Pay Equity Audit 2026: 6-Step Guide for Joint Pay Assessment
Practitioner note: This is not legal advice. For specific situations, consult a qualified attorney or compliance officer.
TL;DR
- EU Pay Transparency Directive 2023/970 implementation deadline: June 7, 2026
- Thresholds: 100+ employees report every 3 years; 250+ annually
- Joint Pay Assessment mandatory from a 5% unexplained pay gap
- 6-step audit: job evaluation → data extract → pay-gap calculation → explanation → measures → reporting
- Fine risk: €50,000 per violation (BMAS draft)
1. EU Pay Transparency and German Implementation
EU Pay Transparency Directive 2023/970 of May 10, 2023, in force since June 6, 2023; implementation deadline June 7, 2026. German implementation: BMAS draft 02/2026 (not yet adopted).
2. Thresholds 100/150/250
| Headcount | Reporting frequency | Mandatory content |
|---|---|---|
| 100–149 | every 3 years | Pay gap unadjusted + adjusted |
| 150–249 | every 2 years | + pay gap per pay band + bonus differential |
| 250+ | annually | + pay bands + median per pay band + Joint Pay Assessment from 5% gap |
3. 6-Step Audit
- Job Evaluation — classify all positions (Skill, Effort, Responsibility, Working Conditions)
- Data extract — payroll export per role, gender, experience
- Pay-gap calculation — unadjusted and adjusted
- Gap explanation — through objective factors (experience, performance, role)
- Measures — for unexplained gap: remediation plan
- Reporting — to authority and internally (anonymized)
4. Job Evaluation Methods
| Method | License | Effort | SME suitability |
|---|---|---|---|
| Hay Job Evaluation | commercial | high | 1,000+ employees |
| Mercer IPE | commercial | high | 500+ employees |
| Korn Ferry | commercial | high | 500+ employees |
| Custom scale (4 criteria × 5 levels) | free | medium | 100+ employees — recommended |
5. Joint Pay Assessment
Trigger: unexplained pay gap >5% in any pay band.
Procedure:
- Employer and employee representatives jointly
- Detailed root-cause analysis per affected group
- Action catalog with timeline
- Reporting to the supervisory authority
- Re-evaluation after 12 months
6. Pay Equity Dashboard
Recommended KPIs:
- Gender pay gap unadjusted
- Gender pay gap adjusted
- Pay gap per pay band
- Bonus differential
- Share of women in top-25% quartile
- Share of women in bottom-25% quartile
- Promotion rate per gender
Summary
The Pay Equity Audit is the central control for the EU Pay Transparency Directive 2023/970. Build it once on the custom 4×5 scale, automate the data extract, and the annual recurrence becomes a 2-day exercise rather than a 2-week project. Pair this with the practical method in our pay gap calculation guide.
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Frequently Asked Questions
When does the obligation begin?
No later than 07 June 2026 (EU transposition deadline). The DE-BMAS draft as of 02/2026 strongly retains threshold values.
Which threshold applies to my company?
100+ employees: pay gap reporting every 3 years. 150+: every 2 years. 250+: annually. From a 5% unexplained gap upward = Joint Pay Assessment obligation.
What is job evaluation?
Systematic assessment of tasks based on 4 criteria (skill, effort, responsibility, working conditions). Methods: Hay, Mercer IPE, Korn Ferry, or a proprietary scale.
What is 'work of equal value'?
Activities with comparable requirement profiles — even across different areas. EU C-624/19 Tesco: sales staff ≈ warehouse employees.
How is the pay gap calculated?
Unadjusted = overall median for men minus women. Adjusted = factoring in job evaluation, professional experience, performance. Both figures must be reported.
Fine risk?
DE-BMAS draft: up to EUR 50,000 per violation. The EU directive requires fines to be 'effective, proportionate, and dissuasive'.
Sources
- Directive (EU) 2023/970 — Pay Transparency (As of: 2026-05-02)
- EntgTranspG — Pay Transparency Act (DE) (As of: 2026-05-02)
- AGG — General Equal Treatment Act (Section 22) (as of: ongoing)