People management FAQs  /  What if a company's gender pay gap is above 5% in the EU?

What if a company's gender pay gap is above 5% in the EU?

Compliance | Jul 09, 2026 by TalentHR, 2 min read

The employer must conduct a mandatory joint pay assessment with worker representatives if any category of workers shows a gender pay gap of 5% or more that cannot be justified by objective, gender-neutral criteria.

This is triggered under the EU Pay Transparency Directive (Directive 2023/970), which member states must transpose by June 7, 2026. The current EU-wide average gap is 11.1% (Eurostat 2024), so many employers will hit this threshold.

What triggers the joint pay assessment

  • The 5% threshold applies per category of workers performing the same work or work of equal value, not to the company-wide average
  • The employer has 6 months to either justify the gap using objective, gender-neutral factors (seniority, qualifications, market conditions) or remedy it
  • When the gap is not justified or remedied within 6 months, the joint pay assessment is mandatory
  • The assessment is conducted with worker representatives (works council, union reps, or elected employee delegates, depending on member state)

What a joint pay assessment involves

  • Analysis of the proportion of female and male workers in each category
  • Detailed information on average pay (base and variable) for female and male workers in each category
  • Identification of pay differences and their causes
  • Measures to address unjustified differences, with specific timelines

Results must be made available to workers and their representatives and submitted to the national monitoring body. Employers with 250+ employees report annually (first reports due June 7, 2027, on 2026 data). 150 to 249 employees report every 3 years, also due June 2027. 100 to 149 employees report every 3 years from June 2031.

Consequences of non-compliance

  • Burden of proof reverses: once a worker shows facts suggesting pay discrimination, the employer must prove there was none
  • Compensation is uncapped (back pay, bonuses, lost opportunities, non-material damages)
  • Penalties must be "effective, proportionate, and dissuasive," set by each member state, and they include banning suppliers (public procurement exclusion)

Companies, including those wanting to reach pay equity, typically start a pay audit now rather than waiting for the June 2027 deadline, since remediation of a 5% gap takes 6 months before the joint assessment is triggered. Updates from the European Council track member state transposition.

Disclaimer:

This article informs. It does not advise on the law. EU member states transpose this rule differently. Some may set stricter thresholds.

TL;DR

  • A 5%+ gender pay gap in any worker category triggers a mandatory joint pay assessment with worker representatives when the gap cannot be justified within 6 months.
  • The assessment analyses causes, sets remediation timelines, and is submitted to the national monitoring body. Burden of proof reverses.
  • Compensation is uncapped, and the first reports on 2026 data are due in June

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