The EU Pay Transparency Directive is due to enter law in the 27 EU member states from June 2026.
This may seem like plenty of time for organisations to prepare, but with the bill having potentially far-reaching operational implications, it’s important to get your house in order as soon as possible.
Our new guide, A Roadmap to Prepare for the EU Pay Transparency Directive, looks at the implications of the directive for businesses, and sets out the practical measures needed to prepare.
The European Parliament and Council adopted the EU Pay Transparency Directive in 2023, and all EU countries are required to adopt it into their national laws by 7th June 2026.
As a result, organisations with employees working in any EU member states will have to comply with the legislation, whether or not they are based in Europe.
Our guide sets out these practical steps in greater detail, but here’s a summary of the roadmap for preparation.
Under the directive, employees have a right to request information about pay levels for groups of workers who perform what is deemed to be the same work, similar work, or work of equal value as them.
The implication of this is that organisations need to have a robust framework and mechanism for grouping and analysing jobs.
It is not just about grouping jobs into a job architecture or family structure. The Directive makes provisions for employees to ask to see pay levels beyond a traditional job framework.
Organisations need to be able to look at job groupings in three ways:
Essentially, organisations must have a way to consolidate and compare jobs of equal value and be able to justify any differences in pay that may exist.
Organisations need a mechanism to value jobs which is objective and unbiased. The Directive recommends using a job evaluation methodology that can systematically value roles based on objective criteria.
Job evaluation (also known as job classification or job levelling) is a process used by companies to evaluate and categorise roles within the company based on a range of factors. These include the role’s level of responsibility, the skills and knowledge required, and complexity of tasks.
There are a number of job evaluation methods to consider, but the steer from the EU is that a structured job evaluation based on objective criteria is recommended. A more analytical method can be less discriminatory due to their systematic and complex approach.
The implication of the Directive is that pay structures should be linked to the groups of jobs of equal work and equal value.
Full compliance with the EU Directive could potentially mean a major change for many organisations that they may not be fully aware of yet.
We would recommend that organisations review current methods for creating pay ranges and their implications as they relate to the EU Directive.
Overhauling how you price your jobs could potentially be a daunting task, so the first step we recommend is creating job groupings aligned to equal work and equal value, mapping pay data onto this and seeing the extent of your risk, in terms of pay equity.
Under the directive, organisations need to be able to share with employees the criteria they use to define pay levels and make pay decisions, specifically how job value is determined and the pay structure methodology. This essentially means a higher level of pay transparency.
Pay transparency has been shown to have many advantages, including staff retention and brand reputation.
Organisations need to consider the level of transparency they want, think about the core principles around pay, and how they communicate this to staff.
Employers need to be clear about why pay varies in the company. They need to be able to explain the criteria for pay progression as well as why current pay for one role differs from that of another.
To comply with the EU Directive, organisations need to have clear mechanisms in place to:
Organisations need to ensure that job titles and job postings are inclusive and gender neutral and that their recruitment processes are inclusive and not open to bias.
This has several implications:
While job descriptions aren’t mentioned specifically in the Directive, they form the foundational building blocks to operationalize many of the requirements.
For this reason, ensuring you have standardisation and governance over your job descriptions is essential.
To ensure that you can prepare for the directive, and be able to carry out on-going management, you need to have a robust approach to standardising, creating, and governing your job descriptions.
Every organisation within the EU will need to have a deep understanding of the pay equity situation of their job groupings.
First of all, this requires grouping jobs based on equal work and equal value, according to objective criteria.
Until you know which jobs are of equal value, and therefore in the same group, it will be challenging to run the reporting. For any organisation who does not have a consolidated view of the value of their work, it is highly recommended that you review your job evaluation so that you have enough time to analyse the pay for each group ahead of June 2026.
The EU Pay TransparencyDirective is far more rigorous than any pay transparency legislation seen so far, with far-reaching operational implications across both compensation and talent management processes.
It’s about more than just displaying pay bands on job postings, the Directive requires companies to consider their compensation and talent management practices.
For any organisation with employees in the EU, there is now, more than ever, an urgency to get your house in order across key talent and compensation processes.
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