Directive (EU) 2023/970 on Pay Transparency: employer obligations, gender pay gap reporting and compliance measures in Romania

Adopted in May 2023, it establishes a coherent legal framework for eliminating gender-based pay discrimination and guaranteeing access to remuneration information for both candidates and existing employees. Member states, including Romania, are required to transpose the Pay Transparency Directive into national law by June 2026, a deadline that, given the operational complexity involved, leaves companies a limited window for preparation.

For chief financial officers, HR and payroll specialists, controllers and board members, pay transparency legislation is not merely a matter of legal compliance. It reconfigures how organisations communicate pay policies, manage recruitment processes and report remuneration gaps. Companies that anticipate these changes and act proactively will be better positioned both from a legal risk perspective and in terms of their reputation on the labour market.

Summary:

1. The transposition deadline into national legislation is June 2026. 
2. Employers will no longer be permitted to ask candidates about their salary history and will be required to publish pay scales in job advertisements. 
3. Companies with more than 100 employees will be required to report periodically on the gender pay gap, with significant sanctions for non-compliance.

Contents:

• Key provisions of Directive (EU) 2023/970
• Employer obligations under pay transparency legislation in the recruitment process
• Employee rights to pay information and remuneration criteria
• Reporting gender pay gaps
• Implementing a pay policy compliant with the principle of "equal work, equal pay"
• Data protection and GDPR compliance
• Sanctions and risks for non-compliance with Directive (EU) 2023/970
• What companies need to do in practice to comply with Directive (EU) 2023/970
• The impact of Directive (EU) 2023/970 on the Romanian business environment

Key provisions of Directive (EU) 2023/970

Directive 2023/970 of the European Parliament and of the Council, published in May 2023, has as its central objective the strengthening of the principle of equal pay between women and men for equal work or work of equal value. Although this principle has existed in European law for decades, enshrined in the Treaty of Rome and subsequently in Directive 2006/54/EC, its practical application has remained inconsistent. The new pay transparency legislation addresses this gap through concrete transparency instruments and more rigorous enforcement mechanisms, directly targeting the elimination of pay discrimination.

The Directive applies to both public and private sector employers, regardless of organisational size, although certain reporting obligations are graduated according to headcount. Transposition into national legislation must be completed by 7 June 2026, meaning Romania will need to adopt substantial legislative amendments to the Labour Code and related equal opportunities legislation.

The principal pillars of the Directive are:

• Transparency at hiring: candidates have the right to know the pay scale or remuneration range for the role prior to interview.
• Employee right to information: employees may request data on average remuneration levels by job category, broken down by gender.
• Pay gap reporting: companies above a certain headcount threshold will be required to report periodically on the gender pay gap.
• Reversal of the burden of proof: in pay discrimination disputes, the employer will be required to demonstrate that remuneration differences are not based on gender criteria.

Employer obligations under pay transparency legislation in the recruitment process

One of the most visible changes introduced by the Directive concerns the recruitment stage. Under the new rules, candidates must have access to clear pay information before participating in any stage of the selection process. In practice, job advertisements will be required to include the salary or salary range for the role, as well as information on pay progression prospects.

What changes in the recruitment practice?

• Publishing pay scales: employers will be required to communicate, either in the job advertisement or prior to the first interview, the remuneration level or salary range for the position in question.
• Prohibition on asking about salary history: employers will no longer be permitted to ask candidates about their previous salaries - a widespread current practice that perpetuates existing inequalities.
• Gender-neutral job titles: job descriptions and role titles must be worded in neutral terms, without suggesting a preference for a particular gender.
• Non-discriminatory selection processes: recruitment procedures must be transparent and must exclude any criteria that could generate indirect discrimination on the basis of gender.

Employee rights to pay information and remuneration criteria under Directive (EU) 2023/970

During the employment relationship, the Directive grants employees extended rights of access to remuneration information. Any employee will be able to request from their employer data on their individual pay level and on the average remuneration levels of colleagues performing equal work or work of equal value, broken down by gender.

The information employees may request includes:

• Their own remuneration level and its position relative to the average for equivalent job categories.
• Average remuneration levels by category of employees performing work of equal value, broken down by gender.
• The objective pay criteria used to determine salaries, allowances and other benefits.
• Performance appraisal and promotion criteria, which must be gender-neutral.

Employers are required to respond to such requests within two months and to inform employees annually of their right to request this information. The criteria used to determine remuneration and career progression must be objective, verifiable and accessible, not merely set out in internal documents to which employees have no practical access.

Reporting gender pay gaps

Pay gap reporting obligations represent one of the most complex chapters of the Directive, both in terms of the volume of data involved and the frequency and recipients of reporting. Directive (EU) 2023/970 introduces a graduated system based on company size.

Thresholds and reporting frequencies:

• Companies with 250+ employees: annual reporting, from the first year following transposition.
• Companies with 150–249 employees: reporting every three years, with the possibility of moving to annual reporting thereafter.
• Companies with 100–149 employees: reporting every three years, with a four-year grace period from transposition.
• Companies with fewer than 100 employees: no formal reporting obligation, although member states may extend this requirement.

Indicators to be calculated and reported:

• Mean gender pay gap (gross pay gap).
• Median pay gap.
• Proportion of female and male employees in each remuneration quartile.
• Mean and median pay gap for variable remuneration components (bonuses, commissions).
• Proportion of employees receiving variable components, broken down by gender.

If reporting reveals a pay gap of more than 5% that cannot be justified by objective, gender-neutral criteria, the employer is required to carry out a joint pay assessment with employee representatives. This assessment must identify the causes of the pay difference and propose concrete corrective measures with clear implementation deadlines.

Reports will be submitted to the competent national authority and made publicly available, which adds a significant reputational dimension to this obligation and exposes potential cases of pay discrimination to public scrutiny.

Implementing a pay policy compliant with the principle of "equal work, equal pay"

The principle of "equal work, equal pay" is not new in European law, but the Directive operationalises it with an unprecedented level of detail. To demonstrate compliance, companies must have clear, documented pay structures justifiable through objective criteria.
The objective criteria for job evaluation are as follows:

• Skills and qualifications: level of education, professional experience and technical competencies required for the role.
• Responsibility: decision-making scope, number of direct reports, financial impact of the role.
• Effort: physical or mental demands associated with the role.
• Working conditions: working environment, schedule, mobility requirements.

These criteria must be applied consistently, without indirectly favouring a particular gender. For example, if an evaluation criterion systematically overvalues competencies traditionally associated with male-dominated roles, this may constitute indirect pay discrimination even where there is no discriminatory intent.

Pay structures must be transparent, achievable and aligned with the principle of equal pay for work of equal value. A robust pay policy requires employers to review pay scales periodically, document remuneration decisions and ensure that promotion policies do not perpetuate existing inequalities.

Employment contracts and internal regulations must be updated to eliminate any clauses or practices incompatible with the Directive's requirements, including confidentiality clauses that prohibit employees from discussing their salaries with one another, which will become null and void by operation of law, thereby ensuring genuine pay transparency.

In this regard, pay transparency and ESG advisory services can support companies in building compliant remuneration structures through pay audits, market benchmarking and HR documentation review.

Data protection and GDPR compliance

Pay transparency and personal data protection are inherently in tension: on one hand, the Directive requires access to remuneration information; on the other, salary data is personal data protected by Regulation (EU) 2016/679 (GDPR). Reconciling these two sets of obligations requires a careful approach.

In terms of practical anonymisation and security measures, companies must pay close attention to:

• Data aggregation: pay information communicated to employees must be presented as averages or ranges by job category, not as individually identifiable data.
• Anonymisation of reports: pay gap reports must not permit the identification of specific individuals.
• Access restrictions: detailed pay data must be accessible only to those with a legitimate need (HR, management, internal audit).
• Updating privacy policies: data protection policies must be revised to reflect the new data flows generated by pay disclosure obligations.

Data protection supervisory authorities and those responsible for enforcing the Directive will need to collaborate to clarify the precise limits of these obligations. Pending the publication of clear national guidance, companies should adopt a cautious approach based on the principle of data minimisation.

Sanctions and risks for non-compliance with Directive (EU) 2023/970

Directive (EU) 2023/970 requires member states to provide for sanctions for pay transparency breaches that are effective, proportionate and dissuasive. Although the specific sanctions framework will be established through national implementing legislation, the Directive sets out several firm principles:

• Full compensation: employees who have suffered pay discrimination are entitled to complete compensation, including back pay, bonuses and other benefits, without any cap imposed through prior agreements between the parties.
• Reversal of the burden of proof: in pay equality disputes, the employer must demonstrate that pay differences are not based on gender criteria. This reversal fundamentally changes the dynamics of legal proceedings.
• Administrative fines: national authorities will be able to impose significant financial penalties for failure to comply with reporting or information obligations.
• Reputational risk: pay gap reports will be publicly available, exposing companies with unjustified disparities to pressure from investors, clients and prospective employees.

Important: a particularly significant point for legal and financial directors is that the Directive explicitly prohibits limiting compensation through contractual clauses. Any agreement that would cap the compensation owed to a discriminated employee will be considered null and void. This means that the potential financial exposure of companies is, in principle, unlimited in proven cases of pay discrimination.

What companies need to do in practice to comply with Directive (EU) 2023/970

Preparing for pay transparency compliance is not a one-day project, it is a process involving multiple departments and requiring structured planning. The following is a practical action plan for companies wishing to be ready ahead of the June 2026 deadline:

• Internal pay audit: analysis of the current remuneration structure to identify any gender-based pay gaps and assessment of the objectivity and documentation of differentiation criteria.
• HR documentation review: updating employment contracts, internal regulations, job descriptions and pay policy to eliminate clauses incompatible with the Directive, including pay confidentiality clauses.
• Updating recruitment processes: revising job advertisement templates, interview guides and selection procedures to include pay information and eliminate questions about salary history.
• Implementing reporting systems: developing or consolidating the IT and data capability required to calculate and report pay gap indicators, where this does not already exist.
• Internal communication: informing managers and employees of the new rights and obligations, to prevent disputes arising from misunderstandings or informal practices incompatible with the Directive.
• Reviewing data protection policies: updating GDPR policies to reflect the new pay data flows.

Finally, companies operating across multiple EU member states should coordinate these efforts at group level, ensuring a coherent and resource-efficient approach.

The impact of Directive (EU) 2023/970 on the Romanian business environment

Viewed from the perspective of pay transparency's impact in Romania, the starting context is a specific one: according to Eurostat data, Romania's gender pay gap stands at 3.6% in 2023 - among the lowest in the EU and significantly below the European average of 12%. Nevertheless, uneven distribution across sectors and hierarchical levels remains a documented reality. The Pay Transparency Directive will bring structural changes to both employment relationships and organisational culture, with visible effects on the labour market.

Challenges for Romanian employers:

• HR data system maturity: many companies, particularly larger SMEs, do not have IT systems capable of automatically generating the reporting indicators required by the Directive.
• Cultural resistance: pay transparency may generate internal tensions where remuneration differences are not justified by clear, objective criteria.
• Compliance costs: pay audits, documentation updates and reporting system implementation represent real investments, particularly for companies that have not addressed these aspects systematically to date.

Medium and long-term benefits:

• Attracting and retaining talent: pay transparency is an attraction factor for candidates from younger generations, who place increasing importance on fairness and clarity in their relationship with employers.
• Reduced litigation: clear, documented pay structures reduce the risk of costly disputes and legal proceedings.
• Improved organisational culture: fair remuneration policies contribute to increased employee engagement and productivity.
• ESG compliance: pay gap reporting is becoming a relevant indicator for investors and business partners evaluating companies' social performance.

In the Romanian labour market, where competition for skilled talent is intense in sectors such as IT, financial services and manufacturing, pay transparency can become a genuine competitive advantage for companies that implement it authentically, not merely as a formal compliance exercise.

In conclusion, Directive (EU) 2023/970 on pay transparency represents a paradigm shift in how companies manage and communicate about remuneration. Companies that treat pay transparency legislation as an opportunity to strengthen their remuneration policies and organisational culture will be better positioned on the labour market and will significantly reduce their exposure to legal and reputational risks.

Pay transparency, implemented correctly, builds trust - both within the organisation and in its relationships with external partners and the market.

Disclaimer: This article is for informational purposes only and does not constitute professional advice.

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