Getting ready for the EUPTD with PayAnalytics
The EU Pay Transparency Directive (Directive (EU) 2023/970, EUPTD) introduces new requirements for employers to ensure equal pay for equal work or work of equal value between women and men.
PayAnalytics supports organizations in preparing and complying with these obligations in the ways described in this article.
Measuring, closing, and reporting on gender pay gaps per category of workers (Articles 9 and 10)
Under the Directive, employers are required to calculate and report on gender pay gaps by categories of workers performing the same work or work of equal value.
If the unadjusted gender pay gap within any category reaches 5% or more and cannot be justified by objective, gender-neutral factors, employers must carry out a joint pay assessment with worker representatives.
How PayAnalytics helps
PayAnalytics automatically calculates unadjusted pay gaps per worker category and allows you to test whether objective factors account for these gaps by examining the adjusted pay gap. For example, if a category shows a 10% unadjusted gap but only a 1% adjusted gap, you can demonstrate that most of the difference stems from legitimate, gender-neutral criteria such as seniority or experience. The tool also lets you verify whether residual pay gaps remain unexplained, highlighting where corrective measures may be needed to ensure compliance. In addition, PayAnalytics offers localized reporting templates to help you meet these reporting obligations efficiently.
Specific PayAnalytics features
Close pay gaps on a per-group basis
With the PayAnalytics platform, you can easily analyze, understand, and close pay gaps in each group. To do so, use the Close pay gaps on a per-group basis setting within your Pay Equity Analysis configuration.
For detailed guidance, refer to our dedicated article: Measuring & closing pay gaps by group.
Progression from the unadjusted to adjusted pay gap in the Pay Equity Analysis
Pay gaps by groups section
Best practice tips
Define your category of worker
The categories of workers may be imposed by local legislation and may have to be approved by the workers' representatives.
The Directive states that the criteria used to define a category of worker should include four factors: skills, effort, responsibility, and working conditions.
If categories have not yet been defined, we recommend a broad approach based on grades or role levels, ideally grounded in a job evaluation methodology.
Job family must be considered carefully and should reflect skills, effort, responsibility, and working conditions in accordance with the Directive. When based on job architecture and for organizations that do not have job grades, it can be an option, but it may carry risks if not well calibrated (for example, male-dominated or female-dominated job families can prove problematic).
Avoid having a small headcount per category of worker (fewer than 5–10 employees). You can combine levels or groups as long as they represent a similar level of skills, effort, responsibility, and working conditions, which can be justified and documented.
Define your adjusted pay gap target
The EUPTD specifies that the gross (unadjusted) pay gap per category of worker should fall below 5% unless it can be justified by objective factors. This implies that the adjusted pay gap should also remain below 5%.
When setting your objectives, keep in mind that an adjusted pay gap of 5% means that female (or male) employees earn 5% less than their counterparts, all else being equal. While this level complies with the Directive, it still reflects a persistent difference that may prove difficult to communicate to employees and workers' representatives. A pay gap between -1% and 1% generally indicates no pay gap.
Specifying and communicating objective, gender-neutral criteria for determining compensation (Article 6)
Under Article 6, employers must make available to workers the criteria used to determine pay levels and pay progression, ensuring that these criteria are objective and gender-neutral.
According to the Directive, pay-setting and pay-progression criteria cannot be based on or influenced by workers' gender. Instead, they must rely on factors such as skills, effort, responsibility, and working conditions relevant to the job performed.
How PayAnalytics helps
By running pay analyses and creating compensation models, you can identify which factors (for example, education, experience, seniority in the role, performance) actually explain pay differences in your organization. Comparing different models allows you to determine which criteria most accurately and fairly describe pay differences. These analyses serve as a solid foundation for communicating the objective, gender-neutral pay criteria required under Article 6 to employees and workers' representatives.
When testing your models, ensure that factors are relevant to the job, measurable, and free from direct or indirect links to gender. Local transposition of the EUPTD may provide further national definitions or examples of such criteria.
Specific PayAnalytics features
Compensation model
The Compensation model tab in the Pay Equity Analysis lets you estimate the relationship between contributing factors and actual employee pay. You can assess the health and explanatory power of your model and examine the impact of each compensation driver.
For detailed guidance on understanding and analyzing your compensation model, see Understanding & analyzing the compensation model.
Compensation drivers in the Compensation model
Best practice tips
Below are the most common gender-neutral criteria used by organizations, along with our recommendations.
Grades and levels: A grading system based on job evaluation typically serves as the strongest explanatory factor for pay differences. Using a structured job evaluation methodology is widely considered an objective and gender-neutral approach to comparing jobs of equal value, and it should form the backbone of any pay equity analysis.
Job family: Job families should reflect your job architecture and group roles based on neutral criteria such as level of complexity, scope, responsibility, skills, or working conditions – factors that relate to the value of the job from an equity perspective, not only market positioning. Because female-dominated roles have historically been undervalued compared to male-dominated roles, linking job families to objective, value-based criteria in a clear way is essential to mitigate this risk.
Time in role or time in grade: Time in role or grade can partially explain pay differences within the same level and is often relevant when salary progression centers on experience in the role. Time spent in the role or grade frequently better captures the worker's experience and helps justify their position within the pay band, especially when pay bands are wide.
Seniority in the company: If your organization rewards tenure, company seniority can be important. Seniority correlates more or less with experience, particularly in organizations where tenure matters. However, in some organizations this factor proves relatively weak, as new hires may enter at higher salary levels due to market pressure. Including seniority can help assess whether long-tenured employees are effectively rewarded compared to new joiners and whether current pay practices align with stated compensation principles.
Location: Location applies when genuine differences in working conditions or cost structures exist between geographies.
Number of employees under management: The number of employees under management can be an appropriate criterion when it reflects a difference in role scope and responsibility, with a consistent definition applied across the organization (for example, direct reports only).
Factors to consider carefully
Performance
Performance ratings can be relevant but warrant caution. Include performance only when it is evaluated consistently, transparently, and through objective, unbiased criteria. Performance very often proves a weak predictor of compensation, as organizations frequently measure it with limited differentiation and apply it inconsistently. We also observe that performance often affects short-term pay changes rather than long-term pay levels. In addition, unconscious bias may influence performance assessments.
Education
If the level of education qualifies as formally neutral, it is typically not available for all employees and only has relevance at entry-level positions, with limited significance once an employee performs the job. After accounting for job grade, level, or role scope, education often explains little additional pay variation.
Factors to avoid
Age
Age makes an inappropriate explanatory factor, as it lacks direct links to the value of the work performed and may introduce indirect discrimination. However, if experience plays a determinant role in your organization, consider using a proxy based on age and the diploma level required by the job to estimate experience (age - years of education).
Part-time vs. full-time status
Working time arrangements should not justify differences in pay rates. While total compensation may differ proportionally, pay comparisons should always use a like-for-like basis (for instance, full-time equivalent, FTE) to avoid disadvantaged groups more likely to work part-time.
Length or type of employment contract
Fixed-term, temporary, or permanent contract status does not reflect job value and may disproportionately affect certain groups.
Maternity leave or long-term leave
Long-term leave such as maternity leave should not serve as a compensation driver. However, you can recalculate compensation on an FTE basis to capture equivalence. For precise rules on the use of FTE calculations, consult the national implementing legislation once it is enacted.
Personal circumstances
Health status, marital status, residence distance, or similar personal factors hold no relevance to job value and must not influence pay.
These non-objective factors should never justify salary differences under the EU Pay Transparency Directive. However, you may still include them in your analytical file and test them to assess their impact, verifying that your organization does not pay employees differently based on these characteristics.
For instance, to assess whether women are penalized following maternity leave, you may include a control or "dummy" variable (for example, having taken maternity leave in the past two years). Then, you can analyze whether it has a statistically negative impact on full-time-equivalent salary. This approach supports the identification of potential discriminatory effects without using such factors as justification for pay differences.
Preparing individual reports to comply with the right to information (Article 7)
Workers shall have the right to request and receive in writing information on their individual pay level and the average pay levels, broken down by gender, for categories of workers performing the same work as them or work of equal value to theirs.
How PayAnalytics helps
In PayAnalytics, you can generate accurate, individual pay transparency statements to provide to employees upon request, fulfilling your obligations under Article 7. We also support you in handling conversations with employees about their pay by giving overviews of where each employee stands compared to their peers within the same category of worker.
Specific PayAnalytics features
Employee pay transparency report
The Employee pay transparency report tab in Reports offers pay information required in accordance with the EUPTD. After selecting the Pay Equity Analysis page, navigate to the employee list, click the three dots next to the relevant employee, and select View employee pay transparency report. Note that the pay equity analysis must have been run for the feature to become available.
Employee pay transparency report
Pay explainability tab in Reports
Specific cases for small headcounts
Article 12(3) of the Directive addresses exceptions to individual disclosure where there is a risk of revealing identifiable pay information due to small group size. In those cases, the information becomes available to workers' representatives, labor inspectorates, or equality bodies, rather than to the individual worker. Importantly, the right to request remains in place, but the channel of disclosure changes to protect privacy: interpretation seems to apply to what Recital 28 allows, which covers legal proceedings, not regular reporting or right-to-information responses.
Best practice tips
Complying with the 5% pay gap threshold per category of worker may not suffice. Even within compliant groups, individual employees may still receive pay below that of their peers without any objective or valid justification.
To prepare for these potential cases:
Set proactive and ambitious goals: Aim to reduce the adjusted pay gap per category of worker to less than 5%, ideally around 1%.
Review negative outliers: Negative outliers can include male or female employees. The key lies in identifying, understanding, and documenting the reasons for large negative deviations. If necessary, develop a remediation plan to address unjustified differences. Use the comment section to add any relevant information that can justify the difference.
Analyze positive outliers: Examine employees whose pay significantly exceeds that of their peers. Consider freezing or limiting increases for large positive outliers, and review different salary components (variable pay, allowances, bonuses) to ensure they do not unintentionally widen the gap.