The journey to communicating pay transparency for managers

What do line managers need to know about EU pay transparency to avoid disruption?

One in three companies say their pay programmes are not ready for increased communication, according to WTW’s 2025 Pay Transparency survey. As the deadline looms for the EU Pay Directive to come into force, the race is on to educate stakeholders around the implications of the directive’s regulations.

The EU Pay Transparency Directive is a fundamental shift in how managers will need to explain differences in pay to employees and stand behind pay decisions which are fair, competitive and equitable.

Yet, a key challenge is how to inform managers of the new transparency requirements on pay and increase capability to manage pay in line with a total rewards philosophy, pay structures and guidelines. So, what do line managers need to know to stay on track with the new regulations?

Core provisions of the EU Pay Transparency Directive

Rights for employees from June 2026 (although some member states have said they will go later):

Employers should have pay structures in place to ensure women and men are paid equally for the same work or work of equal value based on objective, gender-neutral criteria.
Employers must make it easy for employees to access information about what criteria are used to determine pay, pay levels and pay progression.
Employees shall not be prevented from (contractually or otherwise) disclosing their pay to others in order to enforce the principle of equal pay.
Employees will have the right to ask for the average total pay of people in the same category of work as them, broken down by gender.

Reporting requirements starting from June 2027:

Organisations with at least 150 workers will need to report their gender pay gap, at an entity level and by category of worker. Over time, this reporting threshold will be lowered to 100 workers (or less depending on local transposition).
If there are any gaps of 5%+ by category of worker that cannot be explained with objective reasons, and they have not been remedied within six months after reporting, organisations will need to work with workers’ representatives to conduct a joint-pay assessment and make a plan to resolve them (with employee representatives).

Two simple actions that all organisations should take to ensure managers are equipped to talk about and manage pay in line with the requirements of the directive:

Use nudges to guide managers when they are making pay decisions: At point of recruitment, off cycle increases, annual review and promotions, managers need access to concise information that reminds them what pay equity means, why it matters and the consequences of not delivering it (in terms they can understand like employees raising concerns that they are significantly underpaid compared to their role advertised on the open market or seeing how their pay compares to the average).
Provide conversation scenarios and guidance to answer common questions and reactions employees will have: How do I make a request? Why is my pay lower/higher than the average? What does that mean for my pay in the future? What is a category of worker and who am I being compared to? Why do we have a gender pay gap and what are we doing to resolve it? Some of these answers will be complex and require preparation at an individual level, but it is critical that managers understand what they should/should not say and deliver a consistent message.

Managers should be fully briefed and trained on their responsibilities. They will need to be able to articulate their organisation's pay philosophy and reward programme design, the factors which determine pay decisions and the objective reasons for difference. They need to be able to express these clearly so that employees can understand and feel confident in the company's pay management philosophy.

Companies should also leverage technology where possible to support managers in disclosing large amounts of data and help to explain information. Technology can also segment messages to help explain positions relative to others and chatbots help cover rational questions related to how pay is managed, or who is eligible for what.

The EU Pay Transparency Directive is poised to reshape how organisations handle and communicate pay. Proactive preparation is crucial and businesses should engage business leaders, equip managers and leverage technology to ensure effective and sensitive communication. Delaying communication planning can lead to significant challenges.

While the directive's immediate impact is on EU member states, the principles of pay equity and transparency are gaining significant traction worldwide.

We're already seeing similar legislative movements (disclosure of salary ranges, increased reporting requirements) and growing employee expectations in other countries, companies that get ahead of this curve are viewing this opportunity as a strategic catalyst to mitigate future risks, strengthen their employer brand, enhance organisational trust, and foster a more equitable and engaged workforce.