Implementation of the Pay Transparency Directive – An update

The EU’s new Pay Transparency Directive, which shall be incorporated into Swedish law by June 2026, requires increased transparency in pay setting and introduces new reporting obligations for larger employers. Although the legislative process is still ongoing, it is high time for employers to start preparing.

The EU’s new Pay Transparency Directive was adopted in 2023 and shall be implemented in Swedish legislation by June 2026. The purpose of the directive is to strengthen the application of the principle of equal pay for women and men for equal work or work of equal value. According to the directive, this is to be achieved through, among other things, increased transparency in pay setting for both job applicants and employees. Employers with at least 100 employees must also report data on pay differences between women and men according to certain key figures, which must be made public. If there are pay differences of five percent or more between women and men performing work that is considered equal or of equal value, the same employers must also explain how these differences can be objectively justified or how they can be remedied.

In May 2024, the “Inquiry on the Implementation of the Pay Transparency Directive” (SOU 2024:40) presented its proposal on how the directive should be incorporated into Swedish law. The inquiry proposes that the changes be implemented through a new chapter in the Discrimination Act, with planned entry into force on 1 June 2026, but with the pay reporting obligations taking effect at different times depending on the number of employees the employer has (for employers with 150 or more employees, the obligations must be fulfilled for the first time in 2027, and for employers with between 100 and 149 employees, the obligations must be fulfilled for the first time in 2031). The report has been circulated for referral and is now being processed by the Government Offices. This means that we can soon expect the government’s proposal. There is much to suggest that the central parts of the inquiry’s proposal will become reality, although some adjustments may be made during the continued legislative process.

We have previously reported on the Pay Transparency Directive and its implementation in Sweden here. The inquiry’s report can be read here. The Pay Transparency Directive can be read here.

Setterwalls’ comments

Since the fundamental requirements of the Pay Transparency Directive must be incorporated into Swedish law, it is wise to start preparing your organization now. We therefore recommend that employers:

• Allocate extra time and resources for the annual pay survey.
• Review current pay-setting processes and ensure that the pay policy is based on objective and gender-neutral criteria.
• Analyse pay ranges and identify whether there are groups performing equal or equivalent work where the pay gap between women and men exceeds five percent.
• Inform and train staff and managers about the new requirements, especially what they mean in recruitment processes.

Setterwalls is closely monitoring the legislative process and will provide a detailed review as soon as the government’s proposal has been presented.