The European Union's commitment to sustainability and transparency is evident in its recent legislative initiatives. Two key directives, the Corporate Sustainability Reporting Directive (CSRD) and the EU Pay Transparency Directive (EU PTD), directly impact how organisations manage and report on their workforce.
While distinct in their scope and objectives, these directives share a common thread: emphasising the importance of a diverse, equitable, and engaged workforce in achieving broader sustainability and transparency goals.
This article will delve into the overlapping gender pay gap reporting requirements, highlight key differences, and illustrate how preparing for the CSRD can be instrumental in navigating the EU Pay Transparency Directive.
Understanding the common ground: workforce reporting
Both directives mandate organisations to disclose specific workforce-related information, albeit with different focuses:
CSRD
This directive requires companies to report on material environmental and social matters, including workforce diversity, employee engagement, working conditions, and respect for human rights across the entire value chain. The aim is to assess the company's impact on people, encompassing employees and workers beyond direct employment.
EU Pay Transparency Directive
This directive focuses specifically on pay equity and transparency within the organisation. It mandates reporting on gender pay gaps, and being transparent with employees and candidates about pay structures and the criteria used for determining remuneration. The objective is to eliminate gender-based pay discrimination and promote equal pay for equal work or work of equal value.
Key differences: scope and objectives
Despite the shared focus on workforce reporting, the directives differ significantly in their scope and objectives:
| Feature | CSRD | EU Pay Transparency Directive |
| Scope | Broader social sustainability, including human rights and working conditions (to the extent material to the company). Following the “Omnibus” proposed changes to the CSRD in early 2025, the CSRD applies to large undertakings and parent undertakings of a large group with 1000 employees on average and either exceeding €25 million total on a balance sheet or €50 million turnover. The CSRD also covers non-EU companies with €450+ million net turnover generated in the EU and having a large subsidiary or a branch generating €50+ million turnover. | Specifically focused on pay equity and transparency. The pay transparency requirements under the EU PTD apply to all employers, regardless of their size. The reporting requirements apply to employers with at least 100 workers. The directive does not specify whether this is 100 workers per entity or per country. The proposed Dutch implementation suggests that in the Netherlands this may be per country and that employers must count their agency workers towards the threshold. Employers with at least 250 workers must report annually from 2027 and employers with between 100 and 249 workers must report once every three years. |
| Objective | Assess and disclose company's impact on people across the value chain | Eliminate gender pay gap and promote pay transparency |
| Reporting | Qualitative and quantitative data on various social indicators, as outlined in ESRS S1, including:
| Primarily quantitative data on pay gaps and structures, as required by Articles 6-10, including:
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| Gender pay gap reporting requirements | Unlike the EU PTD, the CSRD does not mandate specific gender pay gap reporting metrics. It simply asks employers to report:
The male-female pay gap must be reported for the current reporting period and, if reported in previous sustainability reports, for the previous two reporting periods. This is a gender pay gap consolidated up to a global level, so is relatively meaningless to employees. The reporting period under the CSRD is based on the financial year. | Employers with 100+ employees are required to disclose:
“Gender pay gap” is defined as the difference in average pay levels between female and male workers of an employer expressed as a percentage of the average pay level of male workers. Disclosure is required to be made to a designated authority within the relevant member state. Employers may choose to publish the report on a website or otherwise make it publicly available. The EU PTD requires employers to report on the previous calendar year’s data.
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| Definition of “pay” | Both Directives use the same very broad definition of “pay” including all variable and complementary components including benefits in kind. | |
| Target | Stakeholders, including investors, consumers, and civil society organisations | Primarily employees and job applicants |
| Consequences of non-compliance | Consequences of non- compliance are:
| Non-compliance with the EU PTD carries significant consequences for employers, including:
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Is there any possibility that the EU Pay Transparency Directive could be streamlined or delayed, as has happened with the CSRD?
On 6 February 2025 the European Commission announced an “Omnibus” package of proposals to streamline and simplify the CSRD. In particular, the Omnibus includes proposals to:
- limit the application of the CSRD to companies with 1000+ employees and either a turnover above EUR50 million or a balance sheet above EUR25 million; and
- reduce the sustainability reporting standards (ESRS) with the aim of substantially reducing the number of data points to be reported on.
The proposals need to be adopted and implemented by the European Parliament.
In addition, on 21 May 2025, the European Commission announced a further “Omnibus” package of deregulation measures. Although Omnibus IV introduced a new category of “small mid-caps” (companies with up to 750 employees) able to access certain existing SME benefits, there were no concessions in relation to the EU Pay Transparency Directive.
Naturally, in light of these changes, we have had many clients ask us whether we anticipate any delays or concessions in relation to the EU Pay Transparency Directive. The short answer is no – we have not heard any discussion or possibility from any official source that the EU PTD may be delayed or reduced in scope. Whilst we cannot completely rule out that it might be delayed or reduced, in our view we think this is unlikely, as explained below.
The reason we say that we cannot rule out that it might be delayed or reduced is because, reading the Q&A issued by the European Commission in conjunction with the announcement of the Omnibus amending CSRD, there is a real emphasis on boosting growth in the EU by reducing regulation and there is an indication that the CSRD Omnibus is the first in a series, so further de-regulation may occur. This implies that there may be further series of Omnibus packages (as seen in May), simplifying other measures, to help drive competitiveness for the EU, which could include the EU PTD.
However, we need to bear in mind that the EU PTD was one of just five political priorities Ursula von der Leyen vowed to enact as President of the European Commission, when she was elected in 2019. She was enacted for a second term in July 2024 and will lead until 2029, so we think she is unlikely to give up the pursuit of one of these five key priorities easily.
In addition, the EU gave member states longer than usual to implement the EU PTD in acknowledgement that it is complex – member states will have had three years to implement rather than the usual two years.
Finally, if you look at the totality of what was required by the CSRD, there were so many data points across a huge range of topics, which put an incredible burden on companies. It was therefore fairly easy for the Commission to cut back some of the data points without undermining the concept, whereas in our view it would be much harder to cut out aspects of the EU PTD.
One measure we have seen in the CSRD Omnibus is an increased reporting threshold (from 250 employees to 1000 employees (alongside revenue and balance sheet requirements) – it is possible therefore that the EU PTD thresholds for gender pay gap reporting could be increased, thereby removing smaller companies from the scope of the reporting, although this didn’t occur as part of the May Omnibus and the EU PTD already staggers reporting for smaller companies until 2031.
Leveraging CSRD preparation for the EU Pay Transparency Directive
While the CSRD mandates reporting on percentage gap in pay between men and women, as well as the ratio between its highest paid individuals and the average (amongst other matters), the EU PTD goes further. It introduces comprehensive pay transparency measures, including restrictions on employers asking candidates about salary history, requiring employers to publish pay bands on job adverts, being open with current employees about pay and pay progression criteria and individuals will have the right to request how their pay compares to the average for the opposite sex doing the same job or work of equal value to them. It goes far beyond a mere reporting obligation.
Nonetheless, if you are continuing to prepare for the CSRD, this can significantly ease the compliance journey for the gender pay gap reporting aspects of the EU Pay Transparency Directive. Here's how:
Data collection and management
The CSRD necessitates robust data collection and management systems for various social indicators, including workforce demographics and remuneration, particularly as this data is subject to limited assurance. This data forms the foundation for calculating gender pay gaps and fulfilling the reporting requirements of the EU Pay Transparency Directive.
Stakeholder engagement
Both directives emphasise stakeholder engagement. The process of engaging with employees and relevant stakeholders during CSRD implementation can inform the development of transparent pay policies and practices, fostering trust and understanding.
Transparency and disclosure
The CSRD promotes a culture of transparency and disclosure regarding a company's social and environmental impact. This transparency extends to pay practices, making the transition to the EU Pay Transparency Directive's requirements smoother.
Final thoughts
The CSRD and the EU Pay Transparency Directive, though distinct, are interconnected in their focus on workforce reporting. By viewing these directives not as separate obligations but as complementary aspects of a holistic approach to sustainability and transparency, organisations can streamline their compliance efforts. Preparing for the CSRD's broader requirements lays a strong foundation for meeting the specific demands of the EU Pay Transparency Directive, ultimately contributing to a more equitable and sustainable future.
Your contacts
At Deloitte, we understand that navigating the demands and complexities of Pay Equity and Transparency can be daunting. Our proposition is designed to help you overcome this challenge and achieve your goals. Our aim is to enable you to pay employees equitably and help you demonstrate that you are doing so. With our deep multi-disciplinary expertise in Reward, Legal, and Behaviour Change, we are well-placed to be your trusted partner on this journey. Get in touch to discuss your challenges and needs.
Kathryn Dooks, Partner, Deloitte Legal, 020 7303 2894
Deepinder Lamba, Partner, Deloitte Global Employer Services, 020 7007 2689
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