Germany: The EU Pay Transparency Directive

What is the current implementation status and timing?

The Directive has not yet been implemented in Germany. It is expected that the new government will initiate the legislative process in 2025 with the transposition into German law coming into force before the June 2026 deadline.

Which workers are in scope?

It is anticipated that national laws will align with the Directive definition of a worker requiring the existence of an employment contract or employment relationship defined by law, collective agreements, or practice in force in that Member State. It will likely include part-time, fixed-term, temporary agency workers, managers; and where criteria are met, atypical workers (e.g. zero hours, trainees, apprentices).

Who will be worker representatives?

We are awaiting further details of implementing legislation.

It is likely that trade unions and works councils will both be applicable. Either or both may already be involved in deciding certain elements of pay structures and it is likely that this practice will be retained.

Where no worker representatives are in place, implementing legislation may provide for some form of representation to be set up.

Are there any proposals around the methodology and tools for assessing "equal value"?

There is no current legal requirement to have a job evaluation system in place. In some sectors, CBAs play a significant role in defining categories of employment and payment structures; in others, employers enjoy a relatively wide freedom and are only bound by general rules of equal treatment etc.

We are awaiting further details of measures to be introduced to align with the Directive, although it is not anticipated that national legislation will make it mandatory for employers to have a job evaluation system in place. Employers may therefore face uncertainty on how to evaluate roles/positions in line with the Directive, particularly where there are not bound by a CBA.

It is currently unknown if and when any guidance may be made available to support employers. The explanatory memorandum to the national legislation implementing the Directive may provide some assistance but it is usually not detailed.

Where employers have a works council, they will need to observe co-determination rights regarding pay structures, unless a CBA applies in which case that prevails. Categories in an existing CBA are likely to be challenged in light of the Directive criteria.

How is pay defined?

It is unclear whether legislation will clarify what pay elements are included and excluded from the definition of pay. No draft legislative proposal is currently available.

Current guidance regarding the Pay Transparency Act 2017 is not very detailed and refers to a "wide definition of pay" indicating the elements which must be displayed on pay slips. It is anticipated that there may be some updated official guidance once new legislation implementing the Directive comes into force.

How are the requirements for transparency for job applicants being implemented?

We are awaiting further details of measures to be introduced to align with the Directive.

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Statutory requirements are in place to conduct a non-discriminatory recruitment process and prevent discrimination on specific protected grounds. An employer must also not pay an employee less than others of the other gender performing comparable work. There is no legal requirement (or practice) of providing job applicants with information on the initial pay or pay range before the job interview.

How are the requirements for transparency for workers being implemented?

We are awaiting further details of measures to be introduced to align with the Directive.

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The German Pay Transparency Act of 2017 currently provides for some information rights for employees, but these are more restricted than the Directive.

In establishments with more than 200 employees, employees can ask for details of the median of the annual gross pay of employees of the other gender performing a comparable activity and two pay components while indicating the specific group of comparable employees they are referring to. Employees can also request information on the criteria and practices used to establish their level of remuneration and the level of remuneration of the comparison group they specified with an employer required to respond within three months. However, an employer can for some parts limit its reply to references to collective bargaining agreements where those apply. An employer can also refuse to disclose the reference remuneration if the reference activity is carried out by less than six employees of the other gender.

How are the gender pay reporting requirements being implemented?

Implementing legislation, which may be via an amendment to the current Pay Transparency Act 2017, will be required to implement the extended reporting obligations provided for by the Directive.

It is not anticipated that there will be any changes in the implementing legislation to the threshold and reporting deadlines set out in the Directive. However, we are still awaiting detail of the proposed legislation.

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The Pay Transparency Act 2017 provides for a restricted form of gender pay reporting applying to corporations with more than 500 employees and providing for reports on measures to promote equal treatment and pay equality and employee numbers by gender. However, there is no requirement to report on pay gap percentages.

When counting workers for the purposes of the Directive's pay reporting thresholds, will only workers of a particular "legal entity" be in scope?

There is no definitive answer at present, but it is assumed that reference will be made to a separate legal entity, rather than a group of companies and which is the most common approach for laws, including thresholds in Germany. However, it should be noted that for the current joint pay assessment with the works council, it is considered sufficient that the controlling group company does the joint pay assessment for the whole group of companies it if has decisive influence of the pay conditions at the subsidiaries.

Do we have details on how the Directive's requirements for a joint pay assessment will be implemented?

We are awaiting further details.

Do we have details as to how the Directive obligations will be enforced and potential sanctions?

We are awaiting further details of measures to align with the Directive.

The German Pay Transparency Act 2017 does not contain any specific sanctions – simply the obligation to take the "necessary measures" to eliminate remuneration-related discrimination. It is likely that legislation implementing the Directive may add further options enabling the monitoring body to put pressure on employers to fulfil their information duties and reporting obligations.

Are there any tools or guidance available to support employers?

There is existing employer guidance in respect of the 2017 Pay Transparency Act. It is not clear whether this will be updated or expanded to include information on compliance with the Directive.

The Federal Anti-Discrimination Agency cooperated with the Hans-Böckler-Foundation (which is close to one of the biggest trade unions) to develop a tool for the Pay Transparency Act of 2017 and which enables employers to perform the required job evaluation. www.eg-check.de is based on four groups of job requirements with 19 sub-criteria. It is quite complex but does match with the four evaluation criteria provided in the Directive. There is no information available as to whether an update or another tool is planned.