When can differences in pay or treatment be justified under EU law?

Short answer

Seniority, performance, location and collective bargaining can explain different treatment, but none is an automatic defence. Ask whether workers are comparable, whether a protected ground is engaged, and whether the measure is direct discrimination or a neutral-looking rule that particularly disadvantages a protected group.

Direct discrimination usually needs a specific statutory exception. Indirect discrimination requires a legitimate aim and a criterion that is suitable and no more restrictive than necessary. It should be predefined, job-relevant, consistent and capable of explaining the difference.

Seniority has a limited advantage because experience normally improves performance, but workers can raise serious doubts about that link. Performance must be measured without bias. Different locations may reflect real working conditions or recruitment markets, but workers at separate sites can still be compared. A collective agreement deserves respect, yet it must itself comply with EU equality law.

The decisive issue is evidence connecting the chosen rule to the employer's asserted aim.

Start with the protected ground and type of discrimination

Article 157 TFEU requires equal pay for women and men doing equal work or work of equal value. Directive 2006/54/EC, implemented through national law, prohibits direct and indirect sex discrimination in remuneration. Its definition permits an apparently neutral criterion only where it is:

“objectively justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary”. — Directive 2006/54/EC, Article 2(1)(b)

That is a proportionality test, not a request for a plausible explanation. The employer must identify the real aim, demonstrate how the criterion advances it and address less discriminatory alternatives.

Directive 2000/43/EC applies a similar test to racial or ethnic origin. Directive 2000/78/EC covers religion or belief, disability, age and sexual orientation. Direct differences need a specific exception. Age distinctions may exceptionally pursue legitimate employment-policy, labour-market or training aims by appropriate and necessary means. Disability also requires reasonable accommodation.

The directives are addressed to Member States, so national transposition and procedure matter. Article 157 is different: in Tesco Stores, C-624/19, the Court of Justice confirmed its direct effect between private parties for work-of-equal-value claims.

Seniority is usually defensible—but the link can be challenged

In Cadman, C-17/05, the Court of Justice Grand Chamber considered a pay system in which women generally had shorter service. Rewarding acquired experience was a legitimate aim. The Court explained:

“Length of service goes hand in hand with experience, and experience generally enables the worker to perform his duties better.” — Court of Justice, Cadman, C-17/05, paragraph 35

An employer normally need not prove that every additional year improves performance. But if a worker raises serious doubts—for example, service bears little relation to the role or career interruptions are counted inconsistently—the employer must show that the assumption fits the job.

Seniority must also be distinguished from age. In Hennigs and Mai, joined cases C-297/10 and C-298/10, an age-based entry step in a collective pay scale went beyond what was necessary to reward experience. An older new recruit could receive credit without having more experience. Actual service or professional experience was a better-tailored criterion.

The Court's 2026 judgment in SG v Gemeinde Wien, C-757/24, illustrates the other side. It accepted a rule that counted certain pre-recruitment periods at half value, subject to a three-year ceiling, because the ceiling applied regardless of the age at which the experience was acquired. The legal distinction followed an age-neutral rule, not age itself. The lesson is to test how a seniority formula actually operates, rather than infer discrimination from its effect on an individual worker.

Performance, training and flexibility need a job-specific design

Performance pay is capable of being lawful, but “performance” is a conclusion, not a measurement method. The indicators must relate to the work, be knowable, be applied consistently and avoid embedding stereotypes—for example, rewarding visibility or unrestricted availability when output or skill is the real aim.

In Danfoss, Case 109/88, an opaque mobility, training and seniority system produced lower average pay for women, shifting the burden to the employer. Training or adaptability could be rewarded only where important to the tasks. A neutral-sounding “mobility” label could not itself justify systematic disadvantage.

The newer Directive (EU) 2023/970 required Member States to transpose strengthened pay-transparency rules by 7 June 2026. Article 6 says of pay-setting and progression rules:

“Those criteria shall be objective and gender neutral.” — Directive (EU) 2023/970, Article 6(1)

Through national implementation, workers should access those criteria; Member States may exempt employers with fewer than 50 workers from the progression limb. Article 4 identifies skills, effort, responsibility and working conditions as work-value factors. The applicable national measure must still be checked.

Location can matter, but separate sites do not end the comparison

A location allowance may reflect working conditions, living costs, travel or a recruitment shortage. Evidence must show that the boundary tracks that aim and that the differential is proportionate. Historic practice or unsupported “market rates” are weaker than current data applied consistently.

Location also does not necessarily prevent comparison. Tesco Stores held that women in stores could compare their work with men in distribution centres at different establishments where the same employer was the single source of the pay conditions and could restore equal treatment. Different sites may be relevant to value or justification; they do not automatically make workers legally incomparable.

Enderby, C-127/92 shows the narrower role of labour-market evidence. A shortage of suitable candidates and the need to attract them with higher pay could be an objective economic ground, but only to the extent it actually explained the differential. Proportionality remained for the national court.

Collective bargaining is context, not immunity

In Enderby, pay for female-dominated and male-dominated jobs of assumed equal value came from separate bargaining processes. The Court held that this fact:

“is not sufficient objective justification for the difference in pay between those two jobs.” — Court of Justice, Enderby, C-127/92, operative point 2

Otherwise, equal pay could be circumvented simply by splitting negotiations. Likewise, Hennigs and Mai confirmed that collective agreements must comply with Directive 2000/78. Social partners have broad discretion to balance employment interests, but collective autonomy did not validate an age-based salary step.

The same discipline applies to collectively agreed supplements. In KfH Kuratorium, joined cases C-184/22 and C-185/22, a rule paid part-time workers an overtime supplement only after they exceeded full-time hours. It was indirect sex discrimination if it disadvantaged a significantly higher proportion of women, and the asserted aims of deterring overtime and protecting full-time workers did not justify it.

Evidence that makes a neutral criterion credible

For each difference, record:

1. the protected-ground risk and suitable comparator or disadvantaged group;
2. the exact criterion and when it was adopted;
3. the legitimate operational or employment-policy aim;
4. job evidence connecting the criterion to that aim;
5. group-impact data and consistent application across comparable workers;
6. less discriminatory alternatives considered; and
7. the calculation showing why the size and duration of the difference are necessary.

Once facts support a presumption of discrimination, EU-derived national rules generally shift the burden. A post-claim justification that conflicts with actual decisions or cannot explain the amount is weaker than a documented system tested before use.

Conclusion

EU law does not maintain an approved list of neutral pay criteria. It asks what the criterion really measures, whom it disadvantages and whether the design is proportionate to a legitimate aim. Seniority often reflects experience, but that assumption can be rebutted. Performance and location require specific, consistent evidence. Collective bargaining may support a carefully balanced solution, but cannot authorise discrimination. The strongest justification is transparent, job-related and no broader than necessary.

Sources

• Article 157 TFEU
• Directive 2006/54/EC on equal treatment of women and men in employment
• Directive (EU) 2023/970 on pay transparency
• Directive 2000/78/EC establishing a general framework for equal treatment in employment
• Directive 2000/43/EC implementing equal treatment irrespective of racial or ethnic origin
• Court of Justice, Danfoss, Case 109/88
• Court of Justice, Enderby, C-127/92
• Court of Justice, Cadman, C-17/05
• Court of Justice, Hennigs and Mai, joined cases C-297/10 and C-298/10
• Court of Justice, Tesco Stores, C-624/19
• Court of Justice, Bilka, Case 170/84
• Court of Justice, KfH Kuratorium, joined cases C-184/22 and C-185/22
• Court of Justice, SG v Gemeinde Wien, C-757/24