The landscape is shifting. In May 2023, the European Union adopted the Directive 2023/970, an ambitious text intended to strengthen pay equality between men and women through a lever that has been hitherto underused: transparency. The goal is clear : equip employees with the tools to identify and challenge pay disparities. For Luxembourgish businesses, this directive marks a turning point. At the time of writing, the Luxembourgish bill transposing this directive has not yet been tabled. This should in no way be seen as an invitation to wait, however. Quite the contrary, it is now that employers must begin to prepare.
How will this directive influence pay management?
Although pay equality has been enshrined in legislation for decades, it remains an unfulfilled promise in practice. Pay gaps persist – not necessarily due to deliberate discrimination, but often due to the absence of clear rules, ingrained habits, or a lack of transparency.
The directive introduces a fundamental innovation: It makes transparency a tool of social justice. The idea is simple but powerful: Only what is made visible can be corrected. The directive aims to defuse structural inequalities by requiring employers to objectify, document and communicate certain aspects of their pay policies.
While Luxembourg has not yet tabled its draft transposition legislation, there is no doubt that the directive will be incorporated into national law. True to its tradition of promptly transposing European law, the Grand Duchy will have to comply within the set deadlines – by June 2026 at the latest.
This gives businesses a little time… but not as much as it may seem. For beyond the technical aspects, a complete shift in how remuneration is conceptualised and managed is at stake. Job classification, objectifying pay criteria, producing gender-disaggregated data, establishing procedures for information requests – none of this can be improvised.
The cornerstone: equal pay for equal work of equal value
At the heart of the directive lies a fundamental principle: the right to equal pay for work of equal value. But how can two different positions be objectively compared without resorting to rough approximations?
The challenge, therefore, is to be able to compare equivalent jobs, even when their titles differ, and to base remuneration levels on rational and transparent elements.
Any pay policy will henceforth have to be based on an objective and non-gendered evaluation of positions, based on four key criteria mandated by the directive. Other criteria may also be used by the employer, provided they are measurable and relevant.
1. Skills
This is not just about degrees or job titles. It also encompasses know-how, expertise, level of autonomy, interpersonal skills, and any specific certifications or authorisations. This criterion recognises the technical, intellectual, or relational demands specific to each position.
2. Efforts
The physical, mental, or emotional efforts required are taken into account here: lifting loads, sustained concentration, managing conflicts, or the emotional strain associated with certain professional situations. It brings attention to forms of effort that are often invisible but very real.
3. Responsibilities
This is not limited to hierarchical supervision. It also covers financial, legal, and organisational responsibility, as well as the direct impact on the company’s strategy or reputation.
4. Working conditions
Work location, environment (noise, heat, risk factors), irregular hours, and frequency of travel must all be considered to assess objectively the conditions in which a job is performed.
When combined and applied without gender bias, these four criteria provide a sound basis for comparing the value of jobs — even across very different professions.
For employers, this classification of jobs is a crucial step: it serves as the starting point for identifying any inequalities and addressing them in a structured way. It requires deep reflection on existing jobs, their evaluation, and their positioning within the organisation. This will likely call for a revamp or update of internal classification systems — whether HR documents, pay grids, or internal policies.
According to the directive, the Member States must ensure that analytical tools and methods are made available and easily accessible to support and guide job evaluation and comparison.
Transparency before hiring… but not only!
Another key feature of the directive is that transparency must begin at the recruitment stage.
Employers will consequently be required to:
- communicate clearly the level or range of pay in job advertisements or prior to the interview,
- refrain from asking candidates questions about their previous salary.
This requirement is intended to prevent pay disparities from the moment an employee joins the company, and to break with practices that consist of basing salary offers on previous earnings — a practice that tends to perpetuate historical inequalities.
But such transparency must not stop at hiring. It should continue throughout the employee’s career. Employers will therefore be required to apprise employees of the criteria used to determine starting salaries, the salary ranges for each position or category, and the criteria for salary progression.
The progression criteria must be objective, non-discriminatory, and easy to understand. They may include in particular individual or collective performance, the acquisition or enhancement of skills, or seniority.
Inform, publish, justify: the new responsibilities of companies
The European directive does not stop at guaranteeing equal pay for work of equal value – a principle based on the objective assessment of jobs. It also imposes a series of concrete obligations on employers regarding information and publication. These two pillars are inseparable: on the one hand, structural transparency, which relies on clear criteria for job evaluation; on the other, operational transparency, which requires companies to communicate actively with their employees and to publish key data on their pay practices.
1. Respond to pay information requests
Any employee may request information, directly or through staff representatives or the Centre for Equal Treatment (CET) about average pay levels, broken down by gender, for jobs comparable to their own. This is not about pointing fingers at colleagues, but about understanding one’s position and the reasons behind it. The company will have two months to respond. If the data provided are vague or incomplete, the employee can request further clarification, and the employer must respond within a reasonable timeframe.
2. Inform employees proactively
The company must remind all employees of their rights regarding pay transparency every year. This will entail a duty to communicate proactively using accessible and traceable means (such as HR newsletters, payslips, digital noticeboards, etc).
3. Publish key indicators – Starting at 100 employees
Companies with more than 100 employees will be required to publish a set of detailed data regularly so as to make pay practices more transparent and to measure gender-based pay gaps.
These data must be accessible to employees, their representatives, the relevant authorities, and potentially to the general public if the company opts to publish it on its website, for instance.
The Member States may also centralise this information through administrative databases.
Indicators to be published include in particular:
- The average and median pay gap between men and women.
- These same gaps, but limited to the variable or supplementary components of the pay package.
- The proportion of men and women who receive these types of variable components.
- The distribution of women and men across each pay quartile (from lowest to highest), i.e. by dividing the workforce into four equal groups based on salary level.
- The pay gap between men and women by job category, including details on both base salary and supplementary elements.
The implementation timeline is gradual: As of 7 June 2027, companies with 250 or more employees must publish these data annually. Companies with 150 to 249 employees must comply every three years, starting as of the same date. For companies with 100 to 149 employees, the obligation will come into force in 2031, also with a three-year reporting cycle. For those with fewer than 100 employees, Luxembourg may decide whether they will be subject to these obligations.
| Companies | Starting from | Périodicité |
|---|---|---|
| < 100 employees | No obligation provided for in the directive | |
| From 100 to 149 employees | 2031 | Every 3 years |
| From 150 to 249 employees | June 2027 | Every 3 years |
| > 250 employees | June 2027 | Every year |
This level of transparency contributes to enhancing a company’s reputation in terms of social responsibility. It is fully in line with the growing focus on ESG (Environmental, Social, Governance) standards, which Luxembourgish companies are increasingly expected to meet.
4. Implement a joint assessment in case of unjustified gaps
If an unjustified pay gap of 5% or more is identified in a given category, the employer must initiate a joint assessment with staff representatives. Together, they will analyse the causes of the imbalance, identify possible corrective actions, and draw up a remediation plan. This process must be documented, traceable, and made available to the Labour Inspectorate and CET, though it does not necessarily need to be made public.
Thus, introduced by the directive, this mechanism is designed to hold employers accountable, and to encourage proactive measures rather than reactive responses prompted by legal disputes.
And what if the employer fails to comply?
The directive provides a powerful enforcement tool: the reversal of the burden of proof. In the event of a dispute, if the employer cannot demonstrate that it has fulfilled its obligations regarding transparency and the justification of pay gaps, it will be up to the employer (not the employee) to prove that no discrimination has taken place.
National law must provide for effective, proportionate, and dissuasive sanctions, as required by the European legislation. We can therefore expect the forthcoming Luxembourg bill to strengthen the powers of the Labour Inspectorate and to define clear avenues for employee redress.
An opportunity rather than a constraint
This directive calls for a cultural shift. For companies, it presents an organisational challenge, but also a strategic opportunity: to clarify practices, strengthen internal trust, meet societal expectations, and enhance employer branding.
To prepare, it’s best to start now to:
- map out positions using the directive’s four key criteria,
- objectify pay and progression criteria,
- train HR teams on the new requirements,
- chart a coherent HR communication strategy.
Even though the Luxembourgish transposing legislation is not yet in place, the forthcoming EU obligations are clear and will require significant adjustments to HR practices. Anticipating today means ensuring compliance tomorrow, but also and even more so, it signals a modern, responsible, and committed approach to human resource management.
