Pay transparency is no longer only an HR topic. It is becoming a company-wide requirement involving management, payroll, finance, recruitment, legal teams, and data systems.
The term “Pay Transparency Act” is often used in business discussions. At EU level, the legal instrument is Directive (EU) 2023/970, also known as the EU Pay Transparency Directive. Its goal is to make the principle of equal pay for equal work—or work of equal value—easier to measure, explain, and enforce.
The Directive does not say that every employee doing the same job must earn exactly the same amount. Companies may still reward experience, performance, scarce skills, responsibility, location, working conditions, and other legitimate factors. The requirement is that differences must be based on objective, gender-neutral, and explainable criteria.
In simple terms: if a company cannot explain how it sets pay, it will have a problem defending its pay structure.
The Directive was adopted on 10 May 2023 and had to be transposed into national law by 7 June 2026. Read the official Directive on EUR-Lex.
“Pay transparency does not mean publishing every employee’s salary. It means being able to prove that pay decisions are fair, structured, and based on clear criteria.”
Why the Pay Transparency Directive exists
Equal pay between women and men has been an EU principle for decades. Article 157 of the Treaty on the Functioning of the European Union requires equal pay for equal work or work of equal value.
The real-world problem has been proof. Employees often do not know whether they are being paid fairly, while employers may have pay structures that developed over years through individual negotiations, historical exceptions, counteroffers, bonuses, promotions, and inherited contracts.
The result is often not deliberate discrimination. It is uncontrolled complexity.
A company may have ten people with the same title but different duties, skills, tenure, bonuses, allowances, or performance results. That can be legitimate—but only if the organization can show why the differences exist and why the criteria are applied consistently.
The Directive addresses this gap by requiring more transparency before hiring, during employment, and in company reporting. It also strengthens enforcement, compensation rights, access to evidence, and the burden of proof. Official EU legal text.
The legal position in Bulgaria as of August 2026
Bulgaria’s deadline to transpose the Directive was 7 June 2026. As of 6 August 2026, the Ministry of Labor and Social Policy’s proposed transposition amendments to the Anti-Discrimination Act had completed public consultation, but the official consultation page does not show a final Council of Ministers act or a final adopted transposition law.
The draft proposes obligations around recruitment transparency, employee information rights, pay reporting, pay-gap analysis, and corrective measures. It also proposes that the core rules enter into force from 7 June 2026, with later reporting dates for employers above the relevant employee thresholds. Official Bulgarian public consultation and draft legal text published by the Ministry of Labour and Social Policy.
This distinction matters:
| Status | What it means |
|---|---|
| EU Directive | Binding on Member States as to the result to be achieved |
| Bulgarian transposition draft | Important for preparation, but not final law until adopted and published |
| Existing Bulgarian law | Equal-pay and anti-discrimination principles already apply |
| Employer preparation | Should begin now; waiting for final wording is operationally risky |
This article is a business and systems guide, not legal advice. Bulgarian employers should confirm the final adopted national rules with qualified employment-law counsel once the legislation is published.
What counts as “pay”?
The Directive uses a broad definition. Pay is not only base salary.
It includes ordinary basic or minimum salary, but also direct or indirect compensation in cash or in kind. This can include, depending on the company and national law:
- fixed monthly salary;
- hourly wages;
- performance bonuses;
- sales commissions;
- variable pay;
- shift supplements;
- allowances;
- benefits in kind;
- company cars or transport benefits;
- additional leave benefits;
- retention payments;
- other employment-related compensation.
This is where many companies discover that their data is fragmented. Base salary may sit in payroll software, bonuses in Excel, sales commissions in CRM, company cars in an asset register, and allowances in separate HR files.
A fair-pay review cannot rely on incomplete data.
The Directive applies before employment begins
One of the most visible changes concerns recruitment.
Applicants must receive information about the initial pay or pay range for a role, based on objective and gender-neutral criteria. The information should be provided early enough to support an informed and transparent salary discussion—for example, in the job advertisement, before the interview, or through another clear process.
Employers must also not ask applicants about their previous pay history. Job titles and vacancy notices must be gender-neutral, and recruitment must be conducted without discrimination. Directive, Article 5.
| Recruitment practice | Direction under the Directive |
|---|---|
| Salary range in job advert | Strongly aligned with transparency requirements |
| Salary range shared before interview | Acceptable if it enables informed negotiation |
| Asking “What did you earn at your last job?” | Prohibited |
| Using gender-neutral job titles | Required |
| Hiring based on structured role criteria | Strongly recommended |
| Giving each manager unlimited discretion | High risk |
A salary range alone is not enough. If the company publishes a range of €2,000–€5,000 but has no documented rule for why one candidate receives €2,300 and another receives €4,700, the transparency is superficial.
The real work happens behind the job advertisement: job architecture, pay bands, progression rules, and approval controls.
Employees gain a right to pay information
Employees will have the right to request written information about:
- their own pay level; and
- the average pay levels, broken down by sex, for employees performing the same work or work of equal value.
Employers must inform employees of this right annually. They must also provide the requested information within a reasonable period and, in any event, no later than two months after the request. Directive, Article 7.
This does not mean that employees automatically receive a list of every colleague’s salary. The aim is to provide meaningful, privacy-conscious information by worker category while protecting personal data.
| Employee request | What a prepared employer should be able to provide |
|---|---|
| “What is my pay level?” | The employee’s current pay information and relevant components |
| “What is the average pay in my category?” | Aggregated average pay data, broken down by gender |
| “What is my worker category?” | A documented explanation of the role category and evaluation criteria |
| “Why is this pay difference justified?” | Objective, gender-neutral explanation supported by evidence |
| “How can I challenge inaccurate information?” | A defined internal process, with documented response ownership |
The Directive also prohibits contractual restrictions that stop workers from disclosing their pay for the purpose of enforcing equal pay. A company should therefore review confidentiality clauses, employee handbooks, internal regulations, and onboarding documents.
The foundation: equal work and work of equal value
This is one of the most important—and most misunderstood—parts of the Directive.
The comparison is not limited to employees with identical job titles. The law looks at whether work is the same or has equal value.
The employer’s pay structure must make this assessment possible through objective, gender-neutral criteria. The Directive specifically refers to factors such as:
- skills;
- effort;
- responsibility;
- working conditions;
- other factors genuinely relevant to the role.
For example, a purchasing manager and a production-planning manager may have different job titles. But if the organisation considers them comparable in terms of expertise, responsibility, decision-making, working conditions, and business impact, their roles may be assessed as work of equal value.
| Weak approach | Stronger approach |
|---|---|
| “These two people have different titles, so they cannot be compared.” | Use a documented role-evaluation method based on skills, effort, responsibility, and working conditions. |
| “Salary depends on the manager’s judgment.” | Use defined pay bands, progression criteria, and approval rules. |
| “We have always paid it this way.” | Document a current, objective business justification. |
| “The employee negotiated better.” | Negotiation may explain an individual outcome, but it is a weak long-term system if it causes unexplained structural gaps. |
The Directive is not anti-performance. It is anti-unexplained pay inequality.
Pay reporting: who reports, when, and what data is required?
The Directive creates mandatory gender pay-gap reporting for employers with 100 or more workers. The reporting schedule is set at EU level, though Bulgaria’s final national law may specify reporting channels and formats.
| Employer size | First reporting date | Frequency |
|---|---|---|
| 250+ workers | 7 June 2027 | Every year |
| 150–249 workers | 7 June 2027 | Every three years |
| 100–149 workers | 7 June 2031 | Every three years |
| Fewer than 100 workers | No EU-wide mandatory reporting threshold | Member States may require reporting; voluntary preparation is advisable |
The reported information must include more than one general “gender pay gap” percentage. Under Article 9, employers must provide information on:
| Required reporting metric | Why it matters |
|---|---|
| Overall gender pay gap | Shows the average difference in pay between women and men |
| Gender pay gap in variable or complementary pay | Reveals whether bonuses, commissions, or allowances create inequality |
| Median gender pay gap | Reduces the effect of unusually high or low salaries |
| Median gap in variable pay | Shows whether incentive systems are balanced |
| Share of women and men receiving variable pay | Identifies unequal access to bonuses or incentives |
| Share of women and men in each pay quartile | Shows whether one gender is concentrated in lower or higher pay bands |
| Pay gap by category of workers | Helps identify where differences exist in comparable work categories |
The company’s management must confirm the accuracy of the information after consulting employee representatives. Employee representatives must have access to the methodology used. Directive, Article 9.
The 5% trigger: when a joint pay assessment becomes necessary
A gender pay gap of 5% is often discussed as if it were automatically illegal. That is not correct.
A joint pay assessment is required when all three of the following conditions are met:
- the reporting shows a difference of at least 5% in average pay in any category of workers;
- the employer cannot justify the difference through objective, gender-neutral criteria; and
- the employer has not remedied the unjustified difference within six months of submitting the report.
The assessment must be carried out with employee representatives. It must identify the gap, its causes, and actions to correct and prevent unjustified differences. Directive, Article 10.
| Situation | Is a joint pay assessment likely required? |
|---|---|
| 6% difference, objectively justified by documented role level and experience | Not necessarily |
| 6% difference, no explanation or supporting data | High risk |
| 4% difference, no explanation | A concern requiring review, but does not meet the EU 5% assessment trigger |
| 8% difference, justified but never documented | Risk remains because the employer may struggle to prove the explanation |
| 7% difference, identified and corrected within six months | May avoid the formal trigger, depending on national implementation |
The key lesson is simple: the legal risk is not the number alone. It is the number combined with a lack of evidence and a failure to act.
Enforcement, compensation, and burden of proof
The Directive strengthens employee protections considerably.
Employees who suffer pay discrimination must have access to full compensation or reparation. This may include back pay, bonuses or benefits in kind, compensation for lost opportunities, non-material damage, and interest. The Directive states that compensation cannot be restricted by a pre-set maximum cap. Directive, Article 16.
It also shifts the evidential balance. If an employer has failed to meet transparency obligations, it may be the employer—not the employee—who must prove that there was no pay discrimination. Directive, Article 18.
| Risk area | Why it matters |
|---|---|
| Unclear job categories | The company cannot explain who is comparable to whom |
| Unstructured bonuses | Variable pay creates gaps that cannot be justified |
| Salary history questions | Recruitment process may breach transparency rules |
| No response process for employee requests | Legal and employee-relations risk |
| Missing historical data | Harder to investigate, explain, or correct legacy differences |
| No approval trail | The company cannot show who authorised a pay exception and why |
| Inconsistent data between HR, payroll, and finance | Reporting may be inaccurate or impossible to verify |
Pay transparency will also matter in public procurement. The Directive allows Member States to require compliance with equal-pay obligations in public contracts and concessions and may enable exclusion or penalties in certain cases. Directive, Article 24.
Why Excel is not enough
Many organizations still manage salary bands, bonuses, job levels, annual increases, and headcount budgets through disconnected Excel files. This may work while the team is small. It becomes risky when the company has multiple departments, locations, legal entities, currencies, bonus schemes, or managers with different approval habits.
Excel itself is not the enemy. The problem is uncontrolled, disconnected data.
A spreadsheet can be copied without version history. A formula can be overwritten. A manager may use an old file. Payroll may apply one number while HR stores another. A bonus may be approved by email but never linked to an objective criterion.
Pay transparency requires the company to connect several types of information:
flowchart TD
A["Job architecture"] --> D["Pay bands and criteria"]
B["HR employee data"] --> E["Pay transparency analysis"]
C["Payroll and variable pay"] --> E
D --> E
E --> F["Management review"]
F --> G["Employee information and reporting"]
F --> H["Corrective actions"]
The objective is not to expose individual salaries. The objective is to create reliable, controlled, and explainable pay data.
How SIX ERP can support pay-transparency readiness
SIX ERP can help companies build the data foundation and workflows required for a structured pay-transparency program. It does not replace legal advice, collective consultation, or employment-policy decisions. But it can replace fragmented HR, payroll-support, approval, and reporting processes with a connected environment.
| Pay Transparency need | How SIX ERP can help |
|---|---|
| Employee master data | Maintain structured employee, department, role, location, contract, and employment-history data |
| Job categories | Create consistent job families, grades, roles, departments, and evaluation groups |
| Pay components | Separate base salary, variable pay, allowances, bonuses, commissions, benefits, and other compensation elements |
| Objective criteria | Store and document approved criteria for pay ranges, role levels, performance, progression, and exceptions |
| Approval controls | Route salary changes, bonuses, promotions, and exceptions through defined approval workflows |
| Audit trail | Keep a record of changes, approvals, responsible users, and supporting documentation |
| Reporting | Build dashboards and reports by gender, role category, department, location, pay component, and pay band |
| Employee requests | Create controlled HR workflows for information requests, deadlines, documentation, and responses |
| Budgeting | Connect payroll cost, headcount planning, bonus budgets, and departmental financial planning |
| Corrective action tracking | Record gap reviews, action plans, revised pay decisions, owners, and deadlines |
A strong implementation does not begin with a report. It begins with a clean data model.
For example, the company should be able to distinguish between:
- base salary and temporary allowances;
- contractual bonuses and discretionary bonuses;
- a role grade and an employee’s personal performance level;
- a salary correction and a market adjustment;
- a promotion and a lateral move;
- an approved exception and an undocumented exception.
Without these distinctions, pay-gap analysis can produce numbers but not insight.
A practical Pay Transparency model in SIX ERP
A useful approach is to structure the system around five connected layers.
| Layer | Example information |
|---|---|
| Role architecture | Job title, job family, grade, department, location, skills, responsibility level |
| Employee data | Employment type, working time, start date, manager, leave history, performance data |
| Compensation data | Base salary, variable pay, benefits, allowances, commissions, bonuses |
| Governance | Approval workflows, effective dates, reason codes, evidence, policy references |
| Analytics | Gender pay gap, median gap, pay quartiles, bonus participation, category-level comparison |
This structure gives HR and management a clearer picture than a one-off annual report. It allows the company to identify issues while decisions are still being made.
For example, a dashboard may show that women and men in the same job category have similar base salary, but that men receive a much higher share of variable pay. The issue may be commission eligibility, project assignment, manager discretion, overtime patterns, or a legacy bonus rule. The dashboard identifies the signal; management must investigate the cause.
A practical preparation timeline
Companies should not wait until their first mandatory reporting deadline. The reporting deadline is only the visible end of a longer preparation process.
| Period | Priority actions |
|---|---|
| Now–Q4 2026 | Confirm the final Bulgarian legal position; map current HR, payroll, and compensation data; identify data gaps |
| Q1 2027 | Create job families, worker categories, grading principles, and objective pay-setting criteria |
| Q2 2027 | Clean historical compensation data; classify bonuses and benefits; establish approval and documentation workflows |
| Before 7 June 2027 | Employers with 150+ employees should be able to calculate, validate, and explain their first reporting data |
| 2027 onward | Monitor gaps regularly, respond to employee requests, document justifications, and track corrective actions |
| Before 7 June 2031 | Employers with 100–149 employees should be ready for their first reporting cycle |
For organizations below 100 employees, preparation is still worthwhile. Salary transparency is increasingly expected by candidates, larger customers, investors, and international partners. It is also much easier to build a fair structure at 50 employees than to repair an undocumented salary history at 500 employees.
The questions management should ask now
A company does not need to solve every pay issue immediately. But management should be able to answer the following questions honestly:
- Do we have clear job families and worker categories?
- Can we explain how salaries are set and increased?
- Do our job advertisements include a defined pay range or a reliable process for sharing it?
- Do we ask candidates about previous pay?
- Can we separate base pay from bonuses, commissions, allowances, and benefits?
- Can we calculate the required metrics without manually combining five spreadsheets?
- Can we explain material gender pay differences using objective evidence?
- Who approves pay exceptions, and where is the justification stored?
- Can we respond to an employee information request within two months?
- Do HR, payroll, finance, and management work from the same trusted data?
If the answer to several of these questions is “not yet,” that is not failure. It is the starting point for a structured readiness program.
Final thoughts: compliance is only one part of the value
The Pay Transparency Directive is designed to strengthen equal pay. But companies that prepare well gain more than legal protection.
They gain clearer salary structures, better workforce planning, more disciplined bonus processes, stronger management decisions, improved trust, and a better ability to attract and retain skilled people.
Fair pay needs more than good intentions. It needs data, structure, evidence, and accountable decisions.
SIX ERP can help bring HR data, approvals, payroll-related information, reporting, and management dashboards into one connected system. That gives your company a practical foundation to analyze pay fairly, prepare for Bulgarian and EU reporting requirements, and turn pay transparency into an operational advantage rather than a last-minute compliance project.
