What is a gender pay gap report? The complete guide for EU employers in 2026

A gender pay gap report is a structured disclosure of the pay differences between male and female employees at an organisation. From 7 June 2027, producing one is no longer optional for most European employers. The EU Pay Transparency Directive (2023/970) mandates that companies with 250 or more employees publish seven specific pay metrics, and companies with 150 or more employees follow from 2031.

For an HR Director at a German company with 300 employees, this article answers the questions that matter most: what the report must contain, how the calculations work, what triggers a regulatory investigation, and what to do in 2026 to be ready in time.

What a gender pay gap report must contain

The content of the report is defined precisely in Article 9 of the Directive. There are seven mandatory metrics: employers cannot substitute them, simplify them, or omit any of the seven.

The seven Article 9 metrics

The first six metrics are the unadjusted gap: the raw difference in average pay without controlling for job type, seniority, or working hours. The seventh is the adjusted gap , and it is the one that carries the most legal weight.

Unadjusted vs. adjusted: why the distinction matters

Most companies that have looked at their pay data understand their unadjusted gap. It is the number that appears in headlines: "women at this company earn 18% less than men." This figure reflects the cumulative effect of occupational segregation, part-time work patterns, and differences in seniority distribution. It is real and it matters, but it is not the metric that triggers a legal investigation.

The adjusted gap answers a more specific question: within a group of employees doing work of equal value, are women paid less than men? If a company has ten software engineers at the same grade and experience level, and the women in that group earn 8% less than the men, that is an adjusted pay gap of 8%. It is not explained by job differences. It requires a different explanation, and the Directive requires employers to find it.

Under Article 10, if the adjusted gap in any comparable work group exceeds 5%, and the employer cannot objectively justify it within six months, a formal joint assessment with employee representatives is mandatory. That assessment must identify causes, document corrective actions, and be shared with the monitoring authority. This is not a fine; it is a remediation process with a defined timeline and accountability structure.

What counts as pay under the Directive?

The definition of "pay" in Article 3 is deliberately broad. It covers all components of remuneration: base salary, bonuses, overtime pay, allowances, benefits in kind, pension contributions, and employer-funded training budgets. The only exclusion is expense reimbursement.

This means a company cannot report a clean gender pay gap by calculating base salary alone. If men receive larger annual bonuses on average, even if the bonus policy is technically gender-neutral, that gap must appear in metrics three and four. The Directive's drafters were explicit: any pay practice that creates a gender-based outcome is in scope.

Defining comparable work groups: the most consequential decision

The adjusted pay gap is only as meaningful as the comparable work groups used to calculate it. Defining those groups is the most consequential decision a company will make in its compliance process.

The Directive defines a comparable work group as employees performing work of equal value, assessed by reference to four criteria: the nature of the work, working conditions, the degree of responsibility, and the effort required. Job titles are not sufficient. Two employees with different titles (say, "Senior Analyst" and "Senior Associate) may be doing work of equal value if their actual responsibilities and required skills are equivalent.

The German expert commission, which published recommendations to the BMFSFJ ministry in October 2025, proposed two flexibility provisions that could affect German companies specifically. Companies bound by collective agreements (Tarifverträge) may use existing wage groups as comparable work categories, potentially reducing the frequency of 5% triggers among collectively-bargained workforces. Groups may also be defined separately by location and by legacy employment contracts. These are recommendations, not yet law; the German Referentenentwurf had not been published as of March 2026.

Who must report, and when

The 7 June 2027 deadline for 250+ employers is the critical near-term date. It is 15 months away from this writing. That sounds comfortable, until companies account for the preparation work required: auditing pay data completeness, defining comparable work groups using an objective methodology, conducting the adjusted gap analysis, and engaging the Works Council on the results.

Companies that begin in January 2027 will be working backwards from a legal deadline with six months of runway. Companies that begin in mid-2026 will have time to surface and address gaps before they become public disclosures.

Germany's existing obligation: the EntgTranspG

The Entgelttransparenzgesetz (Transparency in Wage Structures Act), in force since January 2018, gives employees at companies with 200 or more employees the right to request the median pay of at least six colleagues of the other gender performing comparable work. The employer must respond within three months.

This is not a future obligation. It is in force now. A company with 220 employees that has never received a §13 request may believe the law does not apply to it. It does. And the individual disclosure right under the EU Directive (Article 7) will extend this further: any employee will be able to request their individual pay level and the average pay of comparable colleagues, with a response required within two months.

The practical implication is that German companies need a pay equity methodology: a defensible process for defining comparable groups and calculating the adjusted gap, before the first employee submits a request. Waiting for the 2027 reporting deadline misses the exposure that already exists under domestic law.

What the reporting process actually looks like in practice

A pay gap report for a 350-person company does not emerge from a single spreadsheet calculation. The process has four distinct phases:

1. Data collection and cleaning. HR systems rarely store pay data in a format ready for gap analysis. Variable pay components are often held in finance systems. Benefit valuations may sit in payroll. Part-time coefficients require normalisation. This phase typically surfaces inconsistencies that must be resolved before any calculation is valid.
2. Comparable work group definition. The company must define its groups using an objective, defensible methodology, typically a job evaluation exercise or the application of an existing grading framework. The methodology must be documented and shareable with the Works Council.
3. Metric calculation. All seven Article 9 metrics are calculated, both at the company level and, for the adjusted gap, at the comparable work group level. Any group showing a gap above 5% triggers further analysis.
4. Works Council engagement and disclosure. In Germany, the Works Council has co-determination rights under §87 BetrVG. The report must then be published; the Directive requires public disclosure, not merely internal documentation.

Companies that have mapped this process typically estimate 40–80 hours of HR and finance time per reporting cycle using manual methods. Dedicated software can compress this to under a day once data connections are established.

What to do now

The 15 months between today and the 7 June 2027 deadline are not 15 months of available time: they are 15 months that will be consumed by data preparation, group definition, Works Council dialogue, and legal review. Three actions are worth prioritising immediately.

Audit your pay data today. Before any calculation, establish whether your systems hold all seven required data components, including variable pay, benefits in kind, and part-time normalisation factors. The gap you find will almost certainly be larger than expected, simply because variable pay components are rarely analysed alongside base salary.

Establish a comparable work methodology before receiving an individual request. Any employee in a 200+ person German company can request their pay comparison under EntgTranspG today. Having a defensible methodology in place before that request arrives is materially less stressful than constructing one in response to it.

Engage the Works Council early. In Germany, the Works Council's role in pay transparency is significant, both in the joint assessment process under Article 10 and through existing co-determination rights. Early engagement reduces the risk of process disputes later.

The report is not the end of the process

A gender pay gap report that reveals no issues is unusual. Most companies, once they calculate the adjusted gap at the comparable work group level, find gaps above the 5% threshold in at least some categories. The Directive anticipates this: Article 10 provides a six-month window to address the gap before the joint assessment is triggered.

The companies best positioned to handle that process are those that understand their data well enough to distinguish explainable gaps: differences in seniority, tenure, and performance that are genuinely objective, from unexplainable ones that require remediation. Building that understanding is the work of 2026.