By June 2026, companies across the European Union must be ready to comply with the Pay Transparency Directive. The directive is a landmark piece of legislation designed to close the gender pay gap and bring pay equity out of the shadows and into the boardroom.

While Member States are still at varying stages of transposing the Directive into national law, companies don’t need to wait for full legislative clarity to begin preparing. In fact, waiting may put employers on the back foot as several key requirements are already clear and unlikely to change.

What Is the Pay Transparency Directive?

The Directive introduces a comprehensive framework built around a simple principle: equal pay for equal work or work of equal value. In simple terms, the EU Pay Transparency Directive is a new law passed by the European Union in 2023 to make sure that people are paid fairly, regardless of their gender.

The goal is to close the gender pay gap across Europe and give employees and job seekers the right to know how salaries are set, what others are paid for the same work, and how companies ensure equal pay for equal work.

Every EU country has until June 7, 2026, to bring this law into their national systems. That means governments are now drafting proposals to make sure their local laws match with the requirements of the directive.

To enforce that, it introduces a range of obligations for employers, including:

  • Pay transparency before employment: Employers must provide job applicants with information about the initial salary or salary range. Asking about prior pay history is prohibited.
  • Employee right to pay information: Employees will have the right to request data on their own pay and the average pay level for colleagues doing equal work, broken down by gender.
  • Job evaluation and classification: Employers must implement pay structures based on objective, gender-neutral criteria such as skills, effort, responsibility, and working conditions.
  • Pay reporting and assessment: Companies with 100 or more employees must regularly report on gender pay gaps. Where a pay gap of 5% or more exists and cannot be justified, employers will need to take corrective measures.

These obligations are not optional. Non-compliance can lead to legal challenges, reputational damage, and even financial penalties.

Why does this directive matter?

According to the European Commission, The gender pay gap in the EU stands at 12.7 % in 2021 and has only changed minimally over the last decade. In some countries, it's even higher. Part of the problem is that employees often don’t know what their colleagues earn, or how pay is decided.

This Directive makes things more transparent by:

  • Giving job seekers salary info before they even apply
  • Helping employees understand how pay decisions are made
  • Requiring companies to track and report pay gaps
  • Making it easier for workers to challenge unfair pay

The hope and goal is that with more transparency in how pay is decided and how others are paid, there will be equity as well.

Whats your role as an Employer?

Like we said earlier, employers don't have to wait for individual countries before they can implement the directive. The contents of the directive may not change much between countries, so it's only right to start working on internal company policies to fully adopt it once everything is ready. Here’s what the EU Directive requires from employers:

1. Share Salary Ranges in Job Ads or Before Interviews

Job seekers must be told the salary range for any job before the interview. Some countries may require this to be in the job advert itself.

2. Avoid Asking About Past Salaries

Employers can’t ask candidates what they earned in their previous job. The goal is to prevent past salary history from continuing unfair pay gaps.

3. Explain How Pay Is Set

Employers need to share the criteria they use to set salaries, raises, and bonuses—so it’s clear that decisions are based on fair and objective reasons.

4. Let Employees Ask for Pay Info

Employees can request information about:

  • Their own pay level
  • The average pay for people doing the same or similar work (broken down by gender)

Employers must respond within a reasonable timeframe (some national laws may set a strict deadline, like 14 days).

5. Publish Pay Gap Reports

Companies with 100 or more employees must report their gender pay gap every year or every three years (depending on size).

If a company’s gender pay gap is over 5%, and it can’t be explained, they’ll need to do a pay assessment with employee representatives.

6. Make It Easier to Challenge Discrimination

Employees who believe they’ve been paid unfairly based on gender can take legal action. And the burden of proof? In many cases, it will shift to the employer to prove there was no discrimination.

What Happens If a Company Doesn’t Comply?

The Directive says that companies should face real consequences for ignoring the rules. These include:

  • Fines or penalties (each country will decide the amounts)
  • The possibility of being taken to court by employees or job seekers
  • Damaged reputation, transparency is becoming a key part of trust in the workplace

How Can Employers Prepare Before Deadline?

Even without finalized national laws, companies can and should take proactive steps now. Here’s where to start:

1. Audit Your Pay Structures

The Directive hinges on the concept of equal pay for equal work or work of equal value. That starts with building or reviewing a job evaluation system that considers the legally defined criteria. Companies should map out job roles, responsibilities, and working conditions, and identify comparable roles across the organization.

2. Run a Gender Pay Gap Analysis

Using the job evaluation framework, companies should assess current pay levels and identify disparities. Focus on where unexplained pay gaps of 5% or more exist between men and women in comparable roles. These gaps must be justified or addressed under the Directive.

3. Get Ready for Reporting

If you employ more than 100 people, you’ll soon need to publish gender pay gap reports, both company-wide and by job category. This includes tracking pay progression, especially in connection to family leave and part-time work. Start gathering that data now, from salary bands to promotion history, so you’re not caught off guard.

4. Review Recruitment Practices

Align your hiring policies with the new transparency rules: stop asking about previous salaries, and start preparing salary ranges for every open role. Ensure your hiring managers and HR teams are trained and aligned.

5. Create a Communication Plan

The Directive empowers employees to ask questions, and expect clear answers. Transparency doesn't just apply to numbers, but also to policies, standards, and practices. Employers will need to explain how pay decisions are made, and why.

6. Establish Governance

Designate internal roles, including HR leads, compliance officers, legal to oversee implementation. Ensure that your leadership team understands the Directive and is committed to building a fairer, more transparent pay culture.

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