LinkedIn, Headhunting & Salary Ranges: What the EU Pay Transparency Directive Means for Active Sourcing

Although the EU Pay Transparency Directive has not yet been transposed into German law and therefore generally has no direct effect between private parties, it is already becoming clear that it will fundamentally change recruitment processes. In future, applicants must receive information on the initial pay level or pay range in good time before salary negotiations. But how can this requirement be reconciled with modern recruitment methods such as active sourcing, where there is neither a conventional job posting nor a formal invitation to interview?

In active sourcing, companies proactively approach potential candidates. Recruiters identify interesting profiles on professional networks such as LinkedIn, make contact and thereby initiate the recruitment process. The individuals approached are often not actively seeking a new position. At the same time, typical features of a conventional application process are absent: there is neither a job posting nor a formal application. The exchange begins informally and without a predetermined outcome. This raises the question of when the transparency obligations under the Directive are triggered.

Under Article 5(1) of the EU Pay Transparency Directive, job applicants are entitled to receive information on

The concept of pay is to be interpreted broadly in this context. Under the Directive, it includes not only basic salary, but also any other remuneration, whether in cash or in kind, paid by the employer.

The information must be provided in sufficient time to enable informed and transparent salary negotiations. By way of example, the Directive identifies three possible means of providing the information: in a published job posting, prior to the job interview, or “otherwise”. This list is deliberately non-exhaustive, although it has nevertheless led, particularly in media reporting, to the incorrect assumption that salary information will in future have to be included mandatorily in the job posting itself.

In multi-stage procedures, the information therefore does not necessarily have to be provided before the very first meeting, for example where an assessment center is held beforehand. What matters is that the information is communicated before the meeting in which salary could first be negotiated.

The Directive appears to be drafted primarily with the conventional recruitment process in mind: job posting, application, interview and hiring.

In active sourcing, these clear procedural milestones are often absent. The purpose of the provision is therefore decisive: job applicants should be able to make informed decisions about the expected remuneration, and information asymmetries should be eliminated. Transparent salary negotiations accordingly presuppose a link to a specific position. Only at that point is the information obligation triggered.

This gives rise to the following practically relevant distinction:

1. Informal introductory discussion without reference to a specific position

The initial contact often serves merely to get to know the candidate and their professional background. Whether, and for which position, the person may be considered remains open. Functionally, such a discussion is comparable to reviewing a written application. The employer obtains an overview of the candidate’s qualifications and motivation. At this stage, there is not yet any obligation to disclose pay information.

2. Discussion relating to a specific position

As soon as a specific position is being considered for the candidate and a discussion is to take place in which that position — and therefore potentially also the salary — is to be addressed, the information obligation is triggered. The pay information must then be provided in good time before that discussion.

3. Direct transition to an interview

If the recruiter can already ascertain all relevant information from the LinkedIn profile and has a specific position in mind, so that a substantive interview is arranged directly after the initial exchange of messages, the same rules apply as in a conventional recruitment process. The pay information must then already be provided in the course of the conversation, for example on the platform, and in good time before the interview.

It remains to be seen what sanctions the German implementing legislation will provide for. Possible consequences include administrative fines as well as damages or compensation claims by rejected applicants.
Compliance with the information obligations is therefore not a mere formality; in future, non-compliance is likely to entail legal and financial risks.

Under Article 5(3) of the EU Pay Transparency Directive, employers may no longer ask applicants about their current or previous remuneration. This also applies to any discussions conducted in the context of active sourcing.

The EU Pay Transparency Directive presents recruitment professionals and HR departments that rely on active sourcing with new, but manageable, challenges. Not every initial contact triggers an information obligation. However, as soon as a specific position becomes the subject of the discussion, the pay information must be provided in good time before any salary negotiation.

Companies should adapt their processes now. The key recommended actions are: