The Pay Transparency Act explained

Why pay transparency?

The idea behind the legislative proposal is actually quite simple: you can only address inequality once it is visible. As long as salaries remain a well-kept trade secret, an employee has barely any way of knowing whether he or she is being paid fairly compared to colleagues. And without that knowledge, a conversation about it is virtually impossible.

The legislative proposal obliges employers to be open about salary ranges, pay criteria and pay differences within the organisation. With that information, employees can raise differences and an open conversation about pay disparities can take place.

Measures

The legislative proposal introduces a comprehensive package of measures that together have a significant impact on how employers organise their remuneration policy.

Job evaluation

First of all, all employers – large and small – must have a job evaluation and classification system in place that guarantees equal pay for equal or equivalent work. Such a system makes transparent how work is valued, on what grounds positions are classified, and whether people doing comparable work are also paid comparably. This is the foundation of pay transparency.

Salary range

To promote transparency prior to employment, employers will be required to inform applicants, before salary negotiations begin, of the pay or salary range associated with the position. Often a candidate enters a job interview with no idea of what the position pays, while the employer naturally does know. This creates an unequal information position that fosters inequality and limits the negotiating position of applicants.

Salary history

The measure that in practice may have the greatest immediate effect concerns the prohibition on asking about a candidate's salary at their previous employer. Anyone who is consistently placed in a pay scale based on their previous salary carries a pay disadvantage from job to job. Women who at some point started at a lower salary – due to part-time work, a career break, or simply because they asked for less at the time – are thereby disadvantaged again and again.

Insight into pay criteria

In addition, employers must provide their employees with access to the criteria used to determine pay, pay levels and pay progression. Pay progression refers to the steps an employee can take to increase their pay, whether within a pay scale or towards a higher one. For employees, this is valuable information. It makes clear what they can expect and what they might do to advance. It also compels employers to actually formulate and document those criteria.

Reporting obligation

The core objective of the legislative proposal is to increase transparency on pay. To that end, an obligation is introduced for employers to report on pay differences, in the form of a pay report. This obligation applies to employers with at least one hundred employees. Those with between 100 and 250 employees must do so every three years. Those with more than 250 employees in service can count on an annual obligation. Small employers with fewer than 100 employees are exempt from the reporting obligation. This is a deliberate choice to limit the administrative burden on organisations with less capacity.

The report must provide employers and employees with insight into the pay differences within the organisation, thereby mapping out pay structures and policies. Where the report reveals pay differences that cannot be justified on the basis of objective and gender-neutral criteria, the employer must take measures to address those differences.

Role of the works council

The legislative proposal also actively involves employee representatives in the remuneration policy. At several points, involvement of the works council is required in policy and decision-making at company level. That is also logical: the works council has a variety of rights and powers, including the right to consultation, the right to information, and sometimes even a right of consent (see our earlier blog on this subject).

What does this mean in practice for employers?

The transparency measures in the legislative proposal have substantial consequences for employers and the obligations come with a significant administrative burden. Particularly for medium-sized and large employers, this means they will need to be better able to substantiate their pay structure, job grading and HR processes. It is advisable to take action now. Map out the job evaluation system, the salary structure and the remuneration criteria applied, and identify where unexplained pay gaps exist. By getting your house in order today, you avoid having to revise your entire remuneration policy under pressure once the new rules take effect.

Are you already prepared for the obligations that the new EU directive on pay transparency entails? On Thursday 1 October 2026, we will keep you informed at our Ploum Academy on pay transparency of the developments and obligations arising from this directive and the Dutch implementing legislation. We will also offer an insight into how you can put these obligations into practice. More information and registration for this Ploum Academy is available here.

For further questions about this new legislation or other employment law matters, our Employment Law team is ready to assist you. Do not hesitate to get in touch.