Italy Pay Transparency Directive

Italy's Transposition of EU Pay Transparency Directive (EU) 2023/970: A New Era for Pay Equity

As the European Union pushes for greater pay equity, Italy is poised to implement groundbreaking legislation designed to dismantle gender pay gaps and foster a culture of transparency in remuneration. On February 5, 2026, Italy's Council of Ministers approved a draft legislative decree, marking a significant step towards transposing the ambitious EU Pay Transparency Directive (EU) 2023/970 into national law. With the EU deadline for transposition set for June 7, 2026, Italy is actively working to reshape its corporate practices in compensation management, moving from voluntary best practices to a comprehensive, legally binding system of rules.

This forthcoming legislation, currently in its preliminary review and consultation phase, aims to reinforce the principle of "equal pay for equal work or work of equal value" between men and women. It represents a critical evolution in Italy's legal framework, building upon existing national efforts to combat pay discrimination and promote a fairer, more inclusive labor market.

Overview

The EU Pay Transparency Directive (EU) 2023/970, which entered into force on June 7, 2023, is a landmark initiative by the European Parliament and the Council to strengthen the application of the principle of equal pay. It addresses the persistent gender pay gap across the EU, which stood at approximately 12% in 2023, by introducing binding pay transparency measures and robust enforcement mechanisms.

Italy's draft legislative decree, approved on February 5, 2026, is the national instrument for integrating these EU-wide standards into Italian law. The core objective is to reduce the gender pay gap by tackling pay discrimination through enhanced transparency and information. While the directive sets a common framework, it allows Member States some discretion in defining specific aspects, such as worker categories, sanctions, and exemptions. Italy's approach, as outlined in the draft decree, largely aligns with the directive's principles but also introduces specific national clarifications and, in some instances, more stringent obligations.

The draft decree, consisting of 16 articles, establishes a foundational framework, with operational details expected to be further elaborated through implementing decrees and ministerial circulars. This phased approach underscores the complexity of the directive's requirements and the need for careful integration into Italy's existing legal and industrial relations landscape, particularly concerning the significant role of national collective bargaining agreements (NCBAs).

Key Requirements

The Italian draft legislative decree, in transposing the EU Pay Transparency Directive, introduces a comprehensive set of requirements for employers, impacting the entire employment lifecycle from recruitment to ongoing employment and reporting. These requirements are designed to ensure transparency and accountability in pay practices.

Pay Transparency Before Employment

• Mandatory Pay Disclosure in Job Postings: Employers will be required to provide clear and transparent information about the compensation for a position. Job postings and recruitment announcements must disclose either the initial compensation level or the applicable compensation band. This goes slightly beyond the EU Directive's minimum requirement, which suggests that pay information be provided in a manner ensuring informed negotiation, but Italy explicitly mandates its inclusion in job notices.
• Prohibition on Salary History Questions: Employers and any third parties involved in the recruitment process will be prohibited from inquiring about a job applicant's current or past remuneration. This measure aims to prevent historical pay disparities from perpetuating into new employment relationships.

Pay Transparency During Employment

• Right to Information on Pay Levels: Employees will have a statutory right to request and receive information on their individual pay level and the average pay levels, broken down by gender, for categories of workers performing the same work or work of equal value. Employers must provide this information in writing within two months of the request. Employers are also required to inform employees annually of this right and how to exercise it.
• Transparency on Pay Setting and Progression Criteria: Companies with 50 or more employees will be required to make information on the criteria used to determine pay, pay levels, and pay progression easily accessible to all employees. The Italian draft decree emphasizes that these criteria must be objective and gender-neutral, often referencing the classification and grading systems established by National Collective Bargaining Agreements (NCBAs).
• Prohibition of Pay Secrecy Clauses: Contractual clauses that limit the right of workers to disclose information on their own remuneration are prohibited and will be considered void. This ensures that employees can openly discuss their pay to enforce equal treatment.

Gender Pay Gap Reporting and Joint Pay Assessment

• Mandatory Gender Pay Gap Reporting: Employers exceeding a certain threshold of workers will be subject to periodic reporting obligations on gender pay gaps. The Italian draft decree sets the reporting threshold at 100 workers, with phased deadlines: companies with 150 or more employees must submit their first report by June 7, 2027 (using 2026 data), those with 100-149 employees will start reporting by June 7, 2031. This reporting will include detailed information on pay differentials between men and women, broken down by categories of workers performing equal work or work of equal value.
• Joint Pay Assessment Trigger: If the reported data reveals an unjustified gender pay difference of 5% or more in any category of workers, and this difference is not justified by objective and gender-neutral criteria, the employer must undertake a joint pay assessment with worker representatives. This assessment should lead to the adoption of remedial measures within a reasonable period, typically six months, to eliminate gender-based pay discrimination.

Definition of "Equal Work" and "Work of Equal Value"

A cornerstone of the Italian draft decree is its clarification of the criteria for identifying "equal work" or "work of equal value." In the Italian legal system, employee wages are primarily determined by NCBAs. Accordingly, the draft decree anchors the assessment of pay levels to the classification and grading systems established by these agreements. "Equal work" is defined as work performed in identical duties or duties falling within the same pay grade and legal classification under the NCBA. "Work of equal value" refers to different but comparable duties based on NCBA classification criteria, considering factors like skills, effort, responsibility, and working conditions. This emphasis on NCBAs represents a national design choice that may broaden comparator pools and influence how equal pay risk is assessed in practice.

Covered Employers

The EU Pay Transparency Directive applies to all public and private employers across Member States. Italy's draft legislative decree largely mirrors this broad scope, covering all employment contracts, whether fixed-term or indefinite, including part-time and managerial positions. The draft explicitly includes permanent and temporary employees, agency workers, apprentices, and collaborators under coordinated and continuous arrangements (Co-Co-Co workers). While an earlier draft included temporary workers, the amended version published on February 5, 2026, removed them, indicating potential areas of ongoing refinement.

While some transparency obligations, such as disclosing pay ranges in job ads and banning salary history questions, apply to all employers regardless of size, other requirements are tied to employee headcount.

• Transparency on Pay Setting Criteria: Companies with 50 or more employees are required to make information on pay determination and progression criteria accessible.
• Gender Pay Gap Reporting: The mandatory reporting obligation for gender pay gaps applies to employers with 100 or more employees, with a phased implementation schedule.

It is important to note that the directive's reach extends to organizations with employees in EU member states, even if their headquarters are outside the EU, meaning global companies with an Italian presence will be impacted.

Employee Rights

The directive significantly empowers employees by granting them enhanced rights related to pay information and legal recourse.

• Right to Information: As detailed under "Key Requirements," employees have the right to request information on their individual pay and average pay levels, broken down by gender, for comparable roles. They also have the right to know the objective and gender-neutral criteria used for pay and career progression. Employers must respond to these requests within two months.
• Right to Compensation: Workers who have suffered damages as a result of pay discrimination based on gender have the right to claim and obtain full compensation or reparation. Member States are prohibited from setting an upper limit on the compensation that can be awarded, which may include full recovery of back pay, bonuses, and payments in kind.
• Shift in Burden of Proof: In any legal proceedings concerning pay discrimination, once an employee presents facts and circumstances that suggest discrimination, the burden of proof shifts to the employer. The employer must then demonstrate that no discrimination occurred based on objective, gender-neutral criteria. Failure to comply with transparency or reporting obligations can automatically trigger this shift.
• Protection Against Reprisals: Employees and their representatives are explicitly protected against less favorable treatment, dismissal, or other adverse actions by an employer in response to a complaint or legal action aimed at enforcing equal pay rights.
• Right to Disclose Own Pay: Employees cannot be prevented from disclosing their own remuneration. Contractual clauses limiting this right are prohibited.

Penalties

The EU Pay Transparency Directive mandates that Member States establish penalties for breaches that are "effective, proportionate, and dissuasive," including fines. While the directive sets this framework, each Member State determines the specific penalty amounts and structures.

Italy's draft decree refers to the sanctions and enforcement mechanisms already regulated within the existing Italian Equal Opportunities Code (Codice delle pari opportunità). This suggests an integration with established legal processes for discrimination cases.

Potential penalties for non-compliance in Italy, based on existing and proposed frameworks, could include:

• Administrative Fines: For instance, providing incomplete or inaccurate data in gender equality reports may incur financial penalties ranging from €1,000 to €5,000. Not providing required information to employees could result in fines of €250 to €1,500 for each worker involved.
• Suspension of Employment Contribution Benefits: Employers who fail to submit their gender equality report for more than 12 months could face the suspension of employment contribution benefits for 12 months.
• Employee Compensation: As noted under "Employee Rights," workers who experience pay discrimination are entitled to uncapped compensation, including full recovery of back pay, bonuses, and payments in kind.
• Exclusion from Public Procurement: Non-compliance could lead to exclusion from public tender procedures for a certain period.
• Reputational Damage: Non-compliance will often be publicly disclosed, affecting brand image and trust among stakeholders, impacting recruitment and customer relationships.
• Legal Action: Employees, trade unions, equality bodies, and authorized associations will be able to bring legal action under existing equality laws for breaches of the new legislation.

Timeline

The implementation of the EU Pay Transparency Directive in Italy follows a clear, albeit multi-stage, timeline:

• May 10, 2023: The EU Pay Transparency Directive (EU) 2023/970 was adopted by the European Parliament and the Council.
• June 7, 2023: The Directive entered into force.
• February 5, 2026: Italy's Council of Ministers approved a draft legislative decree to transpose the Directive into national law.
• March 18, 2026: The draft decree was transmitted to Parliament, with a deadline for providing an opinion.
• June 7, 2026: This is the overarching deadline for all EU Member States, including Italy, to transpose the Directive into national law. From this date, transparency obligations become legally enforceable for all employers, regardless of size.
• Post-June 7, 2026: Following parliamentary review, the draft decree will return to the Council of Ministers for final adoption. Operational details are expected to follow through implementing decrees and ministerial circulars.
• June 7, 2027: Companies with 150 or more employees must submit their first gender pay gap report, using 2026 data. Companies with 250 or more employees will report annually, while those with 150-249 employees will report every three years.
• June 7, 2031: The reporting threshold will be reduced, requiring companies with 100 to 149 employees to start reporting every three years.

Given that the current date is March 8, 2026, Italy's law is still in the "Pending Implementation" status, with the final text and operational details subject to potential revisions during the legislative process.

Compliance Steps

Employers in Italy, regardless of their size, should proactively prepare for the impending implementation of the EU Pay Transparency Directive. Early preparation is crucial to identify and address potential pay disparities and ensure a smooth transition to the new regulatory landscape.

Key compliance steps include:

• Conduct a Preliminary Pay Equity Audit: Analyze current pay data to understand existing pay structures and identify any gender pay gaps. This involves collecting and categorizing data on remuneration, job roles, and employee demographics.
• Review and Enhance Job Architecture and Pay Bands: Ensure that job classification systems are objective, gender-neutral, and consistently applied. Define clear job structures, career paths, and salary bands for each job grade, aligning with National Collective Bargaining Agreements where applicable.
• Update Recruitment Practices: Revise job advertisement templates to include initial pay levels or pay ranges. Train recruiters and hiring managers to avoid asking about salary history and to ensure all recruitment processes are non-discriminatory and gender-neutral.
• Review and Document Pay-Setting and Progression Criteria: Clearly define and document the objective, gender-neutral criteria used to determine pay, pay levels, and career progression. Make this information easily accessible to employees.
• Remove Pay Confidentiality Clauses: Review all employment contracts and company policies to identify and remove any clauses that restrict employees from disclosing their own pay.
• Prepare for Gender Pay Gap Reporting: For employers meeting the headcount thresholds, establish robust data collection systems to gather the necessary information for gender pay gap reports. This includes detailed data on basic salary and variable components, broken down by gender and worker category.
• Establish Governance Structures and Budget: Allocate resources for compliance efforts, including legal advice, HR system updates, and training. Designate a central point of contact for monitoring information requests and compliance.
• Communicate Employee Rights and Train Staff: Inform employees annually about their new rights to pay information and how to exercise them. Provide training to HR teams, managers, and employee representatives on the new legal requirements and internal processes.
• Engage with Worker Representatives: Foster collaboration with trade unions and worker representatives, particularly in preparing for joint pay assessments if significant, unjustified pay gaps are identified.

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