The era of wage transparency is approaching

Dr. Gergely Torma

Directive 2023/970/EU (the “Directive”) aims to ensure equal pay for equal work between women and men, and to ensure this through transparent and enforceable rules. Hungary has not yet transposed the Directive, so several detailed rules are uncertain, but the deadlines are tight: most obligations will apply from 7 June 2026, and wage reporting obligations will start from 2027, or in the case of some employers – depending on the number of employees – from 2031. Those who prepare in time will gain a competitive advantage: a clearer wage structure, lower risk of legal disputes, etc. Those who delay may not only face fines, but also litigation and reputational risks.

Legal background

The Directive sets minimum requirements for all Member States and all employers, and some of its rules also apply to job applicants. It is an essential requirement that employers establish a wage structure that ensures equal pay for equal work or work of equal value. The concept of ‘pay structure’ is not defined in the Directive itself, so the details are decided at national/Member State level. The structure must allow for comparison of jobs on the basis of non-neutral, objective criteria, in particular skills, effort, responsibility and working conditions. These criteria must be applied consistently in all cases, excluding direct and indirect discrimination based on sex.

The Directive specifically provides for the protection and information of job applicants. Applicants have the right to know the objective, non-neutral selection and pay criteria for the position in question, as well as the relevant parts of the collective agreement applicable to the employer, if any. The starting salary or its range must be disclosed before the job interview, or, failing that, before the conclusion of the contract at the latest, in order to ensure that salary negotiations are transparent and well-founded. The employer may not ask about the applicant’s current or previous salary and is obliged to use non-neutral language in advertisements and job descriptions, while the entire recruitment process must be carried out without discrimination.

“Remuneration” according to the Directive includes the normal basic or minimum wage and any other benefit related to the employment relationship, whether directly or indirectly, in cash or in kind. The wage level is the gross annual wage and the corresponding gross hourly wage. The concept of “salary/wages” is not defined in the Directive, so this will be clarified by Member State law. Based on current informal indications, a narrower approach linked to the consideration of work is expected to prevail in Hungary, which, in addition to the basic wage, also takes into account work-related supplements, variable elements and benefits in kind.

Employers are obliged to make the criteria for wage setting and wage increases easily accessible to employees. The Member State may decide to exempt employers with fewer than 50 employees from this obligation. It is not yet known whether there will be a formal disclosure requirement in Hungary, but it is likely that contractual clauses requiring wage confidentiality will not be applicable after transposition. It is also not known whether any different regulation regarding wage confidentiality can be maintained for employees in managerial positions.

Access to individual wage information will be an important aspect: upon the employee’s request, the employee’s own wage level must be sent in writing within two months, as well as the average wages broken down by gender in the categories of employees who hold the same or equivalent job.

The wage reporting obligation is detailed and measures the actual situation from several perspectives. Among other things, the gender pay gap and its median must be reported, separately for additional or variable benefit elements, etc. The deadlines depend on the number of employees: annually from 7 June 2027 for over 250 employees, every three years from 2027 for 150–249 employees, every three years from 2031 for 100–149 employees; for under 100 employees, the report is voluntary, but the Member State may make it more stringent. The report must be submitted to a designated domestic body that will oversee the implementation; in Hungary, it is not yet known which authority this will be.

If the report shows a difference of at least 5 percent between the average gender wages in any employee category, and this cannot be justified by objective, non-neutral criteria, and the employer has not provided medical