Pay Transparency Act – What Employers Need to Know

Pay Transparency Act – What Employers Need to Know

The Pay Transparency Act (EntgTranspG) has been in force since July 2017 and aims to help close the wage gap between men and women. Its goal is to increase transparency in pay and to enforce the principle of “equal pay for equal work or work of equal value.” For employers, it is important to know the legal obligations not only to avoid legal risks but also to strengthen employee trust.

Who is affected by the Act?

The EntgTranspG generally applies to all employers in Germany. However, certain obligations only apply from a specific company size:

• Individual right to information: Employees in companies with at least 200 employees can request information on the average gross salary of colleagues of the opposite gender performing comparable work.
• Company review procedures: Companies with more than 500 employees are expected to regularly review their pay structures for equal treatment.
• Reporting obligation: Companies with more than 500 employees and subject to management report requirements (§ 289 HGB) must publish a report on gender equality and equal pay every three or five years.
  

What does the right to information cover?

Employees can request information on:

1. The comparator pay – the median monthly gross salary of a comparison group of the opposite gender
2. Up to two individual pay components – e.g. bonuses, allowances, benefits in kind
3. Criteria and procedures for pay determination – how salaries are set and adjusted
   

The request must be submitted in writing or text form to the works council or – if there is none – directly to the employer. The response must be provided within three months.

Employer obligations and challenges

• Data preparation: Determining comparator pay requires accurate classification of employees into comparison groups.
• Documentation: Criteria and procedures for pay determination should be consistent and transparent.
• Deadlines: Information must be provided on time – late or incomplete responses can lead to legal disputes.
• Data protection: Salary data must be treated confidentially and processed in compliance with the GDPR.

How HRCast can help

The EntgTranspG challenges companies to prepare pay data quickly, fully, and accurately. This is where HRCast can assist:

• Central data hub: HRCast automatically consolidates salary data from HR and payroll systems, reducing manual effort.
• Flexible analyses: Comparison groups can be defined individually in the tool, and median values and pay components can be calculated directly.
• Transparent documentation: Criteria for pay determination can be stored in HRCast and accessed at any time – essential for legally compliant responses.
• Time savings: Instead of manually gathering data from multiple systems, HRCast delivers the relevant metrics with just a few clicks.
  

Opportunities through pay transparency

Although some companies perceive the law as bureaucratic, it offers clear benefits:

• Enhanced employer reputation through demonstrably fair pay policies
• Early detection of unequal treatment and targeted corrective actions
• Employee retention through trust and transparency

Practical tips for companies

1. Proactively review pay structures – not only when requested
2. Establish clear job and role descriptions as the basis for comparison groups
3. Maintain high data quality: keep HR and payroll data up to date for quick responses
4. Use digital tools like HRCast to simplify analysis and documentation
5. Develop a communication strategy to provide information transparently and professionally

Thresholds

Conclusion

The Pay Transparency Act is not just a legal obligation but also an opportunity to make fairness visible. Employers who know, document, and transparently communicate their pay structures minimize legal risks and strengthen employee trust. With an integrated solution like HRCast, necessary analyses can be carried out efficiently, securely, and transparently – a clear advantage in times of growing demands on HR data and compliance.

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