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A recent case in the German Federal Labour Court has strengthened the enforcement of equal pay claims and provided some helpful guidance for employers ahead of expected draft legislation to transpose the EU Pay Transparency Directive into domestic law. This article looks at the key takeaways for businesses and what it means for employers in Germany in practice.
Germany has not yet published a draft bill to implement the EU Pay Transparency Directive. While the June 2026 transposition deadline remains unchanged, the national framework is still pending.
Even so, pay equity enforcement in Germany is already developing in ways that matter for employers. In a recent case, the German Federal Labour Court (Bundesarbeitsgericht, "BAG") clarified key principles for equal pay claims. Although the case arose in the normal course of litigation, the outcome aligns closely with the direction of the EU Pay Transparency Directive: making equal pay rights more enforceable and requiring employers to justify pay differences with clear evidence.
What the case was about
A female employee in a leadership level claimed she was paid less than a named male colleague for equal or equivalent work. The employer had introduced an internal pay transparency dashboard that allowed employees to compare their own pay with gender-specific median values for the relevant peer group. Over several years, the claimant's full-time equivalent remuneration was below the median.
The case was not limited to base salary. It also covered bonus payments, pension-related remuneration components (linked to pay level), and long-term incentive elements such as phantom share allocations and related dividend equivalents.
Key takeaways from the BAG decision
1) A single named comparator can be enough
The BAG confirmed that an equal pay claim may be built on a one-to-one comparison with one named male colleague ("pair comparison"). Employees do not need to rely on a wider statistical group comparison. This matters in practice: claims can be constructed around a single individual pay outcome, which increases the risk of litigation, especially where pay is set within broad bands or through discretionary processes.
2) The employer must explain early
If an employee shows a pay gap compared to a male comparator for equal or equivalent work, the case generally moves quickly to the employer's side: the employer must provide an objective explanation for the difference. The BAG rejected attempts to impose additional "thresholds" before this shift happens (for example, requiring the employee to show that discrimination is "predominantly likely"). In other words: a proven pay difference in a valid one-to-one comparison is typically sufficient to require the employer to justify the gap with evidence.
3) "Pay" includes much more than salary
The BAG applied a broad EU-law concept of remuneration. Equal pay exposure is not limited to base pay and covers the full remuneration package, including variable pay (bonus mechanisms), remuneration-linked pension building blocks and long-term incentives / share-based or value-based plans.
For international employers, this is a critical point: equal pay analysis must include variable and deferred components, not only salary.
4) Transparency benchmarks don't cap liability
The Court clarified that median values shown in transparency tools are information metrics, not legal limits. If unequal pay cannot be objectively justified, the claim may lead to full equalisation to the comparator, not merely an adjustment to the median benchmark.
5) Justification is possible — but only with structured documentation
Employers can rebut the presumption with objective reasons such as performance, experience, responsibility scope, or leadership capability (including soft skills). However, generic statements will not suffice. Employers must be able to show:
- which criteria were applied,
- how they were weighted, and
- how they led to the specific individual pay decision.
This is where many organisations are vulnerable: the legal risk is less about the existence of differences and more about whether the company can prove a consistent and non-discriminatory decision process.
What this means for employers in Germany in practice
For HR teams, the decision reinforces a shift towards "forensic readiness". Equal pay disputes increasingly turn into governance and evidence cases, particularly where pay is set within ranges, negotiated individually, or adjusted in calibration rounds.
A practical compliance response should focus on a few core areas:
- Pay governance: ensure there are defined criteria for pay placement within bands and that decisions are recorded, not merely assumed.
- Performance processes: strengthen scorecards, calibration logic and documentation—particularly where subjective elements play a role.
- Variable pay and LTIs: review allocation rules and decision-making for traceability; reduce unchecked discretion or ensure it is properly documented.
- Role architecture: maintain robust job levels and role descriptions to support distinctions in responsibility and impact.
- Preparedness: assume employees may build claims around a named comparator and be ready to provide a clear, evidence-backed narrative quickly.
In short, this case sends a clear message: employers operating in Germany should treat equal pay not merely as a policy topic, but as a process discipline - covering salary, bonus, pensions and long-term incentives - and supported by documentation that stands up to scrutiny.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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