Pay transparency: how to ensure compliance

Introduction

In the first part of our two-part series on the new Pay Transparency Act, we explored the legislation itself and the new obligations it introduces for employers. In the article below, we discuss how these obligations will affect your organisation and which departments will be impacted. We explain what steps are needed to ensure compliance, what the consequences are for non-compliance, and what advantages pay transparency can bring to your organisation. We conclude this series with an overview of how we can support you.

Enjoy reading!

You can read the previous part of this article here.

Employers take note! pay transparency becomes mandatory

What does this mean for my organisation?

The essence of the law? Employers will be required to provide transparency about their pay structures and any existing pay gaps. The burden of proof will also shift: it will now be the employer’s responsibility to demonstrate that men and women receive equal pay for equal work. In addition, the Labour Authority has been granted greater authority to monitor fair pay. But what does this mean in practice for your organisation, and what steps must be taken to ensure compliance?

Which departments will be affected by these obligations?

The impact of the Pay Transparency Act is significant and extends across multiple areas of an organisation. Substantiating pay differences requires considerable effort from employers. Not only is detailed salary and personnel data needed, but also a well-founded job evaluation system and precise record-keeping.

The HR department must ensure a clear job and pay structure, based on objective and gender-neutral criteria. The Finance department must collect, analyse and report on pay data. The Board of Directors must approve salary information, while management needs training to recognise bias and apply fair evaluation criteria. In addition, the works council will play a greater role both in establishing remuneration structures and reviewing pay reports.

Finance

For the Finance department and the CFO, the focus is not only on costs and compliance but also on risk management. The new legislation on pay equality directly affects what is often the largest cost item in many organisations: salaries and employee benefits. What are the financial implications of revising pay structures? How much will it cost to implement reporting systems? And what are the potential risks of fines or compensation claims for non-compliance?

Moreover, remuneration is a highly sensitive issue for employees. The new obligations may even require the inclusion of provisions in the annual report.

Human Resources

For HR departments, this development presents not only new obligations but also opportunities, provided that action is taken proactively and preparations starting now. By acting early, HR can position the efforts around pay transparency in a positive light, both internally and externally. This contributes to strong employer branding: fair, transparent and forward-looking.

A early review of the salary structure helps spot risks and outliers early. A clear communication strategy also prevents employees from fixating on averages and helps avoid unnecessary dissatisfaction.

Executive Board and Management

The Executive Board must oversee compliance and make strategic decisions. The Board is responsible for confirming the accuracy of pay transparency information, following consultation with the Works Council. Pay transparency also affects the organisation’s reputation, among employees, regulators, job applicants and customers alike. Are sufficient HR resources and expertise in place? What is the risk of reputational damage due to unexplained pay gaps? Is compliance sufficiently monitored? And how can the organisation best prepare in advance?

The Act may also influence company culture: openness about pay requires leadership, engagement and clear frameworks.

Governance

The Supervisory Board should be informed about the organisation’s progress on pay equality, not only to exercise sound oversight but also to reduce liability risks. Decisions on pay policies must be better substantiated and, in certain cases, publicly justified. The Works Council will also have greater influence over this policy.

The Pay Transparency Act is far-reaching and requires timely action. Employers must now begin to organise their data, systems and processes. Particularly in larger organisations or corporate structures with international branches or multiple entities, it is essential to define responsibilities clearly. The potential impact on ESG policies, employer branding and corporate reputation should also be assessed. Establishing clear decision-making processes around pay structures and job evaluation is vital to ensure the organisation is ready for next year.

What must I do to become compliant?

How exactly do you classify roles and salaries? Are truly gender-neutral criteria being used, or do differences persist between men and women in comparable roles? How are employees assessed within a salary band, and how are pay increases determined, are these standardised?

It can also be challenging to establish what constitutes an average salary for “work of equal value” and how precisely this should be defined. How can employers make a careful and well-substantiated assessment? Ultimately, it is the employer’s responsibility to ensure a transparent and objective pay structure. This requires time, attention and collaboration.

It begins with introducing or revising a job evaluation system that classifies roles according to objective, gender-neutral criteria, such as skills, responsibilities, effort, and seniority or working conditions, into categories of “equal value”. These criteria form the foundation for a clear and transparent pay policy, which explains how salaries are determined and how employees can progress. Employers must assign appropriate weightings to the four mandatory criteria based on their relevance to each role. Additional factors such as education or soft skills may be included if objectively justified.

In this way, roles can be evaluated fairly and rewarded equally, unless objective reasons, such as experience or competencies, justify a deviation. If the pay structure is not set out in a collective labour agreement, the structure determined by the employer must be approved by the works council.

It is also essential that pay data is up-to-date, reliable and easy to analyse so that pay differences between men and women can be identified. Share salary bands openly with employees and be transparent about remuneration criteria. Train managers and supervisors conducting performance reviews to recognise unconscious bias and apply pay policies correctly. Use a secure, user-friendly HR tool to track pay data and ensure that employees can easily access information about criteria, pay levels and career development opportunities.

Although the final legislation may differ from the current proposal, employers would be wise to begin preparations now by:

• Developing a project plan with clear objectives and involving the right stakeholders;
• Preparing pay data, including creating or updating the job framework and pay structure, and collecting all additional compensation elements (such as bonuses, pension contributions, training allowances, allowance, etc.);
• Analysing the pay gap between men and women, especially by employee category (job group);
• Addressing any pay gaps that cannot be objectively justified within a reasonable period;
• Reviewing and redesigning processes that contribute to or maintain the pay gap.

Starting early helps build a strong reputation, ensures employee satisfaction, and prevents legal issues. Those who wait until after employees start requesting information to assess salary levels will be too late. Without a clear job framework, corrective measures will be inevitable, and basing pay solely on negotiation will no longer be acceptable.

What happens if I fail to meet the transparency and reporting obligations?

Civil liability

Employees who have been underpaid are entitled to full compensation. This means they must be financially compensated as if they had never been subject to unequal pay. This includes not only the outstanding salary but also unpaid pension contributions, bonuses, company car benefits, statutory interest, non-material damages, and any lost career opportunities. On top of this comes statutory interest.

Claims for damages can be filed within five years from the moment the employee becomes aware of the unequal treatment, and full compensation can amount to a substantial sum. The affected employee must then also receive equal pay for their position moving forward.

The new directive strengthens employees’ legal position. When an employer fails to comply with pay transparency obligations, the burden of proof shifts: the employer must prove that pay has been determined fairly and objectively. Employers must therefore maintain a meticulous payroll administration, including documentation justifying pay differences, pay rises and bonuses. Employees must not be disadvantaged in any way for exercising their right to equal pay.

Administrative sanctions

Employers who fail to comply with equal pay rules risk sanctions from the Labour Authority. Fines may reach up to €10,300 per employee and may be doubled in the event of repeated offences. An enforcement order may also be imposed to compel compliance. Note: warnings and fines will be made public, potentially causing reputational damage.

What are the benefits of pay transparency for employers?

For HR and Finance teams, pay transparency can be more than a legal obligation, it can be a strategic opportunity to strengthen the organisation. By investing now in a fair and transparent pay policy, employers can build trust among employees, increase engagement and improve their competitive position in the war for talent, particularly among young professionals who value diversity and fairness highly.

Pay transparency also contributes to an open workplace culture, where expectations are clear and employees understand their position. Well-designed pay structures promote internal equity, reduce staff turnover and strengthen employer branding. With growing public attention to diversity, equality and inclusion (DE&I), transparent pay policies also enhance the organisation’s reputation and ESG profile.

In short: investing in pay transparency is not a one-off exercise to meet legal requirements, but a strategic choice that truly pays off.

How can we support you?

The Pay Transparency Act is more than a new compliance requirement: it represents an important step towards closing the gender pay gap, increasing transparency, and strengthening fairness and trust within organisations. Ensuring timely compliance not only mitigates the risk of fines and claims but also helps create a future-proof working environment where equality and integrity are central.

With less than ten months until the transposition deadline, it is essential to implement robust processes that facilitate compliance and promote transparency. Proactive preparation prevents time pressure and operational risks while strengthening your organisation’s reputation as a transparent and fair employer.

Compliance requires a careful approach, from analysis and strategic communication to the use of specialised tools. As many organisations lack internal reward specialists, external support is often essential. Dedicated software can help collect, analyse and report pay data while providing employees and managers with easy access to the information they are entitled to.

By investing in technology and external expertise, HR and Finance teams can streamline compliance through structured job evaluations, automated reporting and transparent dashboards. We are happy to support organisations with strategy, job evaluation, software selection and the design of reporting structures, enabling a sustainable, future-ready approach.

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