Further Clarity on the German Pay Transparency Act: Top Earners as Suitable Comparators

The EU Pay Transparency Directive stipulates that member states must transpose their provisions into national law by June 7, 2026. Germany is eagerly awaiting the presentation of the corresponding draft law, after the Commission for the "Low-Bureaucracy Implementation of the Pay Transparency Directive" submitted its final report on October 24, 2025, with proposals for implementation. The implementation of the Directive will lead to an amendment of the current Pay Transparency Act in Germany, as the Directive not only has a broader scope than the German law, but also provides for more extensive rights and obligations with regard to individual information rights and reporting obligations. Among other things, German employees will be able to request information on the average remuneration of the comparison group consisting of employees of the opposite gender if these employees perform the same or equivalent work. The current Pay Transparency Act provides for such a right to information only with regard to median remuneration.¹

Just one day before the final report was submitted, however, the German Federal Labor Court issued a crucial decision clarifying the rules on the burden of proof under the Pay Transparency Act (Federal Labor Court, ruling of October 23, 2025 – 8 AZR 300/24). In the underlying case, a female department head at an automobile manufacturer asserted that her remuneration should be raised to the level of a specific male department head, not just the median salary value of the comparative group.

The Facts

The plaintiff had obtained information about her colleague's higher remuneration from a dashboard that the company uses to provide information on its intranet in reference to the German Pay Transparency Act. What is special about this case is that the colleague whom the plaintiff uses as a comparator is also the top earner in the group of male department heads. He receives remuneration that is significantly above the median remuneration of male department heads. The plaintiff, on the other hand, received remuneration that was not only below the median of male department heads, but also below that of female department heads.

The Decision of the Lower Court

Against this background, the lower court – the Baden-Württemberg Regional Labor Court – had ruled that the plaintiff could not demand an adjustment of her remuneration in comparison to the absolute top earner: given the size of the male comparison group and the median remuneration of both comparable gender groups, there was no overwhelming probability of gender-based discrimination. The Regional Labor Court had only recognized a claim in the amount of the difference between the median remuneration of the female and male comparison groups.

The Decision of the Federal Labor Court

The plaintiff appealed this decision and was successful. The Federal Labor Court referred the case back to Stuttgart, where a new decision must now be made. However, the Regional Labor Court must consider the clarifications provided by the Federal Labor Court: a high probability of gender-based discrimination is not required to successfully justify a claim for equal pay. All that is required is the presentation of sufficient facts to suggest gender-based pay discrimination. To this end, it is sufficient if the plaintiff can prove that her employer pays a higher salary to another colleague who performs the same or equivalent work. It is irrelevant that in an individual case the male comparison group is relatively large and the plaintiff herself earns less than the median remuneration of both gender groups. The employer can only refute this presumption by applying objective and gender-neutral criteria.

Consequences for Practice and Outlook

Calculating Pay Gaps 

Historically, Germany has relied on median remuneration as the benchmark for employee information rights because it is less affected by outliers and provides a more typical representation of pay levels. The EU Pay Transparency Directive, however, introduces a significant shift by requiring disclosure of average (mean) remuneration for comparison groups. Unlike the median, the mean (or average) can be heavily influenced by very high earners, making pay gaps appear larger than they would under median-based reporting. At the same time, recent rulings by the German Federal Labor Court have clarified that employees can rely on individual comparators—even the highest-paid colleague—to trigger a presumption of discrimination. This means that while the median remains useful for internal benchmarking, legal risk now extends beyond median-based comparisons, making it essential for employers to monitor both metrics and prepare for increased scrutiny.

Outliers in pay data can distort comparisons and create a perception of discrimination, even when overall pay structures are balanced. Wide salary ranges within the same role further increase litigation risk, as employees may argue that they perform equivalent work. Under current legal standards, employees only need to present sufficient facts—such as one higher-paid comparator—to trigger a presumption of discrimination, without requiring statistical proof. Additionally, over-disclosure of information beyond legal requirements, such as revealing top-earner salaries, can unintentionally strengthen claims.

Which is better?

Median is better for internal equity analysis and minimizing distortion from outliers.

Mean will be legally required under the Directive for transparency and reporting, so employers must prepare for this shift.

In practice, companies should monitor both metrics: 

• Median for fairness and internal consistency.
• Mean for compliance and external reporting.

The recommendation is to use median for internal pay architecture reviews but calculate and track mean values proactively to anticipate Directive-driven reporting and litigation risks.

Presumption of Discrimination 

The Federal Labor Court's statements on the requirements for demonstrating and proving pay discrimination are not new. The fact that only sufficient facts need to be presented to suggest gender-based pay discrimination to put the employer in a position to refute this presumption is established by case law of the Federal Labor Court within the framework of the Pay Transparency Act, which is based on the case law on Section 22 AGG (German Equal Treatment Act). However, the Federal Labor Court’s decision is an important clarification as to which circumstances are not suitable for questioning the presumption. Particularly in companies with remuneration systems that have developed over a long period of time, it is not uncommon for the salary range within the same job title to be very wide. In such cases, it is advisable to review the job architecture in a timely manner. If there are significant gaps in pay, the employer must objectively justify the differences or resolve to remedy the differences.

All indicators point to the need for employers to audit their job architectures and prepare for more robust compliance under the EU Pay Transparency Directive regime.