope of work or other qualifications.

• Employees’ right to salary information: Employees have the right to information about their own salary as well as about the average salary levels broken down by gender for employees who perform the same or equivalent work. The company must actively inform all employees every year of this right and of how they can access the information. If the information provided is inaccurate or incomplete, employees can request further clarification and get a reasonable response.

• Pay review in the event of an excess pay gap: If a company’s pay statistics show a gender-based pay gap of more than 5%, which cannot be explained by objective, gender-neutral conditions, the company must carry out a joint pay review together with employee representatives. This means that unjustified pay differences must be investigated and addressed, for example by adjusting wages.

• Reversed burden of proof: In cases of unequal pay based on gender, the employer must in future be able to document that the pay difference is not due to unlawful discrimination. This means that the employee only needs to demonstrate circumstances that give rise to suspicion of direct or indirect discrimination, and then it is up to the employer to prove that everything is as it should be. Any payments in connection with a salary case may include, for example, full retrospective payment of missing wages, bonuses, etc., and the Directive also requires Member States to introduce effective sanctions (fines, etc.) against infringements.

• Pay transparency in the hiring process: Applicants for a position must be informed before hiring about the initial salary level or a salary range based on objective, gender-neutral criteria for that particular position. This information must be available in job ads or before the interview without being requested. Conversely, the employer is no longer allowed to ask applicants about their previous salary or salary history.

• Special reporting rules for larger companies: Companies with more than 100 employees must prepare a salary statement that reports on gender-disaggregated pay differences in the company.
• Companies with more than 250 employees must do this annually
• Companies with 150–249 employees must do so every 3 years.
• Companies with 100–149 employees will have the same reporting requirements, but only five years after the implementation of the directive (from 2031).

There is no reporting obligation for companies with fewer than 100 employees in the first implementation period.

Raadgiver’s comments

Although the rules are not expected to enter into force until June 2026, it makes sense for companies to start preparations now. A good start would be to review the existing salary structure and ensure that wage formation is based on clear, objective and gender-neutral criteria. At the same time, recruitment processes should be adopted so that they comply with the requirement for salary transparency and the new prohibition on obtaining information about previous salary in the future.

At Raadgiver.dk, we follow the Danish implementation of the Pay Transparency Directive closely and are of course available for legal advice, salary structure assessment and strategic sparring. It is our expectation that the implementation in Danish law will be closely aligned with the current wording of the Directive. Therefore, it can be an advantage to relate to the upcoming requirements already now – both to ensure compliance and to avoid unnecessary administrative burdens.

This article does not constitute and cannot replace legal advice. Raadgiver.dk ApS assumes no liability for any damage or loss, directly or indirectly, attributable to the use of the information provided in the article.