No safe harbour for collective agreements: what the European Commission's FAQ on the Pay Transparency Directive clarify

In early August, the European Commission published fifteen questions and answers on Directive (EU) 2023/970. The document is expressly non-binding, and yet on thirteen pages it answers questions that have been debated in Germany for months: on collective agreements, occupational pensions and market supplements.

An example: the project plan with the assumptions on page one

Picture the head of compensation at an industrial company bound by a collective agreement, a constructed example meant only to show how preparation for the Directive is set up in many organisations. Since spring, a project plan has been on her desk, and its first page contains three assumptions, although nobody would call them that. Employees covered by the collective agreement are considered largely taken care of, because the agreement's pay grades already define the groups of work of equal value and German law, the Entgelttransparenzgesetz, grants collectively agreed pay rules a presumption of adequacy anyway. The analysis is to include pay, meaning base salary and bonus, while the employer-funded occupational pension is counted as benefits and sits in a different system. And the supplement the company has been paying its software developers for three years, so that they do not move to a competitor, appears as a market supplement in the column headed “objectively justified”.

None of these assumptions is far-fetched, and each of them is addressed in the document the European Commission published on 6 August 2026 under the title “FAQ on the Pay Transparency Directive (EU) 2023/970” [1] [2].

What the FAQ are and what they are not

The document runs to thirteen pages and fifteen questions, from an overview of the scope to the support the Commission offers Member States [1]. Much of it repeats what the Directive already says, and readers who know the text will find little new in the first six answers. It opens with a sentence worth taking seriously: the answers reflect preliminary views of the Commission services, not an official position of the Commission, and only the Court of Justice of the EU can interpret EU law authoritatively [1].

The FAQ therefore bind neither employers nor labour courts. They do show how the authority that monitors transposition in the Member States reads the Directive, and in a country that let the transposition deadline of 7 June 2026 pass without a law, that is no minor matter. Since 8 June, public employers in Germany have been directly bound by the Directive and private employers indirectly, through an interpretation of existing law in conformity with it, and for both the Commission's reading is currently the most detailed one available [3] [4].

A collective agreement is not a safe harbour

Question 7 asks whether the Directive applies to employers and workers covered by collective agreements, and the answer is shorter than the question. The principle of equal pay applies to all employers, even when pay is set through collective bargaining; the Court of Justice has confirmed this in Defrenne (C-43/75) and Royal Copenhagen (C-400/93), and employers covered by collective agreements are therefore not excluded from the scope of the Directive [1].

For German readers there is more in these three sentences than their length suggests. Section 4(5) of the Entgelttransparenzgesetz grants collectively agreed pay rules a presumption of adequacy; put briefly, whoever pays according to the collective agreement is in principle deemed to comply with the equal pay requirement [5]. The Directive contains no such presumption. The expert commission advising the German family ministry on transposition debated in November 2025 whether employers bound by collective agreements could be given lighter requirements and did not agree on a general privilege; it recommended only relief in determining worker groups and longer deadlines [6]. The European Commission has not settled that debate, because it cannot, but it has named the direction in which a German law would have to hold up before the Court, and it matches what legal commentators have been writing since spring: the Directive provides no blanket protection for collectively agreed pay systems [4] [5].

For the head of compensation in the example, this does not mean that her collective agreement discriminates. It means that the agreement's pay grades are an assumption about work of equal value that has to be measured against the four criteria of Article 4(4), skills, effort, responsibility and working conditions, rather than being the result of that assessment [1] [7]. Whether a pay grade really groups work of equal value thereby turns from a legal question into a methodological one, and methodological questions are answered with data, not with presumptions.

Occupational pensions always count

Question 8 clarifies which elements of pay are included in the transparency measures, and at one point it does so with a clarity that is rare in the rest of the document: employer's contributions to occupational schemes always need to be taken into account for pay transparency purposes [1]. The basis is the definition of pay in Article 3, which covers, in addition to the ordinary basic or minimum wage or salary, any other consideration, whether in cash or in kind, that a worker receives directly or indirectly from the employer in respect of the employment; complementary and variable components are expressly included, and benefits in kind are to be assigned a monetary value [1] [7].

What the Commission considers may be left out is at least as revealing. Payments and benefits that are not subject to any eligibility criteria and go to all employees without exception, such as lunch vouchers, smartphones, laptops or Christmas gift cards, need not be included, nor do benefits that workers may take up voluntarily without eligibility criteria, such as a gym membership, nor statutory social security benefits [1]. The line is therefore not drawn between cash and benefits in kind but between what is tied to a condition and what is not: the company car from a certain grade upwards belongs in the analysis, the laptop everyone receives does not.

That occupational pensions belong in the analysis is methodologically consistent, because pay gaps during working life carry over into retirement income; Sandra Mekler and I have described this link elsewhere as the path from the gender pay gap to the gender pension gap [8]. In practice, however, occupational pensions often sit in a different system from payroll, with an external provider or in a separate database, and anyone who has not planned for them in the data model for the first report is now finding that an element is missing which the Commission expressly requires. What is not measured does not exist for a model, and in this case it does not exist for the report either, although it very much exists for employees, at the latest when they retire.

Market conditions: to be treated with caution

Question 12 is the most interesting one methodologically. It confirms that the four criteria of Article 4(4) are minimum requirements that each employer may weight differently but none of which may be dropped, and that additional factors are permissible provided the employer can justify their importance and they are gender-neutral, free from bias and applied proportionately [1]. Then follows a sentence likely to cause some unease in the next pay round: while market conditions could influence the level of pay, they are less likely to be directly linked to the intrinsic value of the job itself and should be treated with caution [1].

In this context the Commission refers to Enderby (C-127/92), and the reference is more precise than it first appears. In that case, concerning the pay of predominantly female speech therapists compared with predominantly male pharmacists, the Court accepted the state of the labour market as a possible objective justification, but only for the part of the pay difference that can be shown to be attributable to it [9]. At its core, that is a decomposition task. The market supplement in the example then does not justify the entire difference between the predominantly male developers and employees in roles of equal value, but at most the share the company can attribute to the market and document, with vacancy durations, rejected offers and benchmark data.

For pay analysis this has an uncomfortable consequence. Whoever enters “market supplement” or “hard-to-fill role” as a control variable in a regression model removes the part of the gap that runs through that variable from the unexplained share, and the Oaxaca-Blinder decomposition then reports it as explained. Whether it is objectively justified is something the model does not answer; it presupposes the answer. On the Commission's reading, this is precisely where a report will be questioned in future, and the answer is not in the regression table but in the documentation used to justify the variable.

What else the FAQ clarify, and what they leave open

On data protection, Question 9 states that employers must disclose average pay levels by category of workers, not individual data, and that ensuring compliance with the equal pay principle is an objective of public interest within the meaning of Article 6(3) GDPR. Where there is a risk of disclosing personal data because the number of comparators is very small, Member States may, under Article 12(3) of the Directive, restrict access to workers' representatives, the labour inspectorate or the equality body [1] [7]. From which group size onwards that is the case, the document does not say.

Much of what employers need for the first report also remains open: how workers are to be counted for the thresholds, how exactly mean and median are to be calculated, and which factors beyond the four criteria might be acceptable; the Commission gives no examples [1] [10]. For job classification, it refers to the EU-wide guidelines on gender-neutral job evaluation updated together with the European Institute for Gender Equality (EIGE), which are voluntary and do not replace the Directive, but offer a tool where there was none before [1].

In closing

The FAQ change nothing in the text of the Directive, and they do not replace a transposition law; they do, however, shift the burden of proof for assumptions nobody has had to justify so far. What follows is unspectacular: test the pay grades of the collective agreement once against the four criteria of Article 4 rather than taking them as a given; bring employer contributions to occupational pensions into the data model while the 2026 reporting year is still running; and document each market or scarcity supplement with the share that is actually attributable to the market, rather than entering it as a control variable. The first page of the project plan in the example would then list tasks to check instead of assumptions, which means more work and is the better starting point for the first report.

This article is for information only and does not constitute legal advice.

Frequently asked questions

1. Are the European Commission's FAQ on the Pay Transparency Directive binding?

No. By its own account, the document reflects preliminary views of the Commission services and not an official position; only the Court of Justice of the EU can interpret EU law authoritatively [1]. The FAQ do, however, show how the Commission will assess transposition in the Member States.

2. Does the Pay Transparency Directive apply to employers bound by collective agreements?

Yes. According to Question 7 of the FAQ, the principle of equal pay applies even when pay is set through collective bargaining; employers covered by collective agreements are not excluded from the scope [1]. The Directive contains no presumption of adequacy for collectively agreed pay rules of the kind found in Section 4(5) of the German Entgelttransparenzgesetz [4] [5]. How the German legislature will deal with this remains open.

3. Do occupational pensions belong in the pay gap report?

According to the Commission, yes: employer's contributions to occupational schemes always need to be taken into account for pay transparency purposes. Benefits paid to all without eligibility criteria or taken up voluntarily, as well as statutory social security benefits, may be excluded [1].