Pay Transparency: What’s Changing for Businesses

With Legislative Decree No. 96/2026 (the “Pay Transparency Decree”), effective as of 7 June 2026, Italy has implemented Directive (EU) 2023/970 on pay transparency, introducing a new framework of obligations aimed at strengthening the principle of equal pay between men and women for the same work or work of equal value. The Pay Transparency Decree forms part of the broader framework established by the Italian Equal Opportunities Code, incorporating its key definitions, enforcement mechanisms and sanctions. Rather than introducing a standalone regime, the Decree further develops Italy’s anti-discrimination legislation.

The New Regulatory Framework and Transparency Obligations

The most significant innovation introduced by the Pay Transparency Decree is the promotion of greater pay transparency. The European legislator starts from the premise that, without access to salary-related information, employees are unlikely to identify and challenge potential pay discrimination. Accordingly, the Decree already affects the recruitment phase by requiring employers to draft job advertisements and vacancy notices using gender-neutral criteria and to indicate either the initial salary or the relevant salary range applicable to the position, together with the relevant provisions of the applicable collective bargaining agreement.

Employers are also prohibited from requesting information regarding candidates’ current or previous remuneration. This practice, particularly common when employees move from one employer to another, has long been considered one of the factors contributing to the persistence of historical pay disparities. Furthermore, upon hiring, employers must provide employees with information on the criteria used to determine remuneration, the applicable pay levels and the criteria governing salary progression, subject to certain simplifications for employers with fewer than 50 employees.

Right to Information, Pay Comparison and Reporting Obligations

A cornerstone of the new legislation is the employees’ right to pay information. Once a year, each employee may request written information regarding the average pay levels, broken down by gender, of employees performing the same work or work of equal value. Employers are required to respond within two months. While individual employees’ salaries remain confidential, workers will be entitled to receive aggregated data capable of revealing any unjustified pay disparities.

The concept of “pay level” assumes particular importance under the new framework. It includes the employee’s gross annual remuneration, the corresponding gross hourly rate and all fixed and recurring remuneration components. By contrast, remuneration elements granted on an individual basis and justified by objective criteria—such as productivity bonuses, MBO or LTI incentives, overtime premiums and individual salary supplements—are excluded from the definition of pay level. This differs from the broader concept of “remuneration”, which encompasses all monetary and non-monetary benefits paid directly or indirectly by the employer in connection with the employment relationship, including variable and supplementary remuneration.

Pay comparison becomes the primary mechanism for identifying potential discrimination. The Pay Transparency Decree distinguishes between “the same work”, referring to employees classified under the same contractual level and legal category, and “work of equal value”, referring to comparable professional roles assessed on the basis of skills, responsibilities, working conditions and any other relevant factors. Employers may also adopt their own job classification and evaluation systems, provided these are based on objective and gender-neutral criteria.

Companies employing at least 100 employees will be subject to more stringent reporting obligations. They will be required to prepare periodic reports on the gender pay gap covering not only base salary but also variable remuneration, fringe benefits and career progression. Where an unjustified gender pay gap exceeding 5% emerges, employers must carry out a joint pay assessment together with employees’ representatives in order to identify the causes of the disparity and implement appropriate corrective measures.

Impact on Businesses: Compliance, HR Governance and Reputational Risk

The new regulatory framework requires companies to change their approach to the management of remuneration policies. Pay transparency can no longer be treated as a mere formal compliance obligation; rather, it requires clear, documented and consistent internal systems capable of explaining why employees who appear comparable may receive different economic treatment.

For companies, the first impact concerns the recruitment phase. Job advertisements will need to be reviewed to include salary ranges consistent with the role offered and drafted in gender-neutral terms. Interviews will also need to be managed more carefully, avoiding questions regarding candidates’ current or previous remuneration. This is a significant change, particularly in contexts where individual negotiation has historically played an important role in determining compensation packages.

A second aspect concerns the need to map roles, levels, benefits and variable remuneration components. Companies must be able to explain, including through proper documentation, the reasons for any pay differences: seniority, performance, responsibilities, specific skills, individual targets or particular circumstances will need to be supported by objective and verifiable criteria. Without such traceability, even unintentional differences may give rise to claims.

The issue is also particularly relevant from a reputational perspective. Pay transparency affects internal trust, talent retention and the company’s ability to attract qualified candidates. In a labour market increasingly focused on fairness, inclusion and social sustainability, unclear salary policies may become not only a legal risk, but also an organisational and reputational one.

Sanctions also remain relevant. In the event of established discrimination, employers may be exposed to damages claims, fines and, in the most serious cases, the loss of public benefits or temporary exclusion from incentives and public procurement procedures. However, the key point for businesses is not merely to avoid sanctions, but to build remuneration systems that are robust, defensible and aligned with their HR strategy.

Pay transparency therefore becomes a lever of corporate governance. Companies that start early in reviewing recruitment procedures, classification systems, progression criteria and incentive policies will be able to reduce litigation risk while strengthening their credibility vis-à-vis employees, candidates, investors and stakeholders.

The new legislative framework therefore requires employers to undertake a comprehensive review of their HR policies, including recruitment procedures, salary structures, internal job mapping, criteria governing benefits and variable remuneration, as well as the adoption of gender-neutral job classification and evaluation systems. Pay transparency should no longer be viewed merely as a compliance obligation, but rather as a governance tool capable of strengthening internal accountability while reducing litigation risks.

The first practical step for employers should be the review of recruitment procedures, particularly job advertisements, salary ranges and interview practices, ensuring compliance with the new prohibition against requesting candidates’ salary history. At the same time, companies should begin mapping internal positions, pay structures and remuneration policies in order to demonstrate—both substantively and through appropriate documentation—that no direct or indirect gender-based discrimination exists.

Ultimately, the Pay Transparency Decree represents a significant shift in perspective. Equal pay is no longer left solely to individual enforcement by employees but becomes an issue of prevention, transparency and corporate accountability. In an increasingly competitive labour market where equality, diversity and sustainability play a growing role, the ability to implement transparent and objective remuneration systems may become not only a compliance requirement but also a strategic competitive advantage.