Harder pays better, and gear has a level

Hard, Epic and Legendary now drop higher item levels, rarer elite loot and bigger boss hoards, and every item has a level requirement.

What the hard modes pay

Harder modes pay in quality, not in a flood. There are more foes on Hard, Epic and Legendary, and each ordinary kill still pays only its share. The new rewards come from item level, elites and bosses.

Higher item levels. Everything foes and chests drop is 2 / 3 / 4 item levels above the foe on Hard / Epic / Legendary. That means better materials and stronger affixes. The bonus stops at the world tier's top level (20 on Normal), so the next world tier is still the way up.
Elites always pay. On Epic and Legendary every elite drops at least one rare or better item.
Bigger boss hoards. Bosses drop 5 / 6 / 7 items plus their epic-or-better piece (Medium: 4).
Legendary only: every boss has a 10% chance of an extra legendary. From level 10, 25% of those are a unique instead.
Legendaries still unlock at the same point in the campaign on every mode: a harder mode raises item levels, not how early legendaries appear.

Difficulty modes, straight from the game's rule table
	Easy	Medium	Hard	Epic	Legendary
Foe HP / damage	×1 / ×1	×1.5 / ×1.5	×2 / ×2	×3 / ×3	×4 / ×4
Rescaling floor (HP / dmg)	×0.85 / ×0.75	×0.9 / ×0.85	×1 / ×1	×1 / ×1	×1 / ×1
Foe HP per sellsword	none	none	+16%	+23%	+29%
Rescaling ceiling (HP / dmg)	×1.35 / ×1.35	×1.45 / ×1.45	×1.6 / ×1.55	×1.8 / ×1.7	×2.5 / ×2.3
Pack size · elite packs	×1 (max 8) · —	×1.3 (max 10) · +10%	×1.6 (max 12) · +18%	×2 (max 16) · +28%	×2.4 (max 20) · +38%
Extra pack per room	—	15% chance	25% chance	50% chance	70% chance
Ordinary kills pay (loot, gold; XP is full)	full	67%	50%	37%	28%
Elite affixes	baseline · max 3	baseline, 50% chance of +1 · max 3	+1, 30% chance of +1 · max 4	+1, 50% chance of +1 · max 4	+1, 80% chance of +1 · max 5
Elite HP / damage (extra)	×1 / ×1	×1.15 / ×1.1	×1.3 / ×1.2	×1.5 / ×1.35	×1.7 / ×1.5
Boss damage (extra)	×1	×1	×1.05	×1.1	×1.15
Boss soft enrage	never	after 240s, +10% per 15s	after 200s, +15% per 15s	after 160s, +20% per 15s	after 120s, +25% per 15s
Elite & boss special cooldowns	×1	×0.95	×0.9	×0.85	×0.8
Foe speed · aggro range	×1 · ×1	×1 · ×1.1	×1.04 · ×1.15	×1.06 · ×1.2	×1.08 · ×1.25
Summon hunters	none	30% of foes	50% of foes	70% of foes	85% of foes
Damage summons take	×1	×1.3	×1.5	×1.75	×2
Melee cleave onto summons	—	25%	40%	50%	60%
Stairs: heal · flask	35% · +1	35% · +1	25% · +1	20% · none	15% · none
Potion drops	×1	×0.9	×0.75	×0.7	×0.6
Gold lost on death	10%	15%	20%	25%	30%
XP	×1	×1.2	×1.4	×1.6	×1.8
Gold find · magic find	— · —	+20% · +25%	+35% · +50%	+50% · +80%	+65% · +110%
Legendary pity	normal	83% as long	67% as long	53% as long	42% as long
Drop item level	foe level	foe level +2	foe level +3	foe level +4	foe level +4
Elite drops	normal odds	normal odds	≥1 rare+ each	≥1 rare+ each	≥1 rare+ each
Boss items	4 + 1 epic+	5 + 1 epic+	6 + 1 epic+	7 + 1 epic+	8 + 1 epic+
Boss extra legendary	—	—	—	10% (25% unique)	20% (30% unique)

Level requirements

Every item now needs a hero level to wear: its item level − 4, whatever its rarity. What an on-level foe drops is always wearable, on every difficulty, but a level-1 hero can't wear endgame gear from the stash or a trade.

Required level = item level − 4 (at least 1, at most 20)
Item level	1	5	8	10	12	16	20	24	30
Requires level	1	1	4	6	8	12	16	20	20

The item card shows Requires Level N, in red when you're below it. Bag and stash tiles dim the icon and tag the level.
Items you can't wear yet still drop, and Salvage all and Sell junk never sweep away an upgrade you're growing into.
Sellswords follow the same rule at their own level. A hero who has reached level 20 keeps wearing its gear after a Rebirth.
Anything that raises an item's level raises its requirement too (a unique's Ascend always lands at your level). Smithy upgrades don't change it.
If a hero or sellsword was wearing something above its level, it went to your bag (or the stash when the bag was full) when you loaded. Nothing was lost.