Under Directive (EU) 2023/970, pay is not limited to base salary. Article 3 defines pay as the ordinary basic or minimum wage or salary plus any other consideration, in cash or in kind, that a worker receives directly or indirectly from the employer in respect of employment. Recital 21 says complementary or variable components can include bonuses, overtime compensation, travel facilities, housing and food allowances, training compensation, dismissal payments, statutory sick pay, statutory required compensation and occupational pensions. The Directive also defines pay level as gross annual pay and the corresponding gross hourly pay. Employers should therefore map the substance of remuneration rather than relying only on payroll labels such as salary or wages.
Jurisdiction: European Union
Article 3 Uses a Broad Definition of Pay
The Directive starts with the ordinary basic or minimum wage or salary, but it does not stop there. Article 3 adds any other consideration received directly or indirectly from the employer in respect of employment, whether the consideration is paid in cash or provided in kind. It refers to those other forms of remuneration as complementary or variable components. This means the legal concept is broader than an employer's base-pay field in an HR system. A payment can remain relevant even if it is irregular, contingent, stored under another payroll code or administered by a benefits team rather than through monthly salary processing.
Recital 21 Gives a Non-Exhaustive List of Examples
Recital 21 helps explain what the broad definition can capture. It identifies bonuses, overtime compensation, travel facilities, housing and food allowances, compensation for attending training, payments in the case of dismissal, statutory sick pay, statutory required compensation and occupational pensions. The recital uses these as examples, not as a closed list. Employers should therefore avoid an inclusion checklist that treats anything not named in the recital as automatically outside pay. The better test is whether the worker receives the consideration directly or indirectly from the employer in respect of employment, followed by any more specific treatment required by national implementing law.
Cash and Non-Cash Remuneration Can Both Matter
A benefit does not need to be paid as cash into the worker's bank account to fall within the concept of pay. Article 3 expressly refers to consideration in cash or in kind, while recital 21 mentions travel facilities, housing and food allowances among its examples. This can matter when workers receive materially different reward packages despite having similar salaries. The organisation should identify which non-cash items are remuneration, determine how they are valued for the purpose at hand and document the method consistently. The precise valuation approach should reflect applicable national rules rather than being improvised simply to produce a preferred comparison result.
Pay Level Is a Related but Different Definition
The Directive separately defines pay level as gross annual pay and the corresponding gross hourly pay. This distinction is useful. The definition of pay tells the employer what forms of remuneration can belong inside the concept, while the pay-level definition tells the employer how the resulting amount is expressed for Directive purposes. Recital 22 explains that pay levels should be expressed in gross annual and corresponding gross hourly terms to support a uniform presentation. Compensation data therefore needs both component identification and a consistent time basis, especially where workers are paid hourly, monthly, receive irregular amounts or have different working-time patterns.
Payroll Labels Do Not Decide the Legal Scope
Organisations often use labels such as base salary, allowance, incentive, expense, benefit or one-off payment for administrative purposes. Those labels are useful operationally but they do not by themselves determine whether an item is pay under the Directive. An employer should examine the nature and employment connection of the item, the governing plan or policy, national law, collective agreements and established practice. Genuine reimbursement of a business expense may raise a different question from a fixed travel allowance that forms part of reward. Where classification is uncertain, the methodology should record the issue and the legal or payroll basis used rather than silently excluding the component.
Create a Pay-Component Map Before Analysis
A practical implementation step is to map every recurring and material non-recurring reward component. For each item, record the name, source system, recipient population, frequency, cash or in-kind status, calculation basis and responsible data owner. Link the component to the relevant plan document, collective agreement or policy where one exists. Then classify how it will be handled in employee information processes, equal-pay analysis and Article 9 reporting. This exercise often exposes fragmented data before it becomes a reporting problem. It also creates a defensible audit trail showing that the organisation considered the full remuneration landscape rather than selecting only the easiest salary fields to analyse.
Frequently Asked Questions
Does overtime count as pay under the Directive?
Yes. Recital 21 expressly lists overtime compensation as an example of a complementary or variable component of pay.
Do occupational pensions count as pay?
Recital 21 identifies occupational pensions among the examples of complementary or variable components that should be taken into account. The precise operational treatment should also be checked under national law.
Are only regular monthly payments included?
No. The definition is not limited to regular monthly salary. Variable, indirect and in-kind remuneration can also fall within pay when received from the employer in respect of employment.
Related Guides
Official Sources
Requirements and practices differ by jurisdiction and organisation. Check current local law, official guidance and professional advice for a specific situation.