From 2026, EU groups must report gender pay gaps and face reversed burden of proof. Vietnamese subsidiaries are not directly covered — but they are a mandatory data source for group-wide reporting. This is the preparation playbook.
What Directive 2023/970 demands of groups
The Pay Transparency Directive (EU) 2023/970 sets four pillars applying from 2026:
- Right to know: workers may request and receive average pay by gender for the same work/work of equal value.
- Recruitment transparency: job ads must carry pay ranges; asking candidates’ pay history is banned.
- Pay-gap reporting: in-scope companies periodically report gender pay gaps to authorities.
- Joint assessment: unjustified gaps of 5%+ trigger a joint pay reassessment with worker representatives and remediation within a reasonable time.
And the trump card: reversed burden of proof in litigation — the company proves it did not discriminate.
Why Vietnamese subsidiaries are not exempt
The directive applies inside the EU only — but EU groups roll out global common policies for three reasons:
- Consolidated reporting: pay gaps are measured at group level; missing/poor Vietnamese data distorts the whole report.
- Policy consistency: a group cannot preach “pay transparency” in the EU while its Vietnamese subsidiary pays by gut feeling — a reputational risk when the double standard surfaces.
- Future-proofing: Vietnam is refining its labour-law frame; moving early always costs less than catching up.
Data the Vietnamese subsidiary must prepare
- Pay architecture: a clear grade/step system by position — gaps cannot be measured when pay is set person-by-person on whim.
- Job classification: grouping positions of equal value on gender-neutral criteria (skill, responsibility, working conditions) — not by job title.
- Granular data: base pay + allowances + bonuses by gender, position, seniority — HR systems must export it, not hand-counted.
- Adjustment history: pay-rise/bonus decisions with written rationale — the evidence when sued (reversed burden of proof).
The 4-step rollout
Step 1 — Internal audit (2026): measure gender pay gaps at the Vietnamese subsidiary using group methodology; flag groups at 5%+.
Step 2 — Justification: for each gap, check gender-neutral justification (seniority, performance, skill); unjustified = risk.
Step 3 — Remediation: adjust pay, fix appraisal/raise processes, train managers — before figures enter official reporting.
Step 4 — Sustain: annualise gap audits; every new pay decision passes the gender-equality filter.
The ‘pay by agreement’ trap
Vietnamese practice: many subsidiaries pay by “agreement” — each person a different price, no grades, no criteria. Under EU transparency standards this is the highest-risk black box: unjustified gaps = lost suits (reversed burden of proof). Moving from “agreement” to a grade system + written criteria is the hardest yet mandatory step. Managers used to “gut-feel pay” will resist — it needs top-level commitment.
Litigation scenarios and defence
Post-2026, EU workers can sue armed with the right to know: request pay data, compare, and the company must prove no discrimination. The only defence: transparent pay systems + complete data + documented decisions. A Vietnamese subsidiary supplying clean, timely data to the group contributes to the defence — EU litigation can subpoena group-wide data, including Vietnam.
Frequently asked questions
What does EU Directive 2023/970 require?
Four pillars from 2026: right to know average gender pay, pay ranges in job ads, periodic pay-gap reporting, joint assessment for unjustified 5%+ gaps; plus reversed burden of proof.
Are Vietnamese subsidiaries covered?
Not directly (EU-only), but they must supply data for group consolidated reporting and usually fall under global common policy.
What data must a Vietnamese subsidiary prepare?
Clear grade/step pay architecture, equal-value job classification on gender-neutral criteria, granular pay data by gender/position/seniority, and documented pay decisions.
What is risky about ‘pay by agreement’?
The highest-risk black box under EU transparency: unjustified gaps = lost suits under reversed burden of proof; move to grades + written criteria.
Contact FLAT Law Firm
FLAT Law Firm advises groups and Vietnamese subsidiaries on EU pay-transparency rollout: gap audits, pay architecture, the 4-step process. Contact us in 2026.
