Pay transparency is making its way into Danish businesses, and it’s essential to understand its implications for your company. But what exactly is the pay transparency directive about, and what questions remain unanswered? In this article, we have compiled the most asked questions and answers so you can get a clearer picture of everything surrounding pay transparency.
Current status of the Pay transparency directive
As the directive is currently at the EU level and has not yet been detailed by Danish authorities, it is important to emphasize that we do not have definitive answers on how the legislation will be implemented in Denmark. Below, you will find answers to the most frequently asked questions about the directive based on what we know now and what we expect to happen.
1. What is the Pay transparency directive?
The Pay transparency directive is a new EU regulation that requires businesses to increase transparency around pay practices. This includes obligations like providing salary information and reporting gender-based pay data.
2. Why is Pay transparency important?
The directive was enacted to promote equal pay between men and women. It aims to prevent and address unexplained pay gaps between genders by improving conditions for wage fairness.
The directive’s objectives can be summarised into four key categories:
- Strengthening pay equality by making salary structures more transparent.
- Ensuring employers can proactively address pay disparities.
- Equipping employees with better tools to understand and focus on wage inequality within companies.
- Highlighting fairness and equality in the labour market.
3. When will the directive come into force in Denmark?
As it stands, all EU member states must implement the Pay transparency directive by 7 June 2026. However, Danish authorities have yet to outline the specific rules and requirements applicable in Denmark. No timeline has been set for these decisions, but we are closely monitoring developments to provide updates as soon as they become available.
4. Which companies are covered by the Pay transparency directive?
In general, the directive applies to all companies in both the public and private sectors. However, specific rules and requirements, such as mandatory pay reports, will primarily target larger companies.
5. What specific requirements are included in the Pay transparency directive?
The directive outlines the following premises, which will serve as the foundation for Danish legislation. The specifics have yet to be defined, but here are the known elements:
General provisions
- Access to gender-neutral criteria: Companies must prepare a description of objective, gender-neutral criteria underpinning pay structures and provide these criteria upon employee request.
- Access to statistics: Companies must supply statistics on average pay broken down by gender for employees performing the same or equivalent work if requested by an employee.
For companies with over 100 employees
- Reporting requirements: Companies with over 100 employees must report on gender pay gaps. Companies with over 250 employees must do so annually. Companies with 150–249 employees must report every three years. Companies with 100–149 employees must begin reporting every three years five years after the directive is implemented.
- Pay audits: If a reporting company identifies an unexplained gender pay gap exceeding 5%, it must conduct a joint pay audit with employee representatives.
- Reversal of burden of proof: In discrimination cases, the burden of proof shifts to the employer to demonstrate that pay discrepancies are justified by objective, gender-neutral criteria. Exceptions apply if the employer can prove the lack of compliance is excusable.
For job applicants
- Disclosure of starting pay: Applicants are entitled to information about starting pay or pay ranges based on objective, gender-neutral criteria for the position.
- Prohibition on inquiries about salary history: Employers may no longer ask applicants about their current or previous pay.
6. Are companies required to share pay information?
Yes. Companies with at least 250 employees must annually publish information about pay disparities, categorised by employees performing the same or equivalent work. Smaller companies will also face reporting and disclosure obligations, although the specifics may vary.
7. What new requirements apply to recruitment processes?
The directive not only addresses pay equality for current employees but also seeks to ensure fair and transparent recruitment processes. Companies must:
- Disclose initial salary levels: Provide starting salaries or pay ranges based on objective, gender-neutral criteria.
- Avoid inquiring about salary history: Stop asking applicants about their previous salaries.
8. Are there exceptions for small businesses?
Small and micro-businesses may be exempted from detailed reporting requirements to avoid administrative burdens. However, it will be up to each member state to adapt the directive’s implementation to its labour market. We await further clarification on how Denmark will apply these exemptions.
9. What are the consequences for companies that fail to comply?
Non-compliance with the directive could result in legal action from employees or their representatives. This may include claims for compensation for losses incurred due to pay discrimination. Authorities may also impose sanctions, including fines, for failure to comply.
10. How can companies prepare to meet the requirements?
Although the specific requirements for Denmark are not yet defined, companies can start preparing now. Here are some steps to take:
- Review and adjust pay structures: Ensure salary frameworks are based on objective, gender-neutral criteria.
- Implement data collection systems: Develop systems to collect and analyse pay data by gender.
- Train HR staff and managers: Familiarise them with the directive’s requirements and review recruitment and pay-setting practices to ensure compliance.
- Engage employee representatives: Begin collaborations to address any existing pay disparities and transparency issues.
Need assistance?
At Azets, we provide legal and data support to businesses of all sizes. Our specialists closely monitor legislative developments and can guarantee accurate, timely, and professional assistance – so you can focus on running your business. Contact us to learn more.
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