5 compliance mistakes to avoid with the EU Pay Transparency Directive
With June 2026 looming, the EU Pay Transparency Directive has become a priority for many organisations. UK-headquartered organisations with employees in EU member states are starting to take action.
While a lot of work is being done there are some compliance risks to particularly look out for. These may appear as small oversights but could create serious problems when employees start requesting information and regulators start paying attention.
Here are the five potential pitfalls and what you need to do about them:
1. Creating worker categories that are too broad to compare
The directive requires you to report pay gaps by "categories of workers doing the same work or work of equal value" Which sounds straightforward enough.
However, when you create categories that are very broad, you may not be comparing work of equal value. With broad categories there’s a risk of putting roles together with vastly different responsibilities, seniority levels, and market rates.
This could potentially result in reported gaps exceeding 5%, requiring you to conduct a joint pay assessment. Suddenly you’re having to discuss pay gaps, not to do with gender, but because you have an apparent pay equity problem due to your categories being too broad.
The key to avoiding this and ensuring a good foundation for compliance is having a robust job architecture based on skills, effort, responsibility and working conditions.
2. Failing to prepare for employee information requests
Under the directive, individual employees can request information about their own pay level and the average pay levels by gender for workers doing the same work or work of equal value.
You must respond to a request of this nature within two months.
This isn't just about having the data. It's about having defensible methodologies for determining who does "the same work or work of equal value." It's about having pay structures you can actually explainand it's about training managers to handle these conversations.
Employee information requests will become the new normal in EU subsidiaries. You need proactive systems and processes in place before the first request arrives.
3. Publishing pay ranges without checking internal alignment
The directive requires salary or a salary range to be provided to candidates before the interview.
Most organisations will ensure compliance by providing a range in the job advertisement. This requires checking for internal equity and what existing employees get paid before sharing external pay ranges.
This will be a challenge as many organisations are facing the challenge of a fast-moving external market and having to offer higher salaries than some of their loyal employees receive.
Before you publish any pay range externally, you need a pay equity audit. Your ranges need to work both ways. Attracting external talent whilst maintaining internal equity. If there are gaps, you need a plan to address them. Otherwise, every new hire becomes an equal pay risk.
4. Focusing only on base pay and ignoring total reward
When most people think about pay transparency, they think about salary, but the directive thinks beyond pay.
It requires transparency on total remuneration including variable pay, bonuses and benefits. This is particularly challenging because benefits packages can vary significantly by country.
Your EU subsidiaries might offer different pension contributions, health insurance, car allowances, or other perks. All of this needs to be factored into your pay gap reporting and your internal pay equity analysis.
A 0% base pay gap could mask a 15% total remuneration gap when you factor in bonuses and benefits. And regulators will eventually notice.
5. Overlooking the burden of proof reversal and what it means for ongoing management
This is a major change which may get missed as we focus our attention on compliance: the directive shifts the burden of proof.
In equal pay disputes, the employee only needs to establish facts to claim that discrimination occurred. Then it's on you to prove you didn't discriminate.
This changes everything about how you need to document and manage pay decisions.
- Can you demonstrate, with objective evidence, why Person A earns more than Person B?
- Can you show that your pay structure is genuinely based on objective, gender-neutral criteria?
Many pay decisions are often based on "gut feel," negotiation, or manager discretion with minimal documentation. That might have worked before, but it won't work now.
The burden of proof reversal means you need documented, defensible pay practices, not just during compliance reporting, but for every single pay decision you make. This isn't a one-off project. It's a fundamental change in how you manage reward in the future.
Supplied by REBA Associate Member, 3R Strategy
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