The EU Pay Transparency Directive (Directive (EU) 2023/970) is one of the most significant recent developments in pay equity and employer transparency. It is designed to strengthen the principle of equal pay for equal work, or work for equal value, between men and women.
For employers and employees in APAC and the Middle East, the immediate question is often whether this is simply an EU implementation or whether it could have wider implications outside Europe. While the Directive applies directly to workers employed in an EU Member State, its impact will still be felt more broadly across multinational organisations in APAC and the Middle East.
Below, we explain what the Directive is, who it covers, how it works, and why employers and employees in APAC and the Middle East should still pay attention even if they are not directly within its legal scope.
When did the Directive enter into force?
The Directive entered into force on 7 June 2023, and EU Member States must transpose it into national law by 7 June 2026. While the rules are set at EU level, the exact compliance details will vary once each country implements them locally.
Who is covered under the EU Pay Transparency Directive?
The Directive applies broadly to public and private employers operating in the EU, and to workers who are employed in an EU Member State. This includes employees of non-EU companies if they are working in the EU (for example, a company headquartered in Hong Kong with more than 100 workers in any one EU Member State). It also affects job applicants through recruitment-stage transparency requirements.
While employees who are located and employed outside the EU are not directly covered by the Directive itself.
Practically speaking as HCMs like Workday, SuccessFactors, Oracle and HR operating models are often implemented globally it is very likely that MNCs will make changes globally that will in turn impact HR teams and employees in APAC and the Middle East, as well (similar to how most APAC and Middle East organizations will still need to make sure they are GDPR compliant). For example, if the MNC is using Workday as their HCM, there is a high chance that they will update their job architecture in Workday to allow comparisons required under the Directive on a global basis.
As a result, many multinational organisations are already using 2025–2026 to prepare by standardising job families, defining what counts as work of equal value, cleaning historical pay data, and aligning EU and global reward frameworks. For many, the bigger challenge is not just policy alignment, but also reporting readiness, inconsistent payroll data across multiple locations/countries, and limited visibility over how pay information is captured and compared across different systems.
How does the EU Pay Transparency Directive work?
1. Pay transparency at hiring
Before hiring, employers must:
- Provide information about the initial pay or pay range for the role
- Ensure job titles are gender-neutral
- Ensure recruitment processes are gender-neutral
- Avoid asking candidates about their pay history
2. Timing and national variation
These rules are intended to prevent past pay inequality from carrying over into future roles.
The Directive creates a common EU framework, but implementation will not be identical in every country.
- Member States can go beyond the minimum standards
- Employers operating across multiple EU countries will need to monitor local legislation carefully as transposition progresses
- While the overall direction is clear, the exact reporting formats, deadlines, and enforcement procedures may differ from one jurisdiction to another
3. Transparency during employment
Employees have the legal right to request:
- Information about their own pay level
- Average pay levels broken down by gender for workers doing the same work or work of equal value
4. Gender pay gap reporting
The Directive introduces reporting requirements for employers with at least 100 workers in a Member State. The reporting timetable depends on company size:
- 250 or more employees: annual reporting from 2027
- 150 to 249 employees: reporting every three years from 2027
- 100 to 149 employees: reporting every three years from 2031, with obligations starting later than for larger employers
- Fewer than 100 employees: no EU-level reporting obligation, although local law may impose stricter requirements
Reports must cover areas such as mean and median gender pay gaps, gaps in variable pay, the gender distribution across pay quartiles, and pay gaps by categories of workers.
5. Mandatory action where the gap exceeds 5%
If reporting identifies a gender pay gap of more than 5% that cannot be justified by objective, gender-neutral factors, the employer must:
- Carry out a joint pay assessment with worker representatives
- Take corrective action
This is one of the Directive’s most significant features because it turns reporting into a trigger for action, rather than a simple disclosure exercise.
6. Enforcement, compensation and penalties
The Directive also strengthens enforcement.
- Employees who suffer pay discrimination must have access to compensation
- Member States must put in place effective penalties, including fines
- In disputes, the burden of proof shifts to the employer, meaning it is for the employer to show that there has been no discrimination
- Workers are also protected against retaliation for exercising their rights under the Directive
What This Means for Non-EU Employees:
1. Global job architecture may need to be aligned
To defend pay decisions in the EU, employers need clear and objective frameworks for:
- Job levels
- Job families
- The concept of work of equal value
For multinational organisations, this often leads to broader harmonisation across regions, including APAC and the Middle East, even where local employees are not legally covered.
2. Recruitment practices may become more consistent globally
Many multinational employers choose to apply similar recruitment standards across regions, such as:
- Publishing salary ranges
- Avoiding salary history questions
This can reduce internal inconsistency and reputational risk, rather than running one system for Europe and another elsewhere.
3. Employee expectations may rise outside the EU
Once pay transparency becomes more visible in one part of the business, employees in other regions may begin asking similar questions about:
- Pay fairness
- Salary ranges
- Promotion criteria
- Internal equity
Even where there is no legal obligation, the Directive may influence employee relations and reward strategy more broadly.
4. Group-level pay governance becomes more important
For APAC- or Middle East-headquartered groups with an EU workforce, the Directive may start as an EU compliance issue but quickly become a wider governance issue.
Employers may need:
- Better data quality
- Clearer grading structures
- More consistent documentation of how pay decisions are made across the organisation
The EU Pay Transparency Directive is a broader shift towards more structured, explainable, and defensible pay practices. While it directly applies to employees working in the EU, multinational employers in APAC and the Middle East may still feel its effects through global job architecture, recruitment practices, internal equity expectations and group-wide pay governance. Organisations globally are still recommended to:
- Review job grading and pay frameworks
- Improve pay data quality
- Document objective criteria for pay and promotion
- Assess whether existing pay differences can be clearly explained
- Prepare for wider employee expectations around transparency and fairness
If your organisation manages payroll across multiple locations, now is the time to review how pay transparency requirements may affect your pay data, reporting processes, and payroll governance. Speak with our team to understand what this could mean for your multi-country payroll operations!