As many of you may have heard, strict rules on pay transparency will apply from summer 2026. Under the new rules, employers will have to provide transparent information to employees and job applicants about pay for each position, and companies will also have to report on gender pay gaps. It is clear that the new legislation raises a number of issues and challenges that companies should address as soon as possible and start preparing for in time.
- ILF’s Hungarian member, Smartlegal Schmidt&Partners summarizes this issue in the article.
- Background
In recent years, the European Union has been working consistently to improve the labour market conditions of EU employers, and the issue of wage parity has been receiving increasing attention in the European Union and in Hungary.
The reason for this is that there is a serious pay gap between women and men employees worldwide.
According to Eurostat data in 2023, women’s gross hourly earnings were on average 12.0% below those of men in the EU, and it was 17,8 in Hungary.
- The Directive and the deadline for transposition
The Directive (EU) 2023/970 aims to minimise the pay gap between men and women and promote the principle of equal pay for equal work or work of equal value by promoting pay parity.
EU Member States have until 7 June 2026 to transpose the Directive into national law, i.e. to amend their national legislation to comply with the Directive’s provisions by that date.
Although the many Member States’ legislation is not yet known, several Member States have started transposing the Directive, including Sweden, Finland and Poland.
- The employer’s obligations
Equal pay for equal work or work of equal value: Employers must develop wage structures that guarantee equal pay for work of equal value. The value of work should be determined on the basis of gender-neutral criteria to ensure equal pay for men and women.
Wage transparency: Under the Directive, employers will be obliged to inform applicants of the starting salary or salary range for a particular position as soon as the job advertisement is placed. The aim of the measure is to help employers by creating fair wage bargaining. Employers will no longer be allowed to ask about the applicant’s previous remuneration, thus helping to determine the salary from an objective point of view.
Reporting obligation: The Directive requires companies with 100 or more employees to make certain data on the gender pay gap available. The average gender pay gap for each category of employee must not exceed 5% and, if the gap exceeds this figure, the employer must justify and remedy the pay gap for which there is no objective justification. The frequency of reporting and the deadline for the first report vary according to the size of the company as follows:
| Employees | Frequency | First report |
| 100-149 employees | Every third year | 7th June 2031 on 2030 data |
| 150-249 employees | Every third year | 7th June 2027 on 2026 data |
| 250+ employees | Annually | 7th June 2027 on 2026 data |
Joint pay assessment: Where the report reveals a pay gap of more than 5% that cannot be justified by objective, gender-neutral criteria and the employer has not remedied the unjustified gap within 6 months, companies must take action in the form of a joint pay assessment with employees’ representatives.
- Employees’ rights
Employees will have the right to request information on
- average pay levels, broken down by gender, for their colleagues doing the same or equivalent work, and
- the criteria for determining pay increases and promotions, which must be objective and gender-neutral.
Under the Directive, employees who have sustained damage as a result of an infringement of any right or obligation relating to the principle of equal pay can claim compensation.
The reparation must be capable of putting the employee in a position where he or she would have been treated as if he or she had not been discriminated against and must include, inter alia, full payment of back pay and related bonuses or benefits in kind.
An important provision of the directive is that the employer will have to prove that it has not breached EU rules on equal pay and pay transparency, so the burden of proof will be shifted to employers.
- How companies can prepare
Although the requirements of the Directive will only apply from 2026, it is advisable to start preparing now, as the requirements of the Directive could have a significant impact on the way businesses operate.
In view of the above, it is advisable to start preparing now, which may include an audit of current pay practices and carrying out a thorough equal pay review to identify any potential gender pay gap and take corrective action where necessary.
It is also important to review the job architecture and pay structure and update recruitment procedures.
Written by dr. Agnes Bartus
SMARTLEGAL is a team of agile business & litigation lawyers in Budapest, Hungary, helping international corporate clients and individual entrepreneurs doing business in Hungary. For more information please visit our website at smartlegal.hu