On 7 June 2026, the European Union’s new Pay Transparency Directive will enter into force, bringing transformative changes to how the European labour market operates. Directive (EU) 2023/970 aims not only to reiterate the principle of “equal pay for equal work”, but to ensure its effective enforcement across Member States. While Hungary has not yet implemented national legislation, the upcoming deadline means that employers should begin preparations without delay.
Why Is the Pay Transparency Directive necessary?
According to the to the reasoning of the directive, women in the EU earn on average 13% less than their male counterparts. That gender pay gap has largely stagnated over the past decade. This disparity is not only unjust but also distorts economic efficiency. The directive’s core objective is to increase pay transparency, thereby reducing unjustified gender pay gaps.
What are employers’ obligations under the Pay Transparency Directive?
The directive imposes significant new responsibilities on employers, including:
- Mandatory pay gap reporting: One of the directive’s central elements is the obligation to report on gender pay differences. Companies will be required to regularly disclose gender pay gap data, depending on their size. If a pay gap of more than 5% exists within the same role and cannot be justified by objective, gender-neutral criteria, employers must conduct a pay assessment and develop an action plan to reduce the gap. Importantly, “pay” includes not only base salary but also bonuses, allowances, benefits in kind, and even study leave entitlements.
- Transparency in recruitment: Employers will be required to inform job applicants of the pay range for the advertised position during the selection process. At the same time, it will be prohibited to ask candidates about their current or past salary.
- Pay transparency in internal communication: Employers must clearly communicate the criteria used to determine pay levels and progression. Employees will have the right to request information on how their salary compares to the average pay of colleagues performing equal or equivalent work. Perhaps most significantly, employers will no longer be allowed to prohibit employees from disclosing their own pay – a major cultural shift in many workplaces.
Strengthened enforcement and legal protections
The directive also introduces enhanced legal remedies for employees. Workers may be represented by external organisations in legal proceedings, and the burden of proof in pay discrimination cases will shift to the employer.
If gender-based pay discrimination is established, the directive mandates full compensation, covering both material and non-material damages. Member States will also be required to implement dissuasive penalties to ensure compliance.
How can employers prepare?
Compliance is not only a legal requirement but a strategic opportunity. Organisations also in Hungary should begin by evaluating their current practices: What would a role-by-role, gender-based pay analysis reveal? Do they have quantifiable data on all types of compensation, including bonuses and benefits?
To ensure compliance, employers may need to:
- review and revise job classification systems,
- formalise salary determination procedures,
- redesign recruitment and other HR processes.
They should also prepare to handle internal and external reporting duties, update employee communications, and review contracts and internal policies. Legal alignment with forthcoming national legislation will be critical.
The Pay Transparency Directive as an opportunity
While the directive certainly imposes new administrative and operational burdens, it also offers a unique opportunity to build a more equitable, transparent, and competitive workplace culture – one that can be a key advantage in today’s labour market. Early preparation is essential. The earlier employers begin, the smoother the transition will be.
The experienced teams at WTS Klient Hungary and WTS Legal Hungary offer comprehensive support in all payroll, HR, and labour law matters related to the Pay Transparency Directive. If you need expert assistance, please don’t hesitate to contact us.
This article provides general information and does not constitute advice.
