Pay Gap Calculation in 5 Steps: Adjusted vs. Unadjusted

Main article: Pay Equity Audit 2026 — the six-step guide to a pay equity audit under Art. 9 Directive (EU) 2023/970, with job evaluation and pay grade analysis.

Adjusted or unadjusted: what the two metrics do

Short answer: The unadjusted pay gap is the raw pay difference between women and men in the population under review — as a mean and as a median. The adjusted pay gap is the remainder left once objective factors have been taken out. What must be reported under Art. 9(1) Directive (EU) 2023/970 are the unadjusted figures; the adjustment is a voluntary additional analysis.

The difference is not a statistical detail; it determines how each figure is used. Art. 9(1)(c) Directive (EU) 2023/970 requires the median pay gap in addition to the mean gap under point (a) — not instead of it. Both figures belong side by side in the analysis, and both rest on unfiltered raw data.

The adjusted figure is needed elsewhere: Art. 10(1)(b) Directive (EU) 2023/970 removes the need for a joint pay assessment where the employer has justified the difference on the basis of objective, gender-neutral criteria. The regression supplies the material for exactly that justification. Practitioner recommendation: Run both metrics in parallel and record in writing which variables you have taken out — an adjusted figure without a documented list of variables cannot be followed as a justification.

1. Data extract from the payroll system

Short answer: The extract must be able to carry every later mandatory data point, otherwise the report cannot be produced from the data. Per employee: gender (binary for statistical purposes), gross annual salary, pay grade/position, professional experience, role, promotion date.

Three further fields follow from the reporting contents of Art. 9(1)(a) to (g) Directive (EU) 2023/970. First, the ordinary basic salary must be held separately from complementary or variable components, because the gap has to be shown for both. Second, each person needs a marker showing whether they receive complementary or variable components — the proportion of those employees is itself a mandatory data point. Third, allocation to the quartile pay bands needs a sorting variable. Anyone holding basic salary and bonus in a single field can no longer separate the gap for variable components later.

In data protection terms: the analysis and publication of individually identifiable pay data are to be assessed against Art. 6(1)(c) GDPR (legal obligation) in so far as they rest on a reporting duty. Gender-related pay data are not a special category of personal data — Art. 9(1) GDPR contains an exhaustive list (including racial or ethnic origin, political opinions, health data) and does not mention gender. The limitation follows instead from the principle of data minimisation under Art. 5(1)(c) GDPR. Practitioner recommendation: Extract only fields that carry either a mandatory data point or a justification variable, and work with personnel numbers rather than names from the extract onwards.

2. Job classification

Short answer: The classification determines which positions constitute 'equal work or work of equal value' — it is the reference point for every later metric. Your own scale with 4 criteria (skills, effort, responsibility, working conditions) × 5 levels. Score of 4-20 per position.

The four criteria have a counterpart in the text of the directive: Art. 4(4) Directive (EU) 2023/970 names skills, effort, responsibility and working conditions as criteria for assessing the value of work. The five-level scale and the score range of 4 to 20, by contrast, are this article's practical design, not a requirement of the directive. Under Art. 4(1), Member States ensure that employers have pay structures ensuring equal pay for equal work or work of equal value; under Art. 6(1), the criteria for pay determination, pay levels and pay progression must be objective and gender-neutral — and they must be made available proactively, that is, without anyone having to request them (for private employers the same applies here: the obligations arise only with the national transposing law, see below). Practitioner recommendation: Group the scores into bands (for example 4–7, 8–11, 12–16, 17–20) and treat each band as a category of workers within the meaning of Art. 9(1) Directive (EU) 2023/970; the band width is this article's practical design, and it must be fixed and documented before the analysis.

The national basis differs. In Germany, § 3 of the German Pay Transparency Act (EntgTranspG) prohibits direct and indirect pay discrimination on grounds of gender in respect of all pay components, and § 7 EntgTranspG lays down the equal pay requirement. In Austria, § 11 GlBG requires that company classification rules and norms of collective agreements observe the principle of equal pay in their remuneration criteria and do not prescribe criteria leading to discrimination; § 3 no. 2 GlBG covers the setting of pay itself. Practitioner recommendation: Evaluate the positions before you place the salaries next to them — an evaluation that only emerges after the figures have been seen is hard to defend to the workers' representatives.

3. Median calculation per gender

Short answer: The median is the reporting figure under Art. 9(1)(c) Directive (EU) 2023/970; in practice you calculate it additionally per gender and per comparator group, not just for the company as a whole. Excel: pivot table with a gender filter plus a median formula. Difference in absolute and relative terms.

Alongside the overall figure, Art. 9(1) Directive (EU) 2023/970 requires the gap for categories of workers — that is, for groups of employees doing equal work or work of equal value — as well as the proportion of female and male workers in each quartile pay band. For the quartiles, sort all employees by pay level and divide the list into four equally sized groups; what has to be shown per quartile is the proportion of female and male workers. The groups come from step 2, the quartiles from the same sorting. Practitioner recommendation: Fix and document, before the analysis, which reference base the percentage relates to — which reference base the report itself requires will only follow from the reporting template in the national transposing law (transposition status see below).

Group size is the point at which the analysis can tip over in data protection terms: the smaller a comparator group, the more easily the pay of individual employees can be reverse-engineered from a gender-disaggregated average. Art. 12(3) Directive (EU) 2023/970 additionally allows Member States to provide that only workers' representatives, the labour inspectorate or the equality body are given access where disclosure would otherwise directly or indirectly reveal the pay of an identifiable worker. Practitioner recommendation: combine very small comparator groups in the report or do not show them separately, and set and justify the minimum group size chosen internally. As to evidential value: the median is the reporting figure — for the presumption of discrimination, a pairwise comparison already suffices under Federal Labour Court (BAG) 8 AZR 300/24 (details in the FAQ at the end).

4. Adjustment

Short answer: The adjustment is not a reporting duty but the preparation of the justification under Art. 10(1)(b) Directive (EU) 2023/970. Multiple regression (Excel data analysis or Python pandas): experience, role, pay grade as variables. Adjusted pay gap = the unexplained remainder.

The choice of method is free — regression techniques and software are practitioner knowledge, not a statutory requirement. What is binding, by contrast, is what qualifies as an explanatory factor: it must be objective, gender-neutral criteria (Art. 10(1)(b)), and it should be the same criteria you make available anyway under Art. 6(1) Directive (EU) 2023/970 for pay determination, pay levels and pay progression. What does and does not qualify as an explanatory factor — negotiating skill, for instance — is listed in the FAQ at the end.

The unexplained remainder is at the same time the issue to be proved. Art. 18 Directive (EU) 2023/970 provides for a reversal of the burden of proof; in Germany, § 22 AGG already applies: anyone who proves facts from which discrimination on a ground listed in § 1 AGG may be presumed shifts the burden of proof to the other side. In Austria, prima facie evidence suffices under § 12(12) GlBG (gender) or § 26(12) GlBG (other grounds); the respondent must then prove that, weighing all the circumstances, another motive was more probable or that a ground of justification exists. Practitioner recommendation: Record for each comparator group which variable explains which part of the difference — the remaining balance is the figure you will have to justify in a dispute.

5. Reporting + measures

Short answer: Under the directive, the pay report goes to the competent national authority, which publishes aggregated data — the individual data are not public. Which body this is in Germany and Austria will only be set by the respective transposing act; on the legal position reviewed here (as at 17 August 2026) that transposing law was still outstanding in both countries — check the addressee and the reporting format before the first report. Which measure follows depends on the size of the gap.

Where the gap is 5 % or more: a joint pay assessment under Art. 10 Directive (EU) 2023/970 — conditions in the following paragraph. Where the gap is 2 % to below 5 %: an action plan. Where the gap is below 2 %: documentation plus annual re-reporting.

Art. 10(1) Directive (EU) 2023/970 ties the joint pay assessment to three cumulative conditions and affects only employers subject to the reporting duties under Art. 9: a difference in average pay level of at least 5 per cent in a category of workers (point (a) — the threshold is met at exactly 5 per cent, not only above it), no justification on the basis of objective, gender-neutral criteria (point (b)), and no remedy within six months of the date of the pay reporting (point (c)). It is carried out together with the workers' representatives; its content comprises the analysis of the causes of the gap, an action plan and tracking of implementation, and the result is made known within the organisation.

The tiers below 5 per cent — an action plan from 2 per cent, documentation and annual repetition of the analysis below that — are this article's practical categorisation; the statutory reporting rhythm follows solely the staggering in Art. 9 (annually from 250 employees, otherwise every 3 years). The trigger for the joint pay assessment is the 5 per cent threshold in Art. 10(1)(a).

Who has to report and when — thresholds, first report, rhythm

Short answer: The reporting duty scales with headcount — annually from 250, every three years for 150 to 249 and for 100 to 149, and below 100 the directive provides for no reporting duty. All rows of the table reflect the directive's reporting staggering and contain no practitioner recommendations; for private employers these obligations arise only with the national transposing act.

Which counting method determines the threshold (headcount or full-time equivalents, reference date or average, treatment of part-time work, agency work and subsidiaries) will only be specified by the national transposing law. Practitioner recommendation: Clarify the threshold before the analysis and, for establishments close to the threshold, document both counting methods.

Irrespective of the threshold, further obligations under the directive apply to all employers: informing job applicants of the initial pay or its range (Art. 5(1) — to be provided, among other ways, in the published job advertisement, before the interview or otherwise), the ban on asking about pay history (Art. 5(2)), gender-neutral job advertisements and job titles (Art. 5(3)), employees' right to information with a reply within two months (Art. 7(1) and (4)), and gender-neutral job evaluation (Art. 4).

Germany and Austria: different bases, the same schedule

Short answer: The directive applies equally in both countries; until it is transposed nationally, however, different laws apply — in Germany the EntgTranspG and the AGG, in Austria the GlBG. The table names the national legal bases that apply until then and contains no practitioner recommendations.

The transposition deadline in Art. 34(1) Directive (EU) 2023/970 expired on 7 June 2026. For private employers, the expiry of the deadline changes nothing for the time being: under Art. 288(3) TFEU, a directive is binding only on the Member States to which it is addressed, and leaves to them the choice of form and methods. Where transposition fails to happen, the directive may at most have direct effect against the State and State bodies after the deadline has expired; between private employers and employees it has no direct effect (CJEU, judgment of 14 July 1994 — C-91/92 Faccini Dori). Interpretation of the applicable law in conformity with the directive remains possible.

On the transposition status: as at 17 August 2026, a German act transposing Directive (EU) 2023/970 did not exist even as a ministerial draft — according to the Federal Government's reply of 8 July 2026 (BT-Drs. 21/7026), the lead Federal Ministry for Education, Family Affairs, Senior Citizens, Women and Youth is still clarifying individual questions, after which the legislative procedure is to be initiated; the EUR-Lex transposition database shows zero transposition measures for Germany. In Austria, neither a ministerial draft nor a government bill existed at federal level; the 2026 GlBG consultation draft concerns equal treatment in goods and services, not pay transparency. Check the status again before you plan.