Have you ever wondered how much your colleague in the same position as yours earns? You will soon be able to find out for yourself, perhaps as early as June 2026, if Luxembourg complies with European law on time.

The Council of the European Union adopted a directive on remuneration transparency in April 2023, and member countries have until 7 June this year to transpose it into national law. The idea behind it is to reduce the gender pay gap, which stood at 12% – the average difference in gross pay per hour between men and women – in the EU in 2020, according to data published by Eurostat in 2023.

The new transparency mechanism rules will be “applicable in Luxembourg as soon as the national law transposing this directive comes into force”, the labour ministry told Virgule.

For the moment, however, there is no precise timetable for this law, even though “a preliminary draft law was drawn up under the former Labour Minister Georges Mischo,” the ministry said.

The final draft bill is expected to be put together in the “first quarter of 2026” at the earliest, and will then be submitted to the Government Council for approval, the ministry said. It would then be passed to parliament where it will be scrutinised in committees and by the State Council before deputies can vote on it. Only then will it come into force in Luxembourg.

“Once again, Luxembourg is unfortunately running the risk of being late with the transposition of an European directive,” said Martine Mirkes, deputy director of the Luxembourg Chamber of Employees. Luxembourg, as many other EU countries, routinely misses deadlines to implement EU directives.

What can we expect in terms of transparency rules?

What changes can employees and companies expect in terms of pay transparency?

In the broadest sense, the tone set by the directive is clear: companies must provide their employees with information “on average levels of pay, broken down by gender”, and this applies to workers in equivalent positions or doing “work of equal value”.

Employers must also justify the “criteria used to determine pay and career progression, and they must be objective and gender-neutral”. This measure concerns both existing employees and those applying to new jobs.

Another new feature of the directive is that employers will no longer be able to ask questions about applicants’ previous salaries, and will be obliged to present an initial salary or a salary range for the compensation they will earn at the company.

The measure also provides for a whole disciplinary section to be dealt with properly, since companies with “more than 250 employees are required to notify the competent national authority each year of the pay gap between women and men within the organisation”.

Smaller organisations will also have to follow the procedure, but only every three years, while those with fewer than a hundred employees will have no obligation to report.

Pay differentials in figures in Europe and Luxembourg

The directive on pay transparency at European level was adopted with the aim of reducing the persistent pay gap in the EU. According to data by Eurostat in 2023, the pay gap between women and men was between “12% and 12.7% on average in the European Union”. Overall, this means that gross pay per hour for women is around 12% lower than for their male counterparts.

This difference in pay has longer-term consequences by gender. The gap in retirement pensions between women and men is estimated at 26% average in the EU. This gap is even greater in Luxembourg, where it has been estimated at 33% in 2024, according to OECD figures. This difference can also be explained by the fact that women make greater use of part-time work, for example.

“We want to strike a good balance between effectively protecting employees’ rights and avoiding creating excessive administrative burdens for companies, particularly small and medium-sized enterprises”, the labour ministry told Virgule.

Companies will be able to adapt, but this will require a clear framework, practical tools and targeted exemptions to limit the impact on their operations and competitiveness

Union des entreprises luxembourgeoises (UEL)

If the annual remuneration report reveals a difference of more than 5% that cannot be justified by the company on the basis of objective criteria, then the company will have to “take appropriate measures” as quickly as possible under the EU directive.

Employees who have been the victims of discrimination based on pay could then receive compensation. The directive even specifies that “the burden of proof in cases of discrimination, which traditionally rested with the employee, will now lie with the employer: he will have to prove that he has not infringed EU rules”.

In practical terms, the aim of this directive is to standardise the rules between countries and provide better information and communication on pay transparency. “Luxembourg has one of the lowest pay gaps – even slightly in favour of women – in the European Union with -0.9% in 2023”, the labour ministry said.

Even if it puts this equality into perspective “in terms of hourly pay”, the annual pay gap nevertheless remains in favour of men. “In 2022, men will on average have higher annual incomes than women, with an average annual salary of €73,154 compared to €62,975, mainly due to higher bonuses and longer working hours, with women working more part-time,” the ministry said.

‘Not a revolution’ for companies in the banking sector

“In Luxembourg, companies are already required by the Labour Code to respect equal pay for men and women”, said the UEL. In practical terms, however, things can be very different depending on your branch or the collective agreement that applies to it.

The banking sector is already well versed in this area: “The collective labour agreement for the banking sector, drawn up jointly with the social partners, already provides for an objective and neutral salary classification system”, said Paul Wilwertz, head of communications at the Luxembourg Bankers’ Association.

The collective agreement highlights five objective criteria, such as knowledge, complexity, impact, human contacts, team management, coordination and expertise. Each criterion is broken down into several levels corresponding to points, giving access to a classification associated with a specific pay scale.

“The first individual communications may give rise to questions,” said Veronika Stepanova, head of human resources at BIL. “We are convinced that, in the long term, greater transparency will help to dispel misperceptions and build trust. It should be noted that the analysis of salary practices is already an integral part of BIL’s human resources operations”, she said.

This is not a revolution, but an acceleration

Veronika Stepanova

Head of human resources at BIL

This same trust will be a driving force in “demystifying a subject that is sometimes considered opaque”. “By harmonising practices at European level and increasing requirements, the directive represents a major change in the way companies approach pay, particularly in line with the expectations of the new generations,” said Stepanova.

“This is a major step forward for employees’ rights, particularly in sectors where companies do not yet have a collective labour agreement with a pay grid,” said the CSL’s Mirkes.

Human resources departments or company managers will be responsible for applying the measures of the new law on pay transparency, and will therefore need to be trained accordingly. The labour ministry has also confirmed there will be trainings for staff representatives.

(This article has first been published by Virgule. AI translated, with editing and adaptation by Lucrezia Reale.)