What is pay transparency, and what does it require under the EU Directive?

The EU Pay Transparency Directive is a new law designed to make pay across Europe more transparent, consistent, and fair.
For employers, this means:

• Publishing salary ranges and comparative ratios during recruitment.
• Explaining how pay and progression decisions are made.
• Reporting on pay gaps if you employ 100 or more people.

The aim? To ensure equal pay for equal work - so employees can trust that pay decisions are fair, objective, and explainable.

The EU Pay Transparency Directive came into force in 2023 and must be transposed into national law by 2026. It’s part of a wider European effort to close persistent pay gaps and increase fairness in the workplace. On average, gender pay gaps remain at around 13% across Europe, highlighting why this Directive was introduced.

If you’re hiring:

• Salary ranges must be shared upfront (a clear band is fine).
• Candidates can’t be asked about their salary history.
• Job descriptions should be written in gender-neutral terms.

If you’re employing people:

• Employees have the right to know their pay level and where they sit within the pay band.
• They can also request the average pay level for colleagues doing the same or equivalent work — broken down by gender.
• Employers must be ready to show that pay and progression criteria are objective, fair, and neutral.

If you’re a larger employer (100+ employees):

• You’ll need to report on mean and median pay gaps (base and variable pay).
• Share the distribution of pay across quartiles.
• Disclose the proportion of men and women receiving variable pay.
• Report pay gaps by category of workers.
• If a gap of 5% or more can’t be explained, you’ll need to audit and agree a corrective action plan within six months.

The reporting schedule depends on your size:

• ≥250 employees: annually from 2027
• 150–249 employees: every 3 years from 2027
• 100–149 employees: every 3 years from 2031
• <100: exempt at EU level (but some countries may choose to go further)

For many organisations, the Directive means building more structured and transparent pay frameworks:

• Job architecture and clear role definitions.
• Salary bands and progression paths.
• Reporting systems that balance transparency with employee privacy.

That might feel like a big shift, but it’s also an opportunity: greater clarity builds trust, boosts employee confidence, and strengthens your reputation as a fair employer.

The EU Pay Transparency Directive isn’t just about compliance. It’s about making pay decisions clear, fair, and explainable - for everyone in your workforce.