The EU Pay Transparency Directive isn't just about reporting – it's fundamentally reshaping how companies structure, evaluate, and justify compensation decisions across Europe.
In this month's Reward Hour, Vaso Parisinou and Anita Lettink explored where companies currently stand in their EUPTD journey, revealing critical readiness gaps by country, company size, and industry.
They shared practical insights on tackling one of the directive's most complex challenges: defining and evaluating "work of equal value in practice, and building the foundational structures that make transparent, defensible pay decisions possible.
The discussion included:
As always, there will be plenty of opportunity to ask questions, share experiences, and learn from fellow Reward leaders navigating EUPTD compliance.
If you're more of a reader than a watcher, here's a few of the most interesting insights from Vaso and Anita’s discussion on EUPTD.
A live poll during the session revealed that 44% of attendees are still assessing what they need to do, which Anita confirmed tracks with what she's seeing across the market – with only around 9% of European companies close to fully ready.
Part of the reason for the slow progress is that many companies are waiting for national legislation before acting. But Anita's advice was clear: don't wait. The Directive itself covers 90% of what you need to do to prepare. Read it, work from there, and treat any national transposition as a 10% adjustment on top. The first compliance deadline is June 7th this year, with the first reporting deadline following in June 2027.
Larger global companies tend to be better prepared because they have a more robust team and existing setup, but it's not just a size story.Companies operating under collective labour agreements, which are common across many European industries, often already have job classification, grading, and salary bands built in. For them, compliance is more about verification than construction.
On the other hand, companies that have gone through mergers and acquisitions might face a particularly tough challenge: legacy pay structures from different organisations sitting side-by-side can create pay gaps that are historical, but will still require explanation and remediation.
The Directive requires companies to identify work of equal value, but you can't rely solely on job titles or market benchmarks to do this.
Anita pointed to point factor methods as the gold standard: breaking jobs down into factors like qualifications, effort, responsibility and working conditions, then assigning weighted points to each.
To make this concrete, imagine assigning 30% of a job's total value to qualifications, which equals 300 points, then dividing those across sub-factors like experience, education, and ability based on their relative importance to the role.
This also means looking cross-functionally.
A marketing analyst, an HR analyst, and an IT analyst may score similarly on point factors even if their market rates and job content differ, and those differences need to be justified through objective criteria like documented labour shortages rather than assumed seniority of function.
What matters most is that whatever evaluation method you choose is objective, consistent, and repeatable. If employee A and employee B both ask why they're paid what they're paid, the explanation must be identical in structure.
This consistency is what holds up both internally and, critically, in court, because Anita is confident we will start to see litigation once the Directive kicks in.
💡 Practical application: If you haven't already, start documenting your job evaluation methodology in a way that any manager could pick up and apply consistently. Test it by running it across a handful of cross-functional roles at the same level and see whether the outcomes feel defensible. If they don't, that's a signal to revisit your factors and weightings before you're under pressure to explain them.
One of the most significant cultural shifts the Directive demands is moving away from subjective justifications for pay decisions. Saying "she works really hard" is no longer sufficient.
Instead, compensation conversations need to be grounded in measurable outcomes. Rather than saying someone deserves a pay raise because they work hard, the conversation should sound more like: she increased sales by 40% while the team average was 10%, therefore her raise is higher.
The same logic applies to recognition awards. They remain permissible, but the criteria for receiving them must be objective and accessible to everyone in a comparable role.
Pay for performance is still very much allowed, but the rules of the game must be the same for everyone. If the bonus cap for overshooting a target is 150% for one salesperson at a given level, it must be 150% for all of them.
Anita's most practical piece of advice was to start running pay gap reports immediately, even before all data elements are in place.
The unadjusted pay gap, meaning the raw number before accounting for legitimate differentiating factors, will often look alarming at first. But, once you apply your point factor adjustments, the adjusted gap may be significantly smaller, and you'll start to understand which differences are explainable and which genuinely need fixing.
Running reports early also helps you identify where your longest-tenured employees may have fallen behind market over years of incremental increases while newer hires were brought in at higher rates. These are the gaps most likely to need a dedicated remediation budget, separate from your annual performance review pot, because using performance budget to fix pay equity issues sends the wrong message to your high performers.
And remember that reporting covers everything: base pay, bonus, benefits, stock options and any other compensation component, in cash, in kind or in equity.
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