How should employers be preparing for the EU Pay Transparency Directive?

EU member states are in the process of rolling out legislation to comply with the EU Pay Transparency Directive – which must be in place by June 2026.

We know, we know: 2026 feels like a long way off right now, and you have a million other priorities to think about before then.

But it will creep up in no time, so it’s worth getting a head start on pay transparency now.

What are the best steps for employers to take to get prepared for the EU Pay Transparency Directive? Let’s take a look at three key areas:

• Assemble a working group ASAP
• Get prepared for stricter gender pay gap reporting
• Get prepared for increasing the information employees and applicants have on salary

An overall piece of advice: assemble a working group ASAP

We spoke to David Lorimer, a legal director at Lewis Silkin – a law firm that specialises in employment law – about the best first steps for companies in reaction to the EU Pay Transparency Directive.

His advice was that these new rulings on pay transparency will impact and require input from a whole host of stakeholders across the company. So, a good place to start is with assembling a working group with colleagues from all of the relevant functions, particularly: HR/People, benefits, payroll, finance, legal.

The best part about this is that instead of it feeling like you need to be the person to lead the charge within your organisation, suddenly you have a group of people to tackle it with you.

Get prepared for stricter gender pay gap reporting

One of the key implications of the EU Pay Transparency Directive is that it will introduce much stricter gender pay gap reporting requirements for all companies with over 150 employees in the EU.

Some EU countries already have gender pay gap reporting requirements in place which will be changing due to the Directive, whereas others don’t yet have any requirements. Either way it’s worth getting your ducks in a row in terms of gender pay differences well ahead of time.

Companies can get started by:

• Checking which gender pay gap reporting requirements apply. Companies with over 250 employees will need to report annually, whereas companies with 150-249 employees must report every three years.
• Gathering data to identify existing differences. It’s worth knowing where you currently stand on the reporting requirements (mean and median gender pay gap for base salary, proportion of men and women receiving variable pay, mean and median gender pay gap for variable pay, proportion of men and women in quartile pay bands) to see how much work is needed – companies with a gender pay gap of over 5% in any category are required to conduct a further joint pay assessment (see our FAQs for more information).
• Identifying the reasons for gender pay differences. Could there be any unconscious bias within your hiring processes or performance review cycle? What other reasons could there be for gender pay differences? You’ll need to have these explanations ready for reporting – and they’ll help you to find actions to address any gender pay gap issues you do have.

Preparing for increasing the information employees and applicants have on salary

The other key area that the EU Pay Transparency Directive will bring about changes in is salary information for both existing employees and applicants to new job positions.

There will be increased transparency for both, with key changes including:

• Salary range must be given to job applicants before interview
• Job applicants cannot be asked about their salary history
• Pay levels and career progression frameworks must be made available to employees
• Employees have the right to request information about the salary levels of employees who do equal work or work of equal value to them
• Employees are allowed to discuss salary with their colleagues.

To get prepared for these changes now, companies can:

• Check your hiring process and make adjustments needed to ensure that a) salary ranges are included in your job advert template – or you have another way to give them to applicants before interview b) all language across the hiring and compensation process is gender neutral, and c)processes are in place to ensure no one in the hiring process will ask a candidate about their salary history.
• Check your salary bands for different job levels and positions and ensure you’d be comfortable for them to be shared publicly for new job positions. If you wouldn’t be comfortable sharing them, now’s the time to improve your salary band structure to ensure it’s consistent, fair, and in line with market salary benchmarking data.
• Check your level and career progression frameworks with two questions in mind: firstly, do we have clear criteria outlined for pay and progression requirements at each level? and secondly, would we be comfortable with employees having access to our level and progression frameworks? It’s worth considering how they might need to be presented differently for employees to aid understanding.
• Check your standard employment contract and remove the pay secrecy clause if included – this will now be prohibited under the rulings on employee access to information.
• Make a plan for communicating openly with employees about salary regularly. Employees will need to be informed at least once a year about their right to request pay level and career progression information – so you need to know when that will be and in what kind of format. But it’s also worth thinking through wider employee communications touchpoints with regards to the overall changes on pay transparency and gender pay gap reporting e.g. will you explain any changes being implemented in an all-hands meeting? Do managers need to be briefed to answer questions about pay transparency? How will new increased pay transparency impact existing performance and compensation review cycles?

Whilst there are still lots of open questions when it comes to the rollout of the EU Pay Transparency Directive across the different EU member states, we do know that it’s going to be a substantial change in gender pay gap reporting and pay transparency – so our main message here is that it’s well worth starting to prepare now.