Strengthening Equal Pay Transparency

Directive (EU) 2023/970: A New Era of Pay Equity in Sweden

The European Union has taken a decisive step towards closing the persistent gender pay gap with the adoption of Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023. This landmark legislation, officially titled "Directive (EU) 2023/970 to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms," aims to usher in a new era of pay transparency and accountability across all member states. With a transposition deadline of June 7, 2026, countries like Sweden are actively preparing to integrate these comprehensive requirements into their national legal frameworks.

Sweden, a nation often at the forefront of gender equality, is poised for significant changes as it implements this directive. While the country already boasts robust anti-discrimination laws, including requirements for annual pay surveys, the EU directive introduces new layers of transparency and enforcement that will further refine and strengthen existing practices. The impending implementation in 2026 marks a pivotal moment for Swedish employers and employees, promising a more equitable and transparent labour market.

Overview

Despite decades of legislation promoting equal pay, a significant gender pay gap has stubbornly persisted across the European Union. In 2023, women in the EU still earned, on average, 12.7% less than men, a figure that has remained largely unchanged for a decade and contributes to a substantial pension pay gap and increased risk of poverty for women. This enduring disparity is often attributed to a lack of transparency in pay structures, legal uncertainties, and procedural obstacles that make it difficult for individuals to identify and challenge pay discrimination.

Directive (EU) 2023/970 was adopted in May 2023 to directly address these systemic issues. Its primary purpose is to strengthen the enforcement of the fundamental principle of equal pay for equal work or work of equal value between men and women, a principle enshrined in Article 157 of the Treaty on the Functioning of the European Union (TFEU). The directive achieves this by establishing binding pay transparency standards and robust enforcement mechanisms designed to empower workers, incentivize employers to prevent gender pay gaps, and facilitate the identification and rectification of unjustified pay disparities.

For Sweden, the directive represents the most significant change to pay equality legislation since 1994. Although Sweden's Discrimination Act (Diskrimineringslagen) has included requirements for annual pay surveys since 2008, the EU directive introduces more detailed and harmonized obligations. A Swedish government inquiry, "Inquiry on the Implementation of the Pay Transparency Directive" (SOU 2024:40), presented its proposals in May 2024, suggesting that the directive's provisions be integrated into a new chapter of the Discrimination Act. The planned entry into force for this national legislation is June 1, 2026, with some reporting obligations taking effect at later dates.

Key Requirements

The directive introduces a comprehensive set of measures designed to enhance pay transparency throughout the employment lifecycle. These requirements will necessitate significant adjustments to existing HR practices and remuneration systems across Sweden.

Pay Transparency Before Employment

• Salary Range Disclosure: Employers will be required to disclose the starting salary or a salary range for a role in the job advertisement itself or, at the latest, before the first interview. This aims to ensure transparent and informed pay negotiations. Vague phrases like "competitive salary" without a clear range will no longer suffice.
• Prohibition on Salary History Questions: Employers will be prohibited from asking job applicants about their previous pay history. This measure is crucial to prevent historical pay inequalities from perpetuating and ensuring that salary decisions are based on the value of the role, not past earnings.
• Gender-Neutral Recruitment: Job vacancy notices and job titles must be gender-neutral, and recruitment processes must be conducted in a non-discriminatory manner to guarantee equal pay for the same work or work of equal value.

Pay Transparency During Employment

• Access to Pay Information: Employees will gain an enhanced right to request and receive information about their individual pay level and the average pay levels of colleagues performing the same work or work of equal value, broken down by gender. Employers must provide this information in writing, typically within two months of the request.
• Transparent Pay Structures: Employers must make the criteria used to determine pay levels and career progression objective, gender-neutral, and easily accessible to their workers. This ensures that pay decisions are based on objective factors such as skills, effort, responsibility, and working conditions.
• Prohibition of Pay Secrecy Clauses: Contractual clauses that prohibit employees from disclosing their pay or that of colleagues performing work of equal value will be prohibited, empowering workers to discuss remuneration for the purpose of enforcing their right to equal pay.

Gender Pay Gap Reporting

The directive introduces a harmonized and more detailed gender pay gap reporting framework, with obligations varying based on company size.

• Employers with 250 or more employees: Will be required to report annually on their gender pay gap, with the first report due by June 7, 2027, covering data from the 2026 calendar year.
• Employers with 150 to 249 employees: Will report every three years, with their first report also due by June 7, 2027, covering 2026 data.
• Employers with 100 to 149 employees: Will report every three years, with their first report due by June 7, 2031, covering data from the 2030 calendar year.

In Sweden, existing legislation already mandates annual pay surveys for employers with 10 or more employees. The proposed national implementation of the EU directive will build upon this, expanding the scope of pay surveys to cover developments related to parental leave and similar absences. Employers with at least 100 employees will regularly report gender pay gap data to the Equality Ombudsman (Diskrimineringsombudsmannen) for publication.

Joint Pay Assessment (Pay Audit)

A critical enforcement mechanism is the mandatory joint pay assessment. This will be required if an employer's gender pay gap report reveals an average pay difference of 5% or more between female and male workers in any category, and this gap cannot be justified by objective, gender-neutral factors, or has not been remedied within six months. These assessments must be carried out in cooperation with employee representatives and made available to workers and the applicable monitoring body.

Definition of "Work of Equal Value"

The directive clarifies the concept of "work of equal value," which is central to ensuring fair pay beyond identical roles. While each member state may derive its own methodology, the directive specifies minimum factors to consider when assessing the equivalence of roles. These include skills (experience, knowledge, qualifications), effort (mental or physical exertion), responsibility (level of accountability and decision-making), and working conditions (risks associated with the job). This comprehensive definition aims to prevent indirect discrimination where jobs predominantly held by women are undervalued despite requiring comparable skills, effort, and responsibility.

Covered Employers

The EU Pay Transparency Directive casts a wide net, applying to all employers in both the public and private sectors across the European Union. This includes a broad range of employment relationships, encompassing full-time, part-time, and temporary workers, as well as domestic workers, on-demand workers, intermittent workers, voucher-based workers, platform workers, workers in sheltered employment, trainees, and apprentices, provided they meet the relevant criteria. The directive also extends to non-EU companies with employees based in the EU.

In Sweden, the national implementation will similarly apply to a vast array of employers. The existing Discrimination Act already covers a broad scope, and the new chapter on pay transparency will integrate these new obligations, affecting recruitment processes, salary setting, documentation, and communication across all covered entities.

Employee Rights

The directive significantly strengthens employee rights, empowering individuals to assert their right to equal pay and providing clearer avenues for redress. Key employee rights include:

• Right to Pre-Employment Pay Information: Job applicants have the right to receive information on the initial pay level or range for a position before employment.
• Right to Request Pay Information: Employees can request written information about 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.
• Right to Full Compensation: Workers who have suffered pay discrimination based on gender are entitled to full compensation, which may include back pay, related bonuses, and other payments in kind. This compensation is uncapped, emphasizing the seriousness of pay discrimination.
• Protection Against Victimisation: The directive ensures protection against any adverse treatment or dismissal as a reaction to employees exercising their rights under the pay transparency rules.
• Shift of Burden of Proof: In cases of suspected pay discrimination, the burden of proof will shift from the employee to the employer. This means that if an employee can establish a prima facie case of discrimination, the employer must then prove that their pay practices are fair and transparent and that no discrimination occurred. This is a significant procedural change that aims to facilitate access to justice for victims of discrimination.

Penalties

To ensure the directive's effectiveness, member states are required to establish penalties for non-compliance that are effective, proportionate, and dissuasive. While the exact nature and level of penalties will be determined by each national legislation, common foreseeable sanctions include:

• Administrative Fines: Employers found in violation of the directive's provisions may face administrative fines, which could be substantial and potentially linked to a percentage of the total payroll. Sweden's inquiry proposes administrative fines for failure to provide information to the Equality Ombudsman.
• Compensation for Damages: As mentioned, employees who experience pay discrimination are entitled to full compensation, including back pay and bonuses.
• Exclusion from Public Procurement: Non-compliant employers may face exclusion from public procurement contracts, serving as a significant deterrent, particularly for larger organizations.
• Increased Litigation Risk: The shift in the burden of proof to the employer will likely amplify litigation risks, as organizations will need to be able to demonstrate the absence of discrimination.

The directive also encourages member states to consider aggravating or mitigating factors, including intersectional discrimination, when determining penalties.

Timeline

The EU Pay Transparency Directive officially entered into force on June 7, 2023. Member states were then given three years to transpose the directive into their national laws, setting a firm deadline of June 7, 2026.

For Sweden, the implementation process is well underway. In May 2024, the "Inquiry on the Implementation of the Pay Transparency Directive" (SOU 2024:40) presented its proposals for incorporating the directive into Swedish law, primarily through amendments to the Discrimination Act. The proposed national legislation is expected to enter into force on June 1, 2026, or July 1, 2026. However, some of the reporting obligations will have a phased implementation schedule:

• June 7, 2027: Deadline for the first gender pay gap reporting for employers with 150 or more employees (covering 2026 data).
• June 7, 2031: Deadline for the first gender pay gap reporting for employers with 100-149 employees (covering 2030 data).

It is important to note that while the directive sets minimum requirements, member states can introduce stricter rules. Sweden's existing Discrimination Act already requires annual pay surveys for employers with 10 or more employees, a requirement that is expected to be maintained and expanded.

Compliance Steps

Given the approaching deadlines, Swedish employers, particularly those with 100 or more employees, should proactively take steps to ensure compliance with the new pay equity law. Preparing early can help organizations identify and address issues quietly, mitigating risks of public scrutiny and legal challenges.

• Conduct Internal Pay Audits: Perform a thorough internal pay audit to establish a baseline gender pay gap data. This involves collecting and processing salary data in a gender-disaggregated manner, identifying any existing pay disparities, and understanding their underlying causes.
• Review and Update Pay Structures: Ensure that all pay structures, levels, and progression criteria are objective, gender-neutral, and transparent. This may involve revisiting job evaluation systems to accurately assess "work of equal value" based on skills, effort, responsibility, and working conditions.
• Revise Recruitment Processes: Update job advertisements to include salary ranges and train hiring managers to avoid asking about past salary history. Ensure that job titles and vacancy notices are gender-neutral.
• Establish Data Tracking Systems: Set up or upgrade systems to efficiently track and manage gender-disaggregated pay data, which will be essential for meeting the new reporting obligations.
• Develop Communication Strategies: Prepare to communicate pay policies and structures transparently to employees and job applicants. Inform employees of their right to request pay information and establish clear procedures for handling such requests within the stipulated timeframe.
• Engage with Employee Representatives: For larger employers, foster cooperation with trade unions and employee representatives, especially concerning pay assessments and addressing identified pay gaps.
• Train Staff and Managers: Provide comprehensive training to HR personnel, managers, and recruitment teams on the new requirements, particularly regarding pay transparency in recruitment and pay-setting processes.
• Monitor Legislative Developments: Stay informed about the final legislative proposal from the Swedish government and any further guidance from the Equality Ombudsman, as specific national details may continue to evolve.

References

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Recent Developments — March 2026: Government Seeks Directive Renegotiation

In March 2026 the Swedish Government issued a press release announcing its position that the EU Pay Transparency Directive (2023/970) should be renegotiated at the EU level. The Government's stated concerns include the administrative burden on smaller employers, the prescriptiveness of the reporting obligations, and the cost of compliance for Swedish workplaces that already operate under the existing Discrimination Act framework.

Practically, this signals that Sweden's domestic transposition (planned via amendments to the Discrimination Act, originally targeted for entry into force on 1 June 2026) may be delayed or modified while the Government pursues changes to the Directive itself at the European Council. As at the time of writing, the EU's transposition deadline of 7 June 2026 is highly unlikely to be met by Sweden.

Status: Pending Implementation — domestic legislative work continues, but the timeline and scope are now contingent on EU-level renegotiation discussions.