The EU Pay Transparency Directive imposes a need for companies in the European Union to take action. Employee comparison groups must be established to identify potential gender pay gaps. Employees are granted extensive and highly detailed rights to information, which must also be actively communicated. Even during the recruitment process, companies must be able to provide information about their remuneration systems. Comprehensive reporting obligations apply for companies with 100 or more employees, requiring the disclosure of remuneration structures. The greater involvement of employee representation bodies and regulatory authorities aims to eliminate gender discrimination in remuneration. These measures are complemented by extensive sanction mechanisms. The directive must be transposed into national law by June 7, 2026. In Germany, however, it is expected that the already-strict regulations of the directive will be further intensified.

Company pensions qualify as remuneration

Many companies have not yet realized that occupational pension schemes fall within the directive’s scope. This is due to the fact that occupational pensions in Germany not only serve as a retirement provision but are also considered a form of remuneration.

Numerous special considerations for company pensions

Be honest: Is your company treating its occupational pension schemes as an afterthought, with no one really paying attention to it? You are in good company. However, the new directive will compel companies to be better prepared. This begins with the obligation to provide specific and detailed information about occupational pension schemes as a component of remuneration during the recruitment process. Reporting and disclosure obligations require a different approach than for standard remuneration components due to the specific nature of vested entitlements, actuarial tables, non-forfeitable claims, and the various financing models of occupational pension schemes (implementation methods and benefit types). In addition to covering the entire workforce, companies must differentiate between the beneficiaries of different pension schemes within the organization.

While retirees and former employees, as non-active employees, are not expected to fall under the reporting obligations of the directive (subject to legislative and judicial developments), they may still be entitled to pension adjustments in cases of discrimination in the past. This is because compensation for an unjustified gender pay gap is required independently of the directive. However, the directive will increase transparency and awareness of the issue. Companies must therefore prepare for an increase in litigation from affected individuals.

Severe cost risks

The urgent need for action is evident. Upward adjustments in salaries can, depending on the design of the pension scheme, directly impact entitlements to occupational pensions. In remuneration-linked systems, salary adjustments can significantly affect pension entitlements, as the core pension rights are impacted. In addition to increased lifelong pension payments, active retirees may also have retroactive claims for at least three, or potentially up to 10 years, including compensation for missed adjustments. Exclusion clauses that often serve as a safeguard for companies regarding standard remuneration components are unlikely to apply to occupational pension schemes. Recalculating pension entitlements may also pose administrative and practical challenges, particularly if older insurance tariffs are no longer available for back payments or if pension components need to be determined for each year individually.

Issue: Discriminatory provisions are widespread

The situation is exacerbated by the fact that numerous pension schemes contain “problematic” provisions. Unsurprisingly, older, typewritten plans often include explicit gender-discriminatory clauses. Common examples include differing start dates for pension payments or varying contribution levels based on gender. However, indirect discrimination is more prevalent and equally problematic. These are provisions that, while not explicitly linked to gender, still disadvantage either men or women upon closer examination.

For instance, part-time employment formulas may be discriminatory depending on their structure. Some pension schemes calculate pensionable salaries using formulas that do not weigh all years of employment equally. This can lead to discrimination, particularly against women, who often have part-time employment periods due to family obligations. The calculation method—whether it prioritizes early career years or years closer to retirement—can significantly impact pension outcomes.

Men can also be affected by discrimination. While it is now rare for companies to explicitly exclude widowers’ pensions in outdated pension schemes, another issue has gained prominence: Since many women have lower occupational pensions due to career interruptions and part-time work, some companies have sought to offset these structural disadvantages. As a result, women have sometimes been granted preferential treatment in pension schemes, such as exemption from deductions or enhanced pension accrual formulas. However, such well-intentioned measures can backfire. Increasingly, men—who may receive higher absolute pension amounts—feel disadvantaged by being denied these benefits. Given the strict European case law on gender equality, such complaints are not always easily dismissed.

Spousal and age-gap clauses are not inherently gender-specific but must meet objective legal standards for validity. They aim to prevent pension funds from being excessively burdened by new, significantly younger partners receiving survivor benefits. The admissibility of such clauses depends on their structure and fairness in individual cases. Nevertheless, it is surprising that some pension plans still contain explicitly gender-based and clearly discriminatory provisions—such as those excluding widows’ pensions when the male spouse is significantly older than the female spouse, sometimes in outdated documents, even referred to as a "mistress clause."

Relatively new issues include gender transitions and the recognition of non-binary genders. The legal implications remain to be seen, particularly regarding reporting obligations under the directive once transposed into national law.

Conclusion: Urgent need for action

To avoid significant financial risks, companies should address gender discrimination in occupational pension schemes proactively and without delay. Discriminatory provisions should be rectified. Strategic and tactical consulting can assist in developing comparison groups and fulfilling reporting obligations to prevent occupational pension schemes from becoming an extraordinary cost risk factor affecting corporate financial performance.