The directive is part of the EU’s broader effort to reduce pay gaps and ensure equal pay for equal work.
The directive was adopted by the European Parliament in May 2023 and must be implemented into national law by 7 June 2026.
In Denmark, the government is currently assessing how to incorporate the rules into Danish legislation, with a draft proposal expected during 2025.
Although the details are still being finalised, it is already clear that the new rules will impact HR processes, pay structures, and recruitment practices across Danish companies.
What Is the Pay Transparency Directive?
The Pay Transparency Directive establishes common EU rules to increase clarity and fairness around pay in both private and public organisations.
Its main goal is to reduce gender-based pay gaps and ensure that men and women receive equal pay for the same or equivalent work.
The directive sets out a number of minimum requirements that all member states must comply with, including:
- =Right to information: Employees will have the right to receive information about their individual pay level, as well as average pay levels by gender for job categories involving the same or equivalent work. If the information provided is unclear, employees can request clarifications and must receive a justified response.
- =Pay structure requirements: All companies, regardless of size, must be able to categorise positions into groups performing the same or equivalent work and describe the objective and gender-neutral criteria used to determine pay. These criteria must be accessible to employees.
- =Documentation requirements: Employers must be able to explain and document how pay is determined — based on objective, gender-neutral factors such as responsibility, experience, and performance.
- =Reporting on pay gaps: Companies with more than 100 employees must report on pay differences between men and women.
- ECompanies with more than 250 employees must report annually.
- ECompanies with 100–249 employees must report every three years.
- EIf the report shows a pay gap exceeding 5% that cannot be explained by objective factors, the company must conduct a joint pay assessment with employee representatives.
- =Reversed burden of proof: If a company fails to comply with its obligations under the directive, the burden of proof in an equal pay dispute will shift — meaning the employer must demonstrate that any pay difference is not discriminatory.
- =Pay transparency in recruitment: Job applicants have the right to know the starting salary or salary range for a position — for instance, through the job posting. Employers are also prohibited from asking about a candidate’s current salary or salary history.
What Does It Mean in Practice for Danish Companies?
1. Equal pay and access to data
The directive aims to give both employees and companies a more accurate picture of pay levels and potential disparities.
Companies with more than 50 employees must regularly report on pay gaps between men and women and inform employees of their right to access pay information.
To comply, employers need well-documented and updated pay structures and must be able to explain how salaries are determined based on criteria such as responsibility, experience, and results.
3. Recruitment and employer branding
The directive will also change recruitment practices.
Employers will no longer be allowed to ask candidates about their previous salary or salary history, and there will be greater expectations for transparency regarding salary ranges in job postings.
While this may seem like a challenge, for many companies it is also an opportunity to strengthen trust and credibility in the recruitment process and to demonstrate a clear commitment to equality and transparency.
3. Organisational culture and trust
Increased transparency around pay is also expected to influence workplace culture and employee engagement.
Companies that work strategically with fairness and openness may experience stronger engagement, improved retention, and a reinforced employer brand.
For HR professionals, this means that pay is no longer just about numbers — it’s also about culture, communication, and values.
Learning and Evolving Together with Our Clients
At Compass Human Resources Group, we are closely following the development of the Pay Transparency Directive and, like many of our clients, are in the process of translating the new requirements into practical understanding and action.
We believe that greater transparency around pay can help create fairer and more trustworthy workplaces — and we are continuously developing our knowledge to support our clients in this important transition.
