The New Pay Transparency Act Is Coming in a Few Months – (All) Employers Should Prepare

ince 2017, employees in Germany have had the right to request information from their employer about the salaries of colleagues performing the same or equivalent work – at least where the employer employs more than 200 employees in the same operation. Under the new version of the Pay Transparency Act (Entgelttransparenzgesetz – EntgTranspG), this limitation will be removed, and employers will even have to inform their employees about this right – otherwise, a fine may be imposed.

Overview

Since 2017, the EntgTranspG has been in force in Germany. Its purpose is to close the gender pay gap, which, statistically, amounts to a difference of €4.10 per hour in Germany. Those who believe that this disparity is due to women being employed in lower-paid occupations and industries are ignoring the fact that a significant proportion of the pay gap cannot be attributed to such factors. According to a 2025 survey by the Federal Statistical Office (Statistisches Bundesamt), even after taking all structural explanatory factors into account, there is still an hourly wage difference of €1.52.

However, the EntgTranspG has not made a satisfactory contribution to reducing these salary differences. Rather, the Act has been described by various commentators as a “damp squib” or a “toothless tiger.”

This is where the European Pay Transparency Directive (2023/970; EntgTransp-RL) comes in, which has set a narrow framework for new national pay transparency legislation for the Member States. The current federal coalition is required to implement this framework into the existing EntgTranspG by June 2026. At that point, the new obligations for employers and the new rights for employees will take effect – and it appears that the “toothless tiger” will grow a few new teeth.

Right to Information 2.0

As mentioned at the outset, the strengthened right to information is likely to be the most relevant aspect for employers in the future. After all, it constitutes the most significant way for employees to verify whether they are in fact paid without discrimination.

If this right is asserted, information must be provided on the average levels of remuneration of employees performing the same or equivalent work – broken down by gender (Art. 7 para. 1 EntgTransp-RL). The precise structure of the information to be provided will become clear once the revised EntgTranspG has been enacted.

Compared to the current EntgTranspG, the new EntgTranspG will no longer stipulate a minimum number of employees in an establishment. In addition, the deadline for providing the information will be reduced to at least two months (Art. 7 para. 4 EntgTransp-RL).

At the same time – and this is likely to touch a nerve – employers will be required to inform their employees annually about the right to information and how it can be exercised (Art. 7 para. 3 EntgTransp-RL). A failure to do so will presumably result in a fine (Art. 23 EntgTransp-RL).

Claim for Damages in Case of Discrimination

If a request for information reveals that there is a lower remuneration that is not objectively justified, it will not be resolved with a mere “forward-looking correction.” Instead, affected employees will be entitled to full compensation, which will put them in the position they would have been in had the discrimination never occurred (Art. 16 para. 1 and 3 EntgTransp-RL).

A limitation period of three years will apply. Therefore, the difference in remuneration can be claimed retroactively for up to three years and, for unprepared employers, will regularly result in a substantial back payment (plus interest).

Additionally, the burden of proof will be significantly reduced in favour of the claimant employees (Art. 18 EntgTransp-RL).

Relevance for Dismissal Disputes

It can also be expected that the back payment claims described above will be brought to the negotiating table by employees, particularly (or at least also) in dismissal disputes, in order to increase the pressure towards a higher severance payment.

A comparable development was already observed after the GDPR came into force: The right to information under Art. 15 GDPR regarding data processed by the employer has frequently been asserted in dismissal disputes in order to increase negotiating pressure. In many cases, the fulfilment of the right to information has been – and still is – associated with considerable organisational effort for the employer.

Unlike the right to information under the GDPR, however, the right to information under the new EntgTranspG entails not only a time burden but also a financial one. For unprepared employers, this will regularly be added on top of the severance payment.

Therefore: Review Your Remuneration Systems

Employers should therefore urgently review (or have reviewed) their remuneration and bonus systems against objective, gender-neutral criteria and adjust them accordingly. Those who do not act promptly will very likely do so in the coming years – but then with considerable liability risks in their luggage, risks about which employees.