German Advancement Towards Implementation of the EU Pay Transparency Directive

Germany has taken the next step on the path to fully implement the EU Pay Transparency Directive (PTD). This past summer, an Expert Commission on the “Low-Bureaucracy Implementation of the Pay Transparency Directive” (Commission) formed to prepare a proposal on how to transpose the PTD into German law. The Commission made its final report public on November 7, 2025. 

This report is NOT a draft legislative bill but rather an expert report to legislators with recommendations and suggestions on how to transpose the PTD into German law. Overall, the Commission recommends staying very close to the base level of compliance with the PTD, as opposed to going above and beyond its requirements. However, the Commission recognizes the need to add many detailed regulations to the existing German Pay Transparency Act to implement the base level of compliance the PTD requires. The report serves as an essential resource for legislators as they prepare an initial legislative bill. Therefore, employers can use the report to glean insight into German implementation and should take note of the following key takeaways:

Thresholds for Compliance 

Key Takeaways: The Commission proposes that reporting should be limited to employers with 100 or more employees. If this proposal is adopted, employers with less than 100 employees will be able to forgo the mandatory reporting; however, these small employers will not be absolved from other aspects of the PTD, such as individual rights to comparative pay information. The Commission offers minimal relief to small employers when it comes to dealing with individual employee requests for information. The Commission recommends that employers with fewer than 50 employees be exempt from the obligation to provide individual requesters information on the criteria for wage development. A small employer would still be responsible for supplying all other details of pay information the PTD mandates, including the criteria for determination of pay and its amount.

Definition of “Employer” for Compliance Purposes

Key Takeaways:

• The Commission unanimously advocates that the legislators clarify in the draft legislative bill whether and to what extent regionally different collectively agreed wages are permissible, even if they are based on a “single source,” such as a company collective agreement.
• Furthermore, when creating comparative groups of employees who do equal work or work of equal value, the majority of the Commission advocates a separate comparison / evaluation for different locations (e.g., in different federal states with different salary levels) and for legacy employment contracts (i.e., employment contracts in place with employees who have been working for the employer for a significant amount of time).

If legislators rely on the Commission’s insights, employers may be spared from having to incorporate data from a broader employee population for purposes of reporting as well as responding to individual employee requests for pay information. We anticipate that determining the “Employer” will be fact-specific; however, the report indicates that the draft bill may be more employer-friendly in this regard. 

Comparing Categories of Workers for Reporting Purposes 

Key Takeaways: The Commission recommends that the legislators adopt the same criteria as identified in the Directive to initially identify workers who do equal work or work of equal value, namely: skills required for the respective activity, effort, responsibility, and working conditions. 

Employers Bound by Collective Agreements 

Key Takeaways: 

• The majority of the Commission supports a legal presumption that if the remuneration is governed by a collective agreement, the structure of the wage groups in such agreement is appropriate and non-discriminatory. Therefore, individual requests shall generally be limited to requesting pay information regarding workers that are within the same wage group.
• When providing information about the criteria for pay determination, employers bound by collective agreements should also be able to refer to the respective collective agreement instead of providing detailed information.
• The Commission advocates the introduction of a tiered model for employers bound by collective agreements when responding to requests for information that would provide certain employers with more time to respond to an individual request for information. 

Based on the substance of the report, employers whose workforces are governed by a collective agreement are likely to find that those collective agreements will mitigate risks that non-organized employers will face. However, the challenge will be to find ways to work with and foster a relationship with the employee representatives who are being empowered by the PTD. We recommend employers work closely with labor counsel to understand opportunities to better negotiate with and deal with the employee representatives as Germany moves towards PTD implementation. 

Calculating, Justifying, and Remediating a Pay Gap

Key Takeaways: 

• The Commission recommends that remuneration components that were not provided for work performed during the reporting period (e.g., severance pay) should be excluded. Additionally, the Commission also suggests that legislators should consider excluding certain remuneration components such as voluntary optional benefits and benefits not granted by the contractual employer (stock options, phantom stocks, etc.).
• The actual gross annual remuneration paid and the corresponding gross hourly remuneration should be used as a basis for calculating the pay gap.
• The Commission discusses the possibility of introducing a de minimis threshold to exclude low-value benefits in kind (e.g., discounted canteen meals); but this will be left to the legislators to decide.
• The Commission requests that the legislators include a comprehensive, but not exhaustive, list of justifications for unequal treatment based on previous European Court of Justice case law. The Commission further recognizes that preserving acquired pay rights may be a justification for unequal treatment if the rights followed an event such as a restructuring or acquisition so long as such rights were acquired before the deadline for implementation of the Directive (June 7, 2025).
• The Commission suggests that remedial measures should not only consist of an “upward adjustment” of the remuneration of an employee who has been subject to pay discrimination, but also of freezing the remuneration of the comparative group until equal pay is achieved or reducing remuneration using the existing instruments of labor law (e.g., termination accompanied by new offer with changed working conditions).

These indicators from the Commission should help employer compensation teams begin to test data sets with more confidence that they are relying on the “right” information to stress test whether there is in fact a pay gap. Additionally, once a gap is identified, the Commission has given initial guidance for employers to begin outlining justifications and/or remedial steps.  

Individual Right to Pay Information 

Key Takeaways: 

• When an employee requests comparative pay information, the Commission recommends that pay data for individuals who have already left the company at the time of the request be excluded from the analysis. (Notably, there is no mention as to whether terminated employees can be excluded from the required mandatory report).
• The Commission recommends that the legislators maintain the minimum threshold of six people for any comparative group requested, as already set by the current German Pay Transparency Act.
• In terms of preparing any requested individual pay data (their own individual pay level and the average pay levels, broken down by gender and for groups of employees who perform the same or equivalent work), the majority of the Commission advocates that the information should cover only the total gross remuneration (sum of all payments) paid in the same period of the previous year, broken down into gross annual remuneration and the corresponding gross hourly remuneration (calculated on the basis of the contractually agreed working hours), but that no breakdown into the individual remuneration components is required. Employers should be permitted to exclude remuneration components that are not fully accounted for. The median remuneration is to be omitted and replaced by the average.
• The Commission recommends (i) limiting an employee’s right to pay data information to a single request annually in relation to the previous calendar year (or a different financial year of the company); (ii) repeated requests should be possible no earlier than one year after the last disclosure; (iii) follow-up requests should be limited to one request made within six weeks of receiving the information from the company; and (iv) employees should not be able to make an initial request until January 1, 2027 or June 7, 2027. 

Assuming the legislators adopt the Commission’s recommendations (which is likely), employers can begin to draft processes for responding to an individual rights request. Fortunately, the Commission has indicated that the rights requests will be statutorily curtailed, unlike GDPR individual rights requests, which many employers have had the burden of managing.

Role of Employee Representatives

Key Takeaways:

• In Germany, employees may be represented by a works council and/or a trade union. The majority of the Commission recommends that legislators clarify whether works councils or trade unions are responsible for fulfilling the obligations for “employee representatives” outlined in the PTD including the joint pay assessment.
• The Commission recognizes that not all employers have employee representatives. Per the Commission, the PTD should not be interpreted to mandate the creation of a works council where one did not previously exist. However, the legislators must address in the draft bill whether to mandate the involvement of a “trusted representative” from the workforce to address PTD compliance. 

Employers will need to wait for the draft legislative bill to better understand the role of the employe representative. 

Conclusion 

Now that the Commission has published its report, the Federal Ministry for Education, Family Affairs, Senior Citizens, Women and Youth will develop a draft legislative bill. The Ministry announced that it is planning on submitting the draft by the beginning of 2026. Although it is not certain that all recommendations from the Commission will be reflected in the draft bill, in its announcement, the Ministry indicated it will rely heavily on the report, thus giving employers some sense of how Germany will implement the PTD.  

*Olivia Ann Belker is a Research Assistant with Littler Germany, Hamburg