Executive hands a document across the table during a salary discussion in a job interview
Posted on by Thimon Radtke

Pay Transparency Directive in recruiting

Pay Transparency Directive in recruiting

"What are you earning at the moment?" Hardly any question comes up as naturally in conversations with executives. The EU Pay Transparency Directive prohibits it, and Germany let the deadline for transposing it into national law pass on 7 June 2026. For employers, this creates an uncomfortable interim period.

In short: There is no German implementing law yet. Private employers are formally still subject to the Pay Transparency Act (Entgelttransparenzgesetz) of 2017. However, the directive will entitle applicants to know the starting salary or a salary range, and it prohibits asking about their previous pay. Anyone filling leadership positions should adjust their selection process now.

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What has actually applied since 7 June 2026?

Directive (EU) 2023/970 has been in force since June 2023. Under Article 34, member states were required to adapt their rules by 7 June 2026. Germany did not manage this. A cabinet discussion was initially planned for 24 June 2026 but, according to Personalwirtschaft, was postponed to August. In July, the federal government replied to a parliamentary question that the Federal Ministry for Family Affairs had prepared a draft bill and was still clarifying individual points. Only after that would the legislative process begin (heute im bundestag, 16 July 2026). Up to our editorial deadline at the end of September 2026, we found no draft approved by the cabinet.

Because dates in the debate constantly get mixed up, it is worth separating three levels:

  • Deadline for the legislator: 7 June 2026. It has expired. This concerns the state in the first instance, not your company.
  • Obligations for private employers: In principle, these only arise once the German implementing law is in place. Until then, the Pay Transparency Act of 2017 applies, with its right to information in companies with more than 200 employees. However, courts must interpret existing law in line with the directive; more on this in the next section.
  • Gender pay gap reporting: The directive staggers this obligation by company size. Employers with 250 or more employees report for the first time by 7 June 2027 and annually thereafter. Those with 150 to 249 employees also report by 7 June 2027, then every three years. For 100 to 149 employees, the first deadline is 7 June 2031. It is not yet certain whether the German legislator will adopt these dates unchanged.

For personnel selection, the middle level is the most interesting. The directive's rules on recruiting are worded so clearly that there is little room for a different implementation.

What the directive requires in recruiting

Article 5 governs "pay transparency prior to employment". It explicitly applies to job applicants, in other words to people who do not yet work for you. The following requirements are relevant to your selection process:

  • Applicants are entitled to information about the starting salary or its range, based on objective, gender-neutral criteria, and where applicable about the collective agreement that applies. The directive names the job advertisement, the time before the interview or "otherwise" as possible channels.
  • The employer may not ask applicants about their pay history in current or previous employment. According to Recital 33, the employer should also not actively seek this information by other means.
  • Job advertisements and job titles must be gender-neutral, and the process must be non-discriminatory.

The real bite lies in Article 18. If an employer breaches these transparency obligations and a dispute about pay discrimination arises, the employer must prove that there was no discrimination. The only exceptions are breaches that were obviously unintentional and minor. Anyone who routinely asks about salary therefore weakens their own position in any later proceedings.

Does this already apply today? According to the Personalwirtschaft article linked above, labour lawyers at the law firm Görg consider it possible that courts could already derive the ban on asking about pay and the duty to disclose salary from pre-contractual obligations under the German Civil Code (Sections 311(2) and 241(2) BGB). Individual judges at the Federal Labour Court share this view, but it is disputed in legal literature. So it is not certain. But if you hire an executive today, they will still be working for you long after the law has come into force.

Why executive search is particularly affected

Little changes for positions paid under collective agreements, where salaries are already set out in pay tables. For positions outside collective agreements, the picture is different. Anyone looking for a plant manager, a commercial managing director or a Head of Engineering usually negotiates freely. Until now, the most convenient anchor for this negotiation has been the candidate's current salary, often supplemented by bonus, company car and pension provision.

These are exactly the components the directive covers. Besides base salary, "pay" explicitly includes supplementary and variable components; Recital 21 mentions bonuses and occupational pensions, among others. In our reading, the ban therefore also covers the familiar question about target bonus and company car.

The background: according to the Federal Statistical Office (Destatis), women earned on average 16 percent less per hour than men in 2025, and 17 percent less in the private sector. Once differences in occupation, industry, part-time work and level of requirements are factored out, 6 percent remains that the statistical model does not explain. Anyone who bases every new position on the previous salary carries an existing gap from one employer to the next.

An example from consulting practice, anonymised and for illustration: A mid-sized machine builder is looking for a head of design. Two candidates reach the final round, professionally on a par. The female candidate works at a smaller family business with noticeably lower salary levels, the male candidate at a supplier belonging to a large group. If the offer is based on the previous salary, several tens of thousands of euros can quickly separate two offers for the same role. Under the new rules, exactly this difference becomes a risk as soon as someone asks for the average pay of comparable positions.

Our position on this is clear. Salary history has always been a weak anchor. It says a lot about the previous employer's pay policy and little about the value of the role you want to fill. The directive forces companies to answer a question they should have asked first anyway: what is this position worth to us?

That leaves the question of whether an executive search consultant may still ask about salary when the employer no longer may. The directive is addressed to the employer, but through Recital 33 it also obliges the employer not to actively seek information about pay history. A search via third parties in which exactly this information is collected and passed on is therefore, in our view, not a safe workaround. A binding answer will only come from the German law or from case law.

How does a salary negotiation work without salary history?

The process moves forward. Pay is no longer derived from the CV at the end; it is defined before the first contact. In practice, this means:

  1. Evaluate the position. Article 4 names four criteria for the value of work: skills, effort, responsibility and working conditions. Document in writing how the position is classified against them.
  2. Define the range. Derive a salary band from this and compare it with market data. Internal benchmarks are often missing for executive roles outside collective agreements in mid-sized companies; external salary benchmarks help here.
  3. State the range early. Many leadership positions are filled discreetly and without a public advertisement. In that case, the range belongs in the first qualified conversation at the latest, before the interview with the company.
  4. Ask about expectations. The directive prohibits asking about pay history in previous employment. It does not prohibit asking about salary expectations.
  5. Justify deviations. According to Recital 32, a salary outside the stated range can still be negotiated. Document why: rare specialist knowledge, additional responsibility, relocation.

For direct approach, this has a welcome side effect. Anyone approaching passive candidates is competing with their secure current position. A clear salary range in the first conversation saves both sides weeks if expectations are far apart.

What you should prepare now

This is not a major project. Most adjustments concern forms, interview guides and habits. Check these points before you fill your next leadership position:

  • Remove fields such as "current salary" or "last bonus" from application forms and your applicant tracking system
  • Adapt interview guides and replace the salary question with a question about expectations
  • Create a documented job evaluation and a salary band for every position outside collective agreements
  • Check job advertisements and job titles for gender-neutral wording
  • Inform external service providers, from executive search consultancies to assessment providers, about the new rules
  • Document in writing the reasons for pay differences between comparable positions

The last point goes beyond recruiting. Once the law applies, employees can request information under Article 7 about the average pay of comparable colleagues, broken down by gender. The answer must be given within two months. Any hire you negotiate today without a traceable justification may then become the subject of such a request.

How a structured search runs from job evaluation to contract is described in our article Executive search consultancy: what it does and when it pays off.

Note: This article reflects the state of legislation at the end of September 2026 and does not replace legal advice.

Frequently asked questions

Does the Pay Transparency Directive already apply to my company?

For private employers, new obligations in principle only arise with the German implementing law. Until then, the Pay Transparency Act of 2017 applies. However, courts interpret existing law in light of the directive, and some voices already derive obligations in the application process from the German Civil Code today. Preparing now is therefore sensible.

May I ask applicants about their salary expectations?

The directive prohibits asking about pay in current or previous employment. It does not prohibit asking about salary expectations. Ideally, ask after you have stated the range for the position yourself.

Does the salary range have to appear in the job advertisement?

Not necessarily. The directive names the job advertisement as one option but also allows the information to be provided before the interview or in another way. What matters is that applicants know the range before pay is negotiated. How exactly Germany regulates this will only become clear with the implementing law.

Does the ban on asking about pay also apply to headhunters?

The directive is addressed to the employer. However, it also prohibits the employer from actively seeking information about pay history. Using an executive search consultancy as a workaround is therefore legally risky. Reputable consultants adapt their process to salary ranges and expectations.

When do mid-sized companies have to report on the gender pay gap?

Under the directive, employers with 150 to 249 employees report for the first time by 7 June 2027, and those with 100 to 149 employees by 7 June 2031, each every three years thereafter. Below 100 employees, reporting is voluntary unless the German legislator decides otherwise. The final dates for Germany will be set by the implementing law.

Fill leadership positions transparently and precisely

Are you planning to fill a key position and want to align pay and the selection process with the new rules from the outset? SCHLAGHECK + RADTKE supports companies with executive search, from job evaluation to contract signature, and prepares salary benchmarks for your position as part of our HR consulting. Talk to us in Düsseldorf, Munich or Ulm: get in touch.