Pay transparency in the recruitment process: what employers should prepare now
The EU Pay Transparency Directive (EU) 2023/970 (“Pay Transparency Directive”) will have a noticeable impact on re-cruitment processes. Applicants gain a right to early information on the level of pay. Questions about previous pay will be prohib-ited. And selection processes will have to be strictly gen-der‑neutral. Transposition into national law is required by 7 June 2026. It is already worthwhile for employers to prepare.
Initial pay: what you must communicate, and when
Employers must inform applicants of the initial pay for the specific position, or the range, based on objective, gender‑neutral criteria. It is possible to indicate a pay range or a specific amount. This indication is not binding: the parties may subsequently agree on pay outside the range or above the amount indicated.
The content is crucial. “Pay” covers basic or minimum wages or salaries as well as any other consideration, whether in cash or in kind, which an employer pays directly or indirectly to a worker in respect of the employment relationship. This may include, for example, variable pay, meal allowances or a company car available for private use. It does not include, for instance, annual leave entitlements, working‑from‑home arrangements or sabbaticals. Where a collective agreement applies, the relevant provisions must be specified – including where the agreement is incorporated by reference into the employment contract.
The timing is equally important. The information must be provided in good time – that is, before negotiations on the level of pay and at the latest before the conclusion of the employment contract. Written communication is preferable for evidential purposes. In practice, it is helpful to provide the information in the interview invitation email. This ensures that it is documented and not generally accessible, for example to competitors.
No questions on previous pay
Questions about the pay history during current or previous employment relationships will no longer be permitted. The background is that the pay level at entry often shapes remuneration on a lasting basis. Negotiations are to be oriented towards the requirements and qualifications of the position – not to previous pay. This requirement serves to prevent direct and indirect discrimination and can in particular help to reduce existing disadvantages faced by women.
Objective criteria for determining the pay levels
Permissible criteria are objective and gender‑neutral. The Directive identifies skills, effort, responsibility and working conditions as guiding categories. These can be translated into concrete requirements such as professional experience, qualifications or particular suitability. A supposedly “better negotiating skill” is not an admissible criterion. The Federal Labour Court has already made this clear (judgment of 16 February 2023 – 8 AZR 450/21). Nonetheless, where there are appropriate objective reasons, pay above the indicated range may be agreed.
Non‑discriminatory recruitment process
The recruitment process must continue to be designed in a consistently gender‑neutral manner. This applies to job vacancy notices, job titles and selection decisions. In Germany, this is already required by the General Equal Treatment Act (AGG). In practice, this means: no wording that excludes one sex or makes applications recognisably more difficult. Gender‑neutral designations such as “sales assistant (m/f/d)” are already standard. The aim is equal pay for equal work or work of equal value – from the very beginning.
Practical note
Businesses should set the course now. First: develop a clear pay structure based on objective, gender‑neutral criteria – by function and by group of workers performing the same work or work of equal value. Define initial pay levels and ranges in a transparent and comprehensible way. This will facilitate communication and reduce legal risks.
Second: integrate the pay information early into the process. A standardised email inviting candidates to an interview, including the pay indication, has proven effective. Keep clear records of the information provided and of subsequent negotiations on the level of pay.
Third: revise your job vacancy notices and selection process. Ensure gender‑neutral wording and a non‑discriminatory approach. Train managers and recruitment teams, in particular on the prohibition on asking about previous pay, on how to conduct a non‑discriminatory recruitment process and on permissible criteria for determining pay.
This will ensure that you are well prepared for implementing the Pay Transparency Directive – while at the same time creating transparent, fair processes that are attractive in the competition for talent.
