Pay Transparency: Between a Legitimate Objective and the Practical Challenges of Implementation
In recent years, pay gaps between women and men have become an increasingly prominent topic at European Union level. In this context, the adoption, on 10 May 2023, of the Pay Transparency Directive came as a natural consequence of the pressure to reduce these gaps. The deadline for transposing the Directive into national law expired on 7 June 2026, but Romania is still in the process of transposing it into national legislation.
The objective is difficult to dispute: ensuring equal pay for women and men who perform the same work or work of equal value. However, beyond the stated principle, practical implementation raises numerous questions for both employers and human resources professionals.
A change that goes beyond mere reporting
At first glance, attention is drawn to the differences in remuneration between men and women, the reporting obligations, as well as the new information rights granted to employees. However, pay transparency entails a much deeper change.
For many organizations, the main challenge will not be completing forms or submitting data to the authorities, but rather the ability to demonstrate that existing pay differences, and not only those between men and women, are based on objective, documented and consistently applied criteria.
In many companies, remuneration systems have evolved organically over the years, influenced by individual negotiations, market conditions, the retention of certain specialists or specific management decisions. These decisions have not always been formalized or documented in a manner that would allow them to be justified subsequently.
What does “work of equal value” mean?
Work of equal value does not refer only to identical positions, but to roles involving similar skills, effort, responsibility and working conditions. If two people perform comparable activities and have the same skills and responsibilities, they must be rewarded similarly, even if their job titles differ. The foundation of the pay transparency system is the objective comparison of roles with the same characteristics.
Key concepts
- Remuneration – all amounts and benefits granted to an employee in connection with the work performed, including base salary, bonuses, premiums and other benefits in kind or in cash.
- Pay level – the value of remuneration expressed as gross annual salary and the corresponding gross hourly value.
- Median pay level means the pay level at which half of an employer’s total number of workers earn more and the other half earn less.
- Category of workers – the group of workers who perform the same work or work of equal value, grouped in a non-arbitrary manner based on non-discriminatory, objective and gender-neutral criteria.
- Gender pay gap – the difference between the average pay levels of female and male workers of an employer, expressed as a percentage of the average pay level of male workers.
- Pay structure – the remuneration framework/system existing at unit level through which compliance with the principle of equal pay is ensured, with a view to eliminating inequalities and pay differences based on gender among workers who perform the same work or work of equal value.
What obligations arise for employers?
The Directive introduces rules that change the way employers manage recruitment processes and remuneration policies.
Thus, pay transparency begins as early as the recruitment stage: employers will have to communicate the salary or salary range for the position before the interview takes place, so that candidates can negotiate on an informed basis. At the same time, requesting information about candidates’ current or previous salaries will no longer be permitted, to avoid perpetuating existing pay inequalities.
Transparency does not, however, stop after hiring. Employees will have the right to know the criteria based on which salaries are determined and how they may evolve over time. They will also be able to request information on their own pay level, as well as information on the average pay levels of colleagues performing the same work or work of equal value, broken down by gender.
For employers, one of the most important challenges will be building and documenting a transparent remuneration system based on objective, gender-neutral criteria, ready for internal or external audit. In practice, this involves clearly defining the criteria that justify pay differences, such as professional experience, level of responsibility, skills, performance or complexity of the work, and being able to demonstrate, where necessary, that these criteria are applied consistently and without discrimination.
In addition, employers with at least 100 employees will become subject to periodic reporting obligations regarding pay differences between women and men. If unjustified pay differences between women and men exceed 5%, the employer is required to cooperate with employee representatives to identify and remedy the causes, applying corrective measures within a maximum of 6 months. From this perspective, the Directive does not seek to standardize salaries but requires employers to be able to explain and justify existing differences by reference to genuine, verifiable criteria applied equally to women and men.
Extended rights for employees
The Directive significantly strengthens employees’ rights regarding equal pay and facilitates their access to protection mechanisms when they consider that they have been discriminated against in terms of pay. Thus, employees may file complaints or bring court proceedings if they suspect pay discrimination, benefit from protection against retaliation and may be represented by trade unions.
These steps may also be initiated after the employment relationship has ended. In cases of discrimination, courts may award compensation and require the employer to correct the pay system.
The burden of proof lies with the employer, meaning that once the employee presents indications giving rise to a presumption of discrimination, the employer is required to demonstrate that the pay differences are justified by objective and gender-neutral criteria.
Reporting: who, when and what?
One of the most important novelties introduced by the Directive is the obligation for employers with at least 100 employees to report pay differences between women and men.
The obligations will apply gradually, depending on the size of the organization. Thus:
- 250+ employees: annual reporting, with the first report due on 7 June 2027.
- 150–249 employees: reporting once every 3 years, also starting in 2027.
- 100–149 employees: reporting once every 3 years, starting in 2031.
- Fewer than 100 employees: voluntary reporting.
Reporting is not limited to a simple comparison of average salaries. Employers will have to collect and analyze a range of relevant indicators, including the average and median pay gap between women and men, differences relating to bonuses and other variable components of remuneration, the proportion of women and men receiving such components, as well as their distribution across pay quartiles. Pay differences will also have to be reported for each category of workers performing the same work or work of equal value.
What happens if you do not comply with the rules?
Although the level of sanctions provided for in the draft law is not particularly significant, the risks for employers go far beyond a simple administrative fine. The standard fine ranges from RON 10,000 to RON 20,000, and in the case of repeated breaches it may reach RON 30,000.
More importantly, however, non-compliance may give rise to individual or collective litigation, investigations by the competent authorities and the obligation to compensate affected employees. In addition, the draft law qualifies intersectional discrimination, situations where discrimination based on gender is combined with other protected grounds, as an aggravating circumstance.
Challenges and solutions
Although the objective of the Directive is relatively simple to formulate, its practical implementation is far from being a purely administrative exercise. For many organizations, the greatest challenge will not be reporting itself but building a remuneration system capable of withstanding detailed scrutiny and demonstrating that existing pay differences are justified by objective and gender-neutral criteria.
Implementing these requirements involves challenges such as defining work of equal value, adapting pay systems, collecting data, training HR staff and digitalizing processes. Many companies will also need to review their salary structures, bonus policies and promotion criteria to ensure that they are sufficiently clear, documented and applied uniformly.
Another sensitive aspect is the collection and processing of the data required for reporting. In many organizations, the relevant information is dispersed across HR, payroll and finance departments, which may require adapting IT systems and digitalizing processes that have so far been managed informally.
From a practical perspective, the coming period should be used to carry out an internal audit of remuneration policies, review the organizational chart and job descriptions, define objective evaluation and promotion criteria, and train HR staff and managers involved in recruitment and salary-setting processes. The earlier these steps are initiated, the lower the risk of costly adjustments and subsequent litigation.
And yet, from when does it apply in Romania?
This is probably one of the most frequent questions currently asked by employers. The deadline set for the transposition of Directive (EU) 2023/970 on pay transparency expired on 7 June 2026. However, at the time of writing this article, Romania has not yet completed the legislative transposition procedure, with only a draft law currently in the adoption process.
From a legal perspective, European directives operate differently from European regulations. While regulations apply directly in all Member States from the date of their entry into force, directives set the result to be achieved and leave each State free to choose the form and specific mechanisms of implementation. Therefore, as a rule, the provisions of a directive become applicable in practice through national transposition legislation.
The delay in transposition does not mean, however, that the Directive can be ignored altogether. First, the European Commission may initiate infringement proceedings against Member States that have failed to fulfil their transposition obligation. Secondly, the case law of the Court of Justice of the European Union has recognized, in certain situations, the possibility for provisions of a directive to produce direct effects even in the absence of transposition, if they are sufficiently clear, precise and unconditional.
However, in relationships between private employers and employees, the situation is more nuanced. In principle, an untransposed directive cannot be relied upon directly by an employee against a private employer in order to create obligations that do not yet exist under national law. For this reason, many of the concrete obligations provided for by the Directive, such as reporting mechanisms, reporting formats or certain internal procedures, will become fully applicable only after the adoption of national transposition legislation.
Nevertheless, employers should not view this period as a postponement of compliance. The draft law currently under debate largely reproduces the obligations provided for by the Directive, and the reporting deadlines for companies with more than 150 and 250 employees, respectively, start running as early as 2027. Consequently, organizations falling within the scope of the reporting obligations have only a limited period available to analyze their pay structures, define categories of workers and implement the mechanisms necessary for collecting and processing relevant data.
Conclusion: between compliance and a shift in organizational culture
The Pay Transparency Directive marks an important change in the way employers will approach remuneration policies. Beyond the new information and reporting obligations, the focus shifts to the existence of clear, objective and easily justifiable pay criteria.
Although transposition into Romanian legislation has not yet been completed, the direction is clear. For employers, the coming period represents an opportunity to analyze and adapt their remuneration systems in good time, so that they are prepared for the new requirements and for increasing pay transparency in employment relationships.
Disclaimer: This material is provided for informational purposes only and reflects the legislative framework existing at the date of publication, based on the provisions of Directive (EU) 2023/970 on pay transparency, as well as the draft law currently undergoing adoption for its transposition into Romanian legislation. Since the legislative process has not been finalized, certain aspects may be subject to change. The information presented does not constitute legal advice or any other type of advice and cannot replace an individualized analysis carried out considering the specific circumstances of each case.
