EU Pay Equity Directive: What Employers Need to Know

Is your company ready for pay transparency laws?

According to a survey by Aon plc, 75% of companies aren’t. Rather than join those ranks, it’s time to embrace the movement towards fair pay. While that all sounds fine in theory — the reality is that complying with the EU Pay Equity Directive takes a fair amount of preparation. 

Here’s everything you need to know, including key requirements, potential challenges, and the steps your HR department needs to take to ensure compliance. 

‍

What is the EU Pay Equity Directive?

‍

The EU Pay Equity Directive, also known as the EU Pay Transparency Directive, was adopted by the EU Council in 2023. It’s due to be transposed into national laws by 7 June 2026, with each country being responsible for creating its own laws to ensure compliance.  

As part of a larger movement toward pay transparency in the EU, the primary principle behind the directive is “equal pay for equal work or work of equal value”. 

The directive applies to companies with at least 150 employees, although the reporting requirements are on a sliding scale:

• Companies with 150-250 employees: Must report their gender pay gap every three years.
• Companies with 250+ employees: Must report their gender pay gap every year. 

‍

If companies are found to have a gender pay gap of 5% or more, they must create an action plan that outlines how this will be resolved. And if they don’t? They’ll have to conduct a joint pay assessment (JPA) alongside workers’ representatives. 

It’s expected that by 2029, companies with 100-150 workers will also have to submit reports. 

‍

Key Requirements for Employers Under the EU Pay Equity Directive

‍

Even though the salary transparency directive doesn’t come into force for a few more years, many European companies are choosing to plan ahead and prepare to meet its requirements. 

Want to get ahead of the game? Here’s what you’ll need to consider: 

• Pay transparency: For gender pay gap reporting in the EU, companies need to disclose a range of pay information, at all stages of the employee journey. Within job adverts, a starting salary or salary range should be provided. Companies can’t ask candidates about their salary history. HR teams also need to prepare information for reports, plus ensure the process used for making pay decisions is objective and fair.

• Employee access to salary information:  The directive includes details about the types of pay information employers must disclose — and it’s pretty extensive. Employees can request  The directive states that employees have the right to request information on their pay, plus average pay levels categorised by gender, for others in the same roles, or completing work of the same value. 

• Salary audits: These are the best way for companies of all sizes to identify any gender-based pay gaps, so they can be resolved. 

• Reporting obligations: The size of your company, and the region you’re based in, will determine what you need to report, and how often. In the UK, for example, companies with 250 or more employees must submit their gender pay gap data through the government portal, by either the 30th of March or 4th of April (depending on the type of organisation). 

‍

Impact on HR Practices and Policies

‍

The EU Pay Equity Directive is impacting a range of HR practices and policies. As HR teams adapt to these new requirements, here’s what you need to consider. 

Adjusting compensation policies 

A company’s compensation policy outlines your approach to employee pay. It covers everything from leveling frameworks and salary grids to bonuses, benefits, and pay equity. Ideally, this should be updated at the start of your move towards pay equity, so you have clear guidelines around what you’re aiming for.   

Ready to update your compensation policy? Use our free template to get started. 

‍

Reviewing and updating job descriptions 

The EU Pay Equity Directive stipulates that companies must provide salary information to job applicants. Check you’re using gender-inclusive language, and remove any references to “competitive salary”. Just add a realistic salary range instead (trust us, applicants will thank you!)  

‍

Training for HR and managers 

Learning how to conduct pay equity analyses, complete benchmarking, and communicate changes to employees is a lot for HR teams to take on. By offering training to HR teams and managers, you can help them understand how to apply pay equity principles in a fair, transparent, and sustainable way. 

‍

Incorporating DEIB policies

It’s logical that pay equity blends with diversity, equity, inclusion, and belonging (DEIB) policies. By integrating pay equity into broader DEIB initiatives, companies can work towards promoting a culture of trust, fairness, and transparency while also following best practices for DEI compliance in the EU. 

‍

{{cta}}

‍

Preparing for Compliance with the EU Pay Equity Directive

Rather than wait until the last minute, forward-thinking HR teams are taking a proactive approach to EU pay equity compliance. Doing the groundwork now means that when the directive comes into force, you’re already fully prepared. 

Here’s what to tick off:

1. Conducting pay audits

Internal pay equity audits are essential for identifying any pay gaps that need to be addressed. Once these have been resolved, salary bands can help create a standardised approach to employee pay, making inequalities less likely in the future. 

‍

2. Setting up reporting systems and processes 

When it comes to reporting gender pay gap data, there’s a lot of information to collect. Taking the time to set up standard systems and processes for these reports makes it much easier to meet compliance requirements now, and in the future.

‍

3. Updating HR technology 

HR tech like payroll management and compensation management tools help save time by automating manual processes like salary adjustments and bonus calculations. 

They also help companies make data-driven decisions as they work toward improving pay equity. 

Looking for industry-leading HR tech? Read our rundown of the top compensation software, or book a free demo to see what Figures can do for you. 

‍

4. Engaging employees in pay equity initiatives

Some employees will be interested in pay transparency and equity from the get-go. Others may need a little more persuasion. Creating a compensation communication plan can help communicate the purpose behind any new initiatives and engage employees in the process. 

It’s also worth making sure all employees have a point of contact they can go to with any questions or concerns. For more details about how to prepare for the new regulations, read our full EU Pay Transparency Checklist. 

‍

{{cta}}

‍

Challenges and Potential Solutions for Compliance

Some of the challenges presented by the EU Pay Equity Directive might feel overwhelming. But don’t worry — we’ve got the solutions.

‍

Challenge: Data collection 

Collecting accurate, up-to-date data for pay surveys can take a lot of time. For companies with diverse roles, or operating across multiple regions, this can be even more difficult. 

Solution: Use a salary benchmarking tool or compensation management platform with access to accurate data, tailored to your industry, region, and company size. 

‍

Challenge: Cultural and organisational resistance

Companies with traditional backgrounds or conservative leadership teams may be resistant to the idea of pay equity, especially if it’s a new concept. 

Solution: By clearly outlining the benefits of pay equity, HR teams can get buy-in from senior leadership, while also helping them appreciate the value of pay equity policies. Sharing success stories from other companies can also help illustrate how the process can help drive organisational success. 

‍

Challenge: Legal and privacy concerns 

Pay transparency involves sharing a degree of sensitive pay data. Some employees may be resistant to the idea of others knowing what they’re paid, or be concerned about how and where their data is stored. 

Solution: A compensation communication plan can help outline the importance of pay equity, plus include details of the level of transparency the company is aiming for (for example, some companies choose to publish salary bands for each role, not individual salary details). If you’re using HR tech, a platform with strong security will ensure employee data is protected. 

‍

Benefits of Complying with the EU Pay Equity Directive

‍

HR teams know they must comply with the new pay directives — but there’s much more to it than just following the rules because you have to. The move towards pay equity also brings all kinds of benefits. Here are some of our favourite HR compliance for pay equity benefits: 

• Enhanced employee trust and retention: Pay transparency helps demonstrate your commitment to employees, which can help build trust and boost employee retention. 
• Improved reputation and employer brand: Fair pay practices help improve the brand reputation and image of your organisation, helping attract top talent who value equity. 
• Supporting DEIB goals: Pay equity aligns with broader DEIB goals, helping organisations create an inclusive workplace culture that values all employees, equally.  

‍

{{cta}}

‍

Case Studies: Companies Leading in Pay Equity in the EU

‍

Ready to get inspired by companies that are blazing a trail as they work towards pay equity? Here’s what’s possible.

Slimmer AI promotes fair, transparent pay

Artificial intelligence company Slimmer AI is working towards becoming more transparent about pay, but also improving awareness so employees know what to expect as they progress with the company.

To achieve this, the HR team wanted to carry out salary benchmarking, plus create a compensation policy that showed employees how decisions around pay were made. Rather than rely on out-of-date industry reports, the HR team used Figures to complete the benchmarking process.

And to keep employees in the loop, they held compensation sessions that outlined how employee pay is calculated. Biannual salary reviews and levelling helps ensure that every employee is paid fairly — and knows how their salary has been calculated.  

‍

Read the full case study.

‍

Moving Toward a Fair and Transparent Future in EU Workplaces

‍

Complying with the EU Pay Equity Directive isn’t just about following regulations — it’s about creating equitable workplaces that benefit everyone. 

By demonstrating that your employees are valued, they feel motivated to do their best work. And in turn, this boosts organisational success. It’s a win-win. To tap into those kinds of benefits and get started on your pay equity journey, sign up for a free demo of Figures.  

‍