The EU Pay Transparency Directive (Directive (EU) 2023/970) represents one of the most significant developments in European employment law in recent years. It strengthens the long-standing principle of equal pay for equal work or work of equal value between men and women by imposing new transparency, reporting, and enforcement obligations on employers. Its aim is to ensure that pay differentials are based on objective and gender-neutral criteria, thereby promoting fairness and accountability across all levels of employment. Member States, including Cyprus, must transpose the Directive into national law by 7 June 2026.

1. Purpose of the Directive

The Directive reinforces the principle of equal pay enshrined in Article 157 TFEU. It seeks to ensure that workers have access to clear information on pay levels and pay-setting criteria; to increase employer accountability through mandatory gender pay-gap reporting and joint assessments; and to strengthen enforcement mechanisms by easing the burden of proof and improving access to remedies. The overall objective is to create a culture of transparency and trust in pay practices, thereby reducing pay discrimination and closing the gender pay gap across the EU.

2. Main Provisions

1. Pay Transparency and Hiring Obligations

Employers must disclose the initial pay level or pay range in job advertisements or prior to interview, and may no longer request information about an applicant’s salary history. Employees will have the right to obtain information on their own pay level as well as on average pay levels for colleagues performing the same or equal-value work. Employers must also explain the criteria used to determine pay and career progression and are required to inform employees annually of these rights.

2. Gender Pay-Gap Reporting

Employers with at least 100 employees will be subject to gender pay-gap reporting obligations. Entities with 250 or more employees will report annually starting in 2027; those with 150 to 249 employees will report every three years from 2027; and those with 100 to 149 employees will begin three-yearly reporting from 2031.

Reports must detail overall and category-specific gender pay gaps. Where a pay gap of 5% or more is identified and cannot be justified on objective, gender-neutral grounds, the employer must conduct a joint pay assessment with employee representatives to analyse the causes and agree corrective measures. Information on gender pay gaps will be made publicly available and provided to the competent national authority.

3. Dispute Resolution and Enforcement

The Directive strengthens enforcement by shifting the burden of proof to employers in cases of alleged pay discrimination or non-compliance with transparency obligations where there is a prima facie case of discrimination. Employees who have suffered discrimination are entitled to full compensation, including back pay, bonuses, and related benefits. National courts and equality bodies will have the power to compel disclosure of pay data, subject to data-protection safeguards. Member States must also establish effective, proportionate, and dissuasive penalties, including administrative fines, for breaches of the Directive.

Although the Directive focuses on gender-based disparities, its transparency mechanisms are likely to expose any unjustified pay differences, including those between employees of the same gender performing the same role.

3. Implications for Businesses in Cyprus

Cyprus has not yet published draft legislation to transpose the Directive, but transposition is expected within the next year as part of the government’s alignment with EU social and labour policy. At present, there is no statutory requirement for private-sector employers in Cyprus to monitor or report on gender pay gaps, meaning that the forthcoming legislation will introduce an entirely new compliance framework with far-reaching operational and reputational implications. Employers will be required to adapt existing HR and governance processes to meet new transparency, reporting, and disclosure obligations. These changes are expected to reshape how pay structures are designed and communicated, making it essential for organisations to begin assessing their readiness and planning for implementation well ahead of the June 2026 deadline.

4. How we can Help

We assist employers in developing a structured and proportionate approach to compliance with the Pay Transparency Directive, helping them assess existing frameworks, identify areas of exposure, and implement policies aligned with forthcoming requirements in Cyprus and across the EU. Our team works with clients to design practical strategies that enhance pay governance, strengthen internal controls, and promote transparency while safeguarding business interests. Each engagement is tailored to the organisation’s size, structure, and sector to ensure that compliance measures are both effective and sustainable.