In the EU Pay Transparency Directive, which is due to enter laws for all EU member states by June 2026, companies must report on gender pay gaps.
This will be a legal requirement, and companies with more than 250 employees must produce annual reports, with action to be taken where gender pay gaps exceed 5% and cannot be justified.
Let's look at the reporting requirements from the EU Directive:
“Employers must provide the gender pay gap between workers by categories of workers broken down by ordinary basic wage or salary and complementary or variable components”
The table below sets out the reporting requirements, and the information businesses will need to provide in their annual reporting.
| The mean gender pay gap for base pay | This shows the opportunity gap in the organisation. The difference between the pay of the ‘middle’ female and male shows the opportunity for women and men to progress up the company. |
| The mean gender pay gap for complementary or variable components | This shows the opportunity gap for the additional elements of pay that the company offers. Often these are either a percentage of pay or only offered with seniority. Therefore, if females are not able to progress their pay and their level within the organisation, the pay gap increases for these elements. |
| The median gender pay gap for base pay | The median is the middle person’s pay, so removes the outliers. (median male base pay minus median female base pay) divided by median male base pay x100 to get a percentage |
| The median gender pay gap for complementary or variable components | median male complementary / variable component(s) minus median female complementary / variable component(s)) divided by median male complementary / variable component(s) x100 to get a percentage |
| The proportion of female and male workers receiving variable pay | Number of female workers receiving variable pay / total number of female workers x100 to get a percentage Number of male workers receiving variable pay / total number of male workers x100 to get a percentage |
| The proportion of female and male workers in each quartile pay band | Take all the pay in the company from lowest to highest and split it into four equal groups. Count the number of males in each of those groups and divide by the total number in each group by 100 to get a percentage |
| The mean gender pay gap by category of workers (basic and complementary or variable components) | Whereas the rest of the calculations are not about equal pay but about the opportunity for equal pay, this requirement is about equal pay. Pay gaps need to be calculated for each group of jobs that are of equal value. The calculation is the same but the expectation is that as they are in jobs of equal value the pay gap between male and females should be small (unless everyone is paid exactly the same it is mathematically unlikely that it will be zero), and definitely below 5%. |
Our new Roadmap to prepare for the EU Pay Transparency Directive guide, looks into the requirements of the EU legislation, and the steps organisations need to take to prepare.
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