What does the principle of ‘equal pay for equal work’ mean?

he principle that all forms of discrimination are harmful and prohibited has been recognized for a very long time. Numerous human rights instruments had already enshrined the principle of gender equality by the 1970s, including the principle that equal pay must be provided for equal work. However, although progress had been evident in earlier years, it stalled around ten years ago, and since then the gap between the average pay levels of men and women in the EU has not decreased significantly. For this reason, the European Parliament and the Council have gone beyond merely reaffirming the principle and have introduced concrete measures. One of the key objectives is to ensure pay transparency and to equip employees with effective tools to enforce this principle. In addition, it is essential to define clearly what the principle of “equal pay for equal work” means in practice.

The objective of the Pay Transparency Directive is to put the principle of equal pay for equal work, or work of equal value, into practice.

The EU Pay Transparency Directive adopted in 2023 (Directive (EU) 2023/970 of the European Parliament and of the Council on strengthening the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms) aims to clarify key concepts, enhance transparency, and provide employees with the tools needed to enforce their rights. The objective of the Directive is to ensure that employers establish pay structures that guarantee equal pay for equal work or work of equal value for employees in both the public and private sectors.The Directive sets out minimum requirements that Member States must transpose into their national legislation by 7 June 2026.

Preparation is particularly challenging for Hungarian companies, as the Hungarian implementing legislation has not yet been drafted and could potentially be more stringent—that is, more favourable to employees—than the Directive itself. To date, no draft legislation has been published, and no formal consultations have commenced. As a result, companies can prepare for the expected obligations only on the basis of the Directive and EU court rulings concerning gender-based pay discrimination. These judgments provide robust methodologies for comparing the value of different and unrelated job roles.

Different Job Roles – Work of Equal Value

While it is relatively easy to require that the same pay and criteria be applied to employees in identical positions, the concept of “work of equal value” raises a more complex question: how should two different job roles be compared? For example, how can the pay of a sales assistant (a role typically performed by women) be assessed and compared with that of a warehouse worker (a role typically performed by men)?

A key requirement is that the value of work performed in different positions can be assessed objectively and in a gender-neutral manner, thereby enabling the creation of categories that are independent of specific positions or job roles. Assessment criteria may include the level of education, professional knowledge, skills, and training required to perform the work, the effort involved, the degree of responsibility borne by the employee, and the working conditions. Human skills required to perform the work must not be underestimated. The essence of the comparison method is that these criteria are scored and weighted for each job role, and the resulting total scores are then compared.

Based on this assessment, employee categories must be established in which remuneration is equal. These categories do not correspond to specific job titles or positions; rather, jobs of equal value—even where they are entirely different roles, such as warehouse worker and sales assistant—are grouped within the same category. The categories are defined by the employer in cooperation with employee representatives. Their creation must not be arbitrary; even roles that the employer may initially or subjectively regard as having a higher value must be assessed and classified objectively.

It is very important to emphasize this point, as there are many misconceptions about it: differences in pay between women and men may be justified and are not automatically prohibited. There is no requirement for all employees within the same category to earn exactly the same amount. If, based on objective and gender-neutral criteria, an employee demonstrably performs at a higher level—for example, by processing significantly more data within a given period than a colleague—this may justify higher remuneration.

Transparency prior to employment (irrespective of the number of employees):

A common misconception is that the requirements of the Pay Transparency Directive apply only to large companies. In reality, certain obligations may also affect even very small businesses. For instance, job applicants must be entitled to receive information from the prospective employer on the initial remuneration or its range for a given position, determined on the basis of objective and gender-neutral criteria. Although this information does not have to be included in the job advertisement itself, candidates must be informed in a way that ensures transparent and well-informed pay negotiations.

Transparency during employment (irrespective of company size / optional simplified regime for companies with fewer than 50 employees):

The Directive allows Member States to exempt companies with fewer than 50 employees from the obligations relating to transparency in pay setting and pay progression; however, in principle, these requirements may also apply regardless of company size. Employers are required to make easily accessible to their employees information on the criteria used to determine remuneration, pay levels, and pay progression. These criteria must be objective and gender-neutral.

However, in the case of the right to information, the Directive does not provide for any exemptions based on company size; this requirement must be complied with by all employers. Accordingly, employees have the right to request and receive information about their individual pay level and about average pay levels broken down by gender within their own category. Furthermore, employees must not be restricted from disclosing their own salary.

Reporting obligations (for companies with more than 100 employees):

Companies employing more than 100 employees—although Member States may extend this obligation to smaller employers as well—will be required to prepare reports containing the following data:

• the gender pay gap;
• the gender pay gap in relation to supplementary or variable components of remuneration;
• the median gender pay gap;
• the median gender pay gap in relation to supplementary or variable components of remuneration;
• the proportion of female and male employees receiving supplementary or variable components as part of their remuneration;
• the proportion of female and male employees within each pay quartile;
• the gender pay gap by employee category, broken down by ordinary basic pay and by supplementary or variable components of remuneration.

Companies with more than 150 employees must submit reports every three years starting in 2027. Companies with more than 250 employees must report annually from 2027. Companies with 100–150 employees will submit their first report in 2031 and thereafter every three years. Reports must always relate to the preceding year; accordingly, companies with more than 150 employees will be required to prepare their first report for the year 2026.

Joint pay assessment (companies with more than 100 employees) – in cooperation with employee representatives:

If the pay report shows that, in any category, the difference between the average pay levels of female and male employees exceeds 5%, and the employer is unable to justify this on the basis of objective and gender-neutral criteria, and if the employer does not remedy the unjustified difference within six months of submitting the pay report, a joint pay assessment must be carried out with employee representatives.

It is very important to emphasize—given the many misunderstandings on this point—that differences in pay between women and men may exist. It is by no means required that everyone within a category actually earns the same amount. If an employee objectively performs at a higher level based on gender-neutral criteria—for example by processing significantly more data within a given period than a colleague—this may justify higher remuneration.

The pay assessment must address, among other things, the analysis of the proportion of female and male employees in each employee category, the reasons for differences in average pay levels, measures to address pay disparities, and a review of the effectiveness of measures taken following previous joint pay assessments. In addition to preparing the assessment, unjustified pay differences must be eliminated within a reasonable period of time.

Legal consequences

Although the establishment of sanctions for pay inequalities is the responsibility of the Member States and the specific penalties are therefore not yet known, such sanctions are expected to be effective, proportionate, and dissuasive. However, potentially more significant than any future sanctions is the fact that employees are entitled to compensation. This means that, within the applicable limitation period—i.e. retroactively for up to three years—employees must be placed in the position they would have been in had they not been subjected to gender-based discrimination or had their rights and obligations relating to the principle of equal pay not been infringed. No upper limit may be imposed on such compensation. In practice, this means that an employee may receive the pay difference retroactively for a period of up to three years. Moreover, the burden of proof rests with the employer, who must demonstrate that neither direct nor indirect discrimination occurred in relation to remuneration.

LeitnerLaw and LeitnerLeitner’s World of Work Business Unit approach employment matters from a holistic perspective, providing comprehensive solutions across organisational, legal, remuneration, and tax-related areas.

If you wish to reliably address legal, administrative, tax, payroll, organisational and integration issues related to international mobility; align your parent company’s practices with local legal requirements; harmonise the culture of your workforce with international expectations; introduce atypical forms of employment; ensure that the employment arrangements you apply do not entail hidden tax risks; and, last but not least, develop a gender-neutral remuneration system, the advisors of our World of Work Business Unit will be pleased to assist you.

We work closely with LeitnerLeitner consultants Dr Nóra Rácz and Diána Elek.

In summary, although the Hungarian implementing legislation is not yet available, it is already advisable to review the company’s organisational structure and existing remuneration system in light of the general requirements of the Directive. Employee categories and the corresponding pay levels should be developed and defined without delay. This will help avoid having to implement these changes under time pressure once the Hungarian legislation is enacted. Demonstrating that remuneration has been established on the basis of objective and gender-neutral criteria is only possible if the employee categories have been carefully designed and thoroughly assessed. Moreover, as a significant number of companies will be required to report next year on this year’s remuneration data, they should already ensure that employees are remunerated in a manner that complies with the expected requirements. For this reason, work on organisational development and legal compliance should begin now.