The Pay Transparency Directive is one of the most significant changes facing employers in Europe. It does not concern HR teams only. It affects the way companies define, document, communicate and justify their remuneration practices.
The webinar hosted by Sb Accounting & Consulting brought together the following experts:
- Boyan Lazarov, Managing Partner at CasePro;
- Savina Dineva, Business Development Manager at Sb;
- Denitsa Yordanova, Legal Associate at Sb;
- Nevelina Petrova, HR Manager at Kalmar Bulgaria.
They discussed both the legal framework and the practical questions facing employers: transparency in recruitment, comparison criteria, employees’ information rights, reporting and internal preparation.
The Pay Transparency Directive: Key Points at a Glance
- The Pay Transparency Directive does not mean equal pay for everyone. It requires differences in pay to be justifiable based on objective and neutral criteria.
- Employers will need to have clear pay structures, criteria and documentation in place.
- Candidates must receive information about the starting salary or pay range before the interview. Employers should not ask about previous pay.
- Employees will have the right to request information about their individual pay level and the average pay levels, broken down by sex, for categories of workers performing the same work as them or work of equal value.
- Reporting obligations will not apply to all companies, but the principles of transparency and objectivity will affect all employers.
Why the Pay Transparency Directive Matters Now
The principle of equal pay for men and women for equal work or work of equal value is not new. What is new is that the Directive introduces specific mechanisms designed to make this principle practically enforceable. Such as transparency, the right to information, reporting, and an obligation for employers to be able to justify or explain, in an objective and gender-neutral manner, the rationale behind pay differences.
This is why preparation is not merely a legal project. It requires coordination between HR, payroll, finance, legal and management teams. Companies need to understand what data they have, how their roles are structured, which criteria determine remuneration, and how these rules will be communicated to employees, candidates and institutions.
Transparency in Recruitment
One of the most visible changes will be in the recruitment process. Employers will be required to provide candidates with information about the starting salary or pay range for the position. The Pay Transparency Directive allows this information to be provided in the job advertisement or in another appropriate manner, but it must be available before the interview.
Another significant change is the restriction on employers asking candidates about their current or previous remuneration. This does not mean that discussions about expectations will disappear. A possible approach is for the company to communicate the pay range and check whether it meets the candidate’s expectations.
Job offers should be worded in a gender-neutral manner, both in terms of job titles and the overall language used in the communication. In addition, the company should ensure that its recruitment and selection processes are carried out in a non-discriminatory way.
Pay Ranges must be Based on a Real Internal Logic
A pay range should not be selected arbitrarily simply to make a job advertisement more attractive. It should be linked to the company’s actual pay structure: job families, levels, internal rules, promotion criteria, bonuses, benefits and performance processes.
If the externally communicated range does not correspond to the internal rules, this may create tension both among candidates and current employees. Employers should therefore first align their internal logic and only then communicate it externally.
Equal Work and Work of Equal Value
The most challenging part is defining the comparison groups. Equal work usually means identical or similar functions and duties. Work of equal value, however, may cover employees in different positions who perform different functions, but whose work is of equal value to the employer.
The Directive identifies four main criteria: skills, effort, responsibilities and working conditions. In practice, additional criteria may also be needed, such as performance, quality of work or specific expertise. It is important for these criteria to be objective, neutral and documented.
Pay is not Just One Figure
In the context of the Pay Transparency Directive, pay should be viewed as a broader remuneration package. It may include base salary, additional remuneration, bonuses, benefits, compensation and other payments, whether in cash or in kind.
This creates practical challenges. If two people have a similar overall package but a different structure of components, questions may arise as to why the base salary, bonus or a particular benefit differs. The same logic applies to pay increases.
Information Rights and Confidentiality
Employees will be able to request information about their individual pay level and the average pay levels of employees performing equal work or work of equal value. This information should be provided with a breakdown by sex, but within the relevant category of employees.
An important clarification is that this does not mean publishing individual salaries. Employers provide aggregated information, not a list of specific remuneration amounts. At the same time, clauses that restrict employees from sharing information about their pay for the purpose of verifying compliance with the principle of equal pay will need to be reviewed.
Reporting and Data under the Pay Transparency Directive
Reporting obligations will depend on the size of the employer and the final national legislative provisions. However, even companies that will not be required to submit regular reports must be able to apply the principles of the Pay Transparency Directive and respond to information requests from employees.
This raises important questions for HR and payroll systems: where the data is stored, whether it is sufficiently detailed, and whether it distinguishes between base and gross salary, bonuses, length-of-service supplements, benefits, incomplete periods, sick leave, maternity leave and other specific circumstances.
How Companies can Start Preparing for the Pay Transparency Directive
- Review job positions, job families, levels and internal roles.
- Define which positions are comparable and based on which criteria.
- Update the internal remuneration rules and job descriptions.
- Review bonuses, benefits, performance processes and promotion rules.
- Check whether HR and payroll systems contain the data needed for analysis and reporting.
- Prepare a clear process for responding to employee requests and communicating with teams.
The practical example shared by Kalmar Bulgaria during the webinar shows that preparation is a long process, even for companies with more mature HR and compensation structures. This is why the most important recommendation is for employers not to wait until the last moment. The earlier the internal analysis begins, the easier it will be to identify risks, organise the data and build clear communication towards employees and candidates.
Watch the full recording of the Sb webinar “Pay Transparency Directive” to hear all practical examples, the expert discussion and the answers to questions from the audience.
Questions & Answers from the Sb Webinar: Pay Transparency Directive
We have also prepared a separate Q&A section with the questions submitted by participants during the Sb webinar “Pay Transparency Directive” and the answers provided by the experts.
To make the content easier to navigate, the questions are divided into 8 thematic sections – from pay transparency in recruitment and salary ranges to employee information rights, reporting obligations, comparison of work of equal value, and practical steps employers can take to prepare.
You can explore the full Q&A section to find specific answers to the topics most relevant to your organisation.
Communication, Applicability, and First Steps for Employers based on the Pay Transparency Directive
The employer should inform employees annually of their right to receive written information about 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. The exact timing will be determined when the Directive is transposed; it should specify by when the employer must provide this information to employees, for example by 31 January each year. As for the communication to employees, it should include notice of: 1) what the employees’ right consists of, i.e. what information they may request, and 2) how they can exercise that right, i.e. what steps they need to take.
The Directive will cover all employers, regardless of the number of employees. It will also apply to a company with 80 employees, although the current expectation is that companies with fewer than 100 employees will be exempt only from mandatory reporting. All other requirements under the Directive, however, will apply.
The Directive applies to all employers without exception. The only relief currently envisaged concerns the reporting obligation: companies with fewer than 100 employees are exempt from mandatory reporting, but all other requirements will apply.
The Directive requires employers to have so-called pay structures. In broad terms, these are pay systems or pay rules that clearly describe, formulate and determine how, under what conditions and in what circumstances the different elements of remuneration are paid. It should be clear how remuneration is determined for each position, what the remuneration ranges are, how pay is structured across different job levels, for example junior and senior specialist levels, under what conditions additional components are paid, what the criteria for salary increases are, and so on. For example, payment for overtime or night work is due by law, but on what basis would the employer pay a bonus? What criteria must an employee meet, what objectives must they achieve and, overall, what conditions must be present for a bonus to be paid? The pay rules should provide answers to all these questions. Preparing or optimising pay systems is one of the key obligations for employers and, to a large extent, forms the basis for fulfilling many of the other obligations and requirements under the Directive.
Yes. The employer should have clearly defined and documented criteria for determining remuneration and, more generally, pay structures. These criteria must be objective and gender-neutral. Employers should provide their employees with easy access specifically to the criteria used to determine pay, pay levels and pay increases.
Job descriptions are among the documents that should be reviewed when companies start preparing for the adoption and implementation of the Directive. Each job description should reflect the actual duties, rights, requirements, specifics and characteristics of the relevant position, while also taking into account the employee to whom it applies. Very often, employees in the same department, for example, have identical job descriptions but objectively perform different job functions.
The Salary Rules are a mandatory document for every employer under the Ordinance on the Structure and Organisation of Salary and the Labour Code.
This refers to the obligation to inform employees annually of their right to request information on individual or average pay levels, as well as the ways in which they can exercise that right. The Directive does not answer this question and does not set a deadline by which this annual obligation must be fulfilled. The Draft Act amending and supplementing the Protection against Discrimination Act provides for ‘by 31 January of each calendar year’.
Recruitment, Job Offers, and Salary Ranges
It is not mandatory for the range to be stated in writing, but it is strongly recommended, because this gives the employer a mechanism to prove that it has fulfilled its obligation to provide the information.
The Directive does not set a maximum width for the range to be indicated during the recruitment process. Nevertheless, the stated range should reflect the remuneration genuinely envisaged for the position and should be specific enough to fulfil the purpose of transparency.
Employers will not be entitled to request information from candidates about their remuneration with their current or previous employer. However, this does not preclude asking candidates about their expected remuneration.
The employer does not have access to this information and cannot request such a statement from the Employment Register on its own. Only the employee can request such a statement and specify exactly what information they want to be included. If the employee chooses to include remuneration information, this is not information requested by the employer, but rather the employee’s personal decision.
The requirement is not to ask candidates about their current or previous pay, but there is no obstacle or prohibition against asking them about their remuneration expectations.
The starting remuneration or its range may be omitted from the job advertisement and communicated in another way, provided this happens before the job interview, not during it, in order to ensure transparency in the negotiations. For example, if the employer shortlists 10 candidates it wishes to interview, it may invite them in writing to an interview on a specific date and time and, at the same time, provide information on the starting remuneration or its range.
The Directive does not provide this level of detail, but the Draft Act amending and supplementing the Protection against Discrimination Act refers to base salary.
Equal Work, Work of Equal Value, and Comparison Criteria according to the Pay Transparency Directive
The same work should be assessed comprehensively, not only on the basis of a job description or code under the National Classification of Occupations and Positions. The classification code may serve as a starting point, but the decisive factors are the job functions actually performed, the responsibilities, complexity and degree of independence. Employees with the same classification code may perform work that differs in substance. For example, an accountant who mainly records invoices and an accountant who participates in audits and inspections, prepares opinions and carries broader responsibility may have different work content.
The comparison between employees in different positions, not only managers, should be carried out on the basis of objective and gender-neutral criteria. The Directive identifies four criteria: skills, effort, responsibility and working conditions. The employer may also define other relevant criteria such as workload, complexity of tasks, performance and others. The purpose of applying the criteria is to compare the value of the work, because the job functions are clearly different, and to determine which employees perform work of equal value and should therefore be paid equally.
The permissible difference in pay between employees performing the same work or work of equal value is below 5%. Where the difference is equal to or greater than 5%, it should either be objectively justified or corrected.
The value of work is determined on the basis of the criteria set out in the Directive: skills, effort, working conditions and responsibility. The employer may also define other appropriate criteria, provided they are objective and fair.
Yes. The ‘skills’ criterion may include education and/or qualifications.
Positions and codes under the National Classification of Occupations and Positions may only serve as a guide and starting point. Grouping into job families cannot be done solely on the basis of position and classification code. It is possible to have employees with the same position and code who perform completely different job functions.
The same work is performed by employees who have identical or very similar job functions. Work of equal value is performed by employees who have different job functions, for example an accountant and a gardener, but whose work has equal value for the employer. How do we measure the value of work? By applying objective and gender-neutral criteria that allow us to compare employees who perform entirely different activities.
Remuneration, all of its components and pay levels should be clearly defined in the so-called pay structures. In these structures, the employer specifies the criteria it uses to form remuneration for different positions, and employees have the right to access those criteria.
The employer may include any criteria it considers applicable and relevant to the specific company and business. The important point is that they must be objective, fair and neutral, not subjective. The assessment by the direct manager should also be based on an objective foundation and should have reference points on the basis of which the assessment is formed. If that assessment has no parameters by which it is formed, there is a risk that it may breach the requirement for objectivity.
Locations, Flat Structures, and Specific Internal Models
It is entirely possible for employees working in different regions of the country to receive different remuneration, provided there are objective reasons for this. However, factors such as location, for example, cannot in themselves be a sufficiently valid reason for such a difference. Rather, factors such as workload, working conditions, responsibility and similar criteria should be considered. For example, a grocery store in Sofia, especially in a more central area, may have a much higher daily customer flow than a grocery store in a smaller town. Objectively, the workload and volume of work are higher in the Sofia store.
Regardless of the company’s structure, it is important to have detailed, clear, practically applicable and effective pay systems or pay structures that set out the rules and criteria for formulating and paying all elements of remuneration. Creating more job titles does not guarantee compliance with the principle of equal treatment, because equal pay is due not only for the same work, but also for work of equal value, meaning work performed by employees with different job functions whose work has equal value for the employer.
Yes, it will.
I assume this question refers to reporting. If the Bulgarian entity has fewer than 100 employees, the reporting obligation will most likely not apply. All other obligations and requirements under the Directive will also apply to companies with fewer than 100 employees.
The report is prepared at company level. The Directive does not identify location or site as a separate component or field.
Information on average pay level is provided for the relevant category of employees to which the requesting person belongs. In other words, it depends on how the employer has defined the categories of employees within the company. If the employer has determined that a given category includes employees from different cities, it should be possible to request information for that category, regardless of location.
Pay Components, Seniority Allowance, Bonuses, and Benefits based on the Pay Transparency Directive
All differences in remuneration should be capable of objective and neutral justification; otherwise they will be reflected and visible in the reports submitted to the institutions. In other words, if there is a difference in base salaries and more experienced specialists receive lower remuneration, this must be objectively justified. This is particularly relevant because the Bulgarian Labour Code requires remuneration to be determined as base salary, not as gross salary.
The concept of ‘pay’ under the Directive is multi-component and quite broad. Pay should be understood as remuneration itself, as well as all additional payments, whether in cash or in kind.
Yes, this is a relatively clear component of remuneration, which is due by operation of law.
Reporting is expected to include both values as separate components: pay differences, meaning differences in average pay levels, and median pay differences.
A ‘quartile segment from the perspective of pay’ means each of the four equal groups into which employees are divided according to their pay levels, from the lowest to the highest. In simpler terms, a quartile segment means a group. The employer divides employees into four groups based on remuneration: for example, the first group includes employees in the lowest pay range, such as between EUR 1,000 and EUR 1,500, while the fourth group includes those in the highest range, for example between EUR 2,500 and EUR 3,000.
Information Rights, GDPR, and Confidentiality
The application of the Directive’s requirements does not exclude the obligation to process personal data in accordance with the GDPR / Regulation (EU) 2016/679. We expect the transposition of the Directive to provide a specific mechanism enabling employers to respond in situations where there is a risk of disclosing personal data, including the individual remuneration of one or more employees.
The Directive generally refers to a ‘reasonable time’, with some obligations having a fixed deadline and others not. For example, where an employee requests written information on their individual or average pay level, the employer’s deadline is 2 months.
Yes.
Reporting, Workforce Headcount, and Data
Reporting will be made to the institutions assigned with these functions, most likely the Commission for Protection against Discrimination.
Information on the average pay level is provided in relation to the relevant category of employees to which the employee making the request belongs. In other words, the employer should determine the category to which the requesting employee belongs and provide data on the average pay level for that specific category of employees.
Reporting will most likely be carried out at national level.
The reports will contain the established components. Justification will become relevant if the results of those reports show that there is a difference of at least 5% or more.
Differences Above 5%, Corrections, Claims, and Sanctions according to the Pay Transparency Directive
Where pay differences of at least 5% or more exist and are not objectively justified, the employer should take corrective action.
The Directive provides for the possibility of compensation being paid to employees whose right to equal pay has been breached, and there should be no maximum cap on such compensation. It also provides for sanctions against employers, which may include fines based on gross annual turnover or on the total payroll.
If differences of at least 5% or more are identified, the employer has two options: either to explain and justify them objectively or to correct them. The Directive provides that the correction period is 6 months, after which a joint pay assessment with employee representatives is triggered.
This text is for informational purposes only and does not constitute legal advice. For additional questions or enquiries regarding the Pay Transparency Directive, please contact us!
