The EU Pay Transparency Directive - 3 lessons businesses can learn from existing global legislation
Employees want equity and clarity on pay, and so do investors and board members.
Today, policies to reduce gender disparity are more than a nice-to-have. They are essential for all businesses, and increased regulation is helping to drive this change.
The EU Pay Transparency Directive is part of a global trend in greater pay transparency, with the aim of bolstering equal pay laws and reducing the gender pay gap.
While its immediate impact is on organisations with employees in an EU member state, its influence is already being felt globally, with businesses outside the EU using the directive as a benchmark, recognising its potential to build employee trust, improve talent attraction, and create a more equitable workplace.
Ahead of the June 2026 implementation deadline, EU employers can learn valuable lessons from countries such as the UK, US, Brazil, Australia, Canada and Japan, that have already implemented similar legislation.
Here are three key takeaways:
1. Start preparations early
Begin gathering and analysing relevant data, including pay data, job architecture, and existing policies and procedures.
Identify potential gaps in your current practices and start addressing them now.
This includes:
- Data management: Assess your ability to collect, consolidate, and analyse pay data across different EU member states. Consider the capability of your HR technology and/or streamlining existing processes to ensure compliance.
- Job architecture review: Ensure your job architecture is aligned with the directive's reporting categories. This may involve revisiting job descriptions, evaluating job families, and ensuring consistency across the organisation.
- Policy and process alignment: Review existing reward policies and processes to ensure they are consistent with the directive's requirements. This includes policies related to pay equity, pay transparency, and the use of salary history in hiring.
2. Educate key stakeholders
Equip leaders, line managers, and HR teams with the knowledge and skills to navigate pay transparency discussions effectively.
This includes training on:
- The directive's requirements: Ensure your leadership understands the legal obligations, reporting requirements, and potential implications of the directive.
- Company pay practices: Provide clear and consistent messaging about your company's approach to pay transparency, including how pay decisions are made, how pay ranges are determined, and how pay equity is addressed.
- Navigating difficult conversations: Train managers and HR professionals on how to handle potentially sensitive conversations about pay, address employee concerns, and communicate transparently about pay decisions.
3. Take a sustainable approach
Embed transparency into your culture and governance and ensure your approach to pay is fair, flexible, and built to last.
This involves:
- Building a culture of transparency: Encourage open dialogue about pay, address pay equity proactively. Communicate transparently about pay decisions.
- Developing flexible pay practices: Design pay structures and policies that are adaptable to changing market conditions, internal equity considerations, and evolving legal requirements.
- Monitoring and evaluation: Regularly review and assess your pay practices to ensure they remain fair, competitive, and aligned with the directive's principles.
By learning from global experiences and proactively embracing these three key steps, businesses can move beyond mere compliance and create a more equitable and transparent workplace that benefits both employees and the organisation.
By choosing to adopt the directive’s standards globally - even in countries where it’s not mandatory - businesses can simplify operations and ensure a consistent approach (particularly useful in terms of managing compensation for employees who work across borders).
It will also help to retain a competitive edge in terms of talent attraction.
