Pay Transparency Directive: A Guide for Employers by 2026

By now, everyone in HR has heard of the EU Pay Transparency Directive.

But with the 2026 deadline creeping ever closer, it’s time to get serious. This directive looks to promote equal pay, boost transparency, and ensure fairness in the workplace. But exactly how does that impact your to-do list?

Well, the best time to start preparing is right now. Here’s everything you need to know, including the directive’s purpose and key requirements. We’ve even included a step-by-step list of what you need to do.

What is the purpose of the Pay Transparency Directive?

The EU Pay Transparency Directive was created as part of a wider movement towards pay transparency across Europe. The EU Council adopted the Directive in 2023, and it’s due to come into force by 7 June 2026.

The directive aims to close the gender pay gap by ensuring “equal pay for equal work or work of equal value”. In other words — everyone doing the same job gets paid the same amount.

In turn, these equal pay practices are designed to foster transparency, accountability, and fairness in the workplace. And to ensure this happens, companies within the EU must follow certain requirements.

Key requirements of the Pay Transparency Directive

EU pay transparency rules apply to companies in the EU with over 150 employees. The key requirements these companies must follow include:

• Salary disclosures for job postings: To ensure transparency from the very start of the hiring process, companies must include a salary range within job adverts.

• Gender pay gap reporting: Companies with 250+ employees must report their gender pay gap every year, while companies with 150-250 employees must report their gender pay gap every three years.

• Right to pay information: Employees will have the right to request pay information, to identify any pay gaps or discrepancies.

• Pay audits and action plans: Companies with pay gaps of 5% or more must complete pay audits and develop action plans showing how these gaps will be resolved. If action plans aren’t created, the next step is a joint pay assessment (JPA), conducted alongside workers’ representatives.

Why early preparation is essential

The middle of 2026 might seem a long way off — but it’ll soon be here. That’s why the time to prepare is now. Leaving it until the last minute increases the risks of non-compliance penalties and potential reputational harm to your company’s brand image, once employees and job seekers discover you’ve done nothing to prepare.

Meeting the requirements of the directive isn’t a walk in the park either — if your company has never conducted pay gap reporting, developed salary bands, or prepared information for pay requests, your HR department may soon start to feel overwhelmed.

You’ll also need to consider how to revise compensation structures if pay gaps are identified, plus decide whether your existing HR systems are up to the job. Companies will also need to train managers in how to communicate these changes to their teams.

If you start now — you’ll have time to get all these tasks ticked off before the directive comes into force. Plus, you’ll be able to position your company as a leader in fairness and transparency.

{{cta}}

Challenges employers may face

Like any new systems, processes, or regulations, the EU Employment Directive 2026 throws up some potential challenges for employers, including:

• Data collection and analysis: Finding data for pay surveys can be a big administrative burden, especially if your company has a lot of roles, or works across multiple regions.

• Technology upgrades: Compiling pay audits plus creating audits and reports relies on robust HR and payroll software, so you may need to upgrade your existing technology.

• Cultural resistance: HR team members may not enjoy the idea of extra work, managers might not understand how to communicate these changes to their teams, and there may be pushback from employees who are used to confidential pay practices.

• Legal and privacy concerns: The need for transparency needs to be balanced with the protection of sensitive employee data.  

Preparing for pay transparency: Your step-by-step guide

Convinced that the time to start preparing is right now? Follow these 5 steps to get started.

Step 1: Conduct a pay audit

The first step in preparing for the directive is to complete an internal pay equity audit. These compare employee salaries across roles and departments, to identify any gaps.

If any disparities are identified, these should be resolved. Keeping employees fully informed during this process is essential, so now is also a good time to create a communication plan with guidance for how to consistently address pay inequities.

During this step, it’s also a good idea to create salary bands, reducing the chance of pay gaps in the future. These bands will also be essential for any job adverts once the directive comes into force.

Step 2: Upgrade your HR tech stack

Now it’s time to consider if your existing HR technology is up to the job. It’s best to choose HR tech and payroll systems that offer pay data tracking, analysis, and reporting.

For more details, read our roundup of top compensation software, including key features, usability, and pricing.  

Step 3: Revise policies and processes

The directive impacts a wide range of workplace policies and processes, so these will need to be revised and updated. Consider updating:

• Job descriptions
• Hiring practices
• Employee contracts
• Employee handbooks

Step 4: Train managers and HR staff

Your managers and HR team may have heard of the directive, but not know exactly how it’s going to impact their day-to-day work. Keeping these key staff members updated and informed is crucial, so they know what to expect.

Step 5: Develop a compliance timeline

Now you’ve ticked off the main items, it’s time to check you’re on track. Use our list of how different countries are implementing the directive to make sure your HR team has prepared all the information you’ll need, by the deadline.

Then, work backward to create a phased plan that breaks down all the steps you need to complete. Starting this process now means that by the time the directive comes into force, you’ll be fully prepared. If you’ve got time, it’s even worth drafting a gender pay gap report template, including all the information you’ll need to report.

The benefits of pay transparency compliance

Complying with the directive isn’t just about ticking boxes. Making sure your company meets reporting obligations also brings a wide range of benefits, including:

• Improved employee trust and retention: Pay transparency helps show a company’s commitment to its employees. In turn, this helps boost trust and retention, as employees know you recognise their value.

• Enhanced company brand: Equitable and transparent pay practices don’t just benefit your employees. It also enhances your company’s brand with potential new hires, who want to work for companies with an open and fair approach to employee pay.

• Alignment with DEIB goals: Meeting the requirements of the directive also helps support broader diversity, equity, inclusion, and belonging (DEIB) initiatives, strengthening workplace culture.

{{cta}}

Case studies: early adopters of pay transparency

Ready to see how companies that voluntarily adopted pay transparency practices have made the process work for them? Here are two examples to get you started.

How Slimmer AI created a transparent approach to employee pay

The HR team at artificial intelligence company Slimmer AI wanted to create a fair and transparent pay structure, which showed employees how their pay was calculated. They also wanted to establish salary bands that helped show team members how their pay would increase as they developed their careers with the company.

Thanks to Figures, the Slimmer AI team had access to the kind of accurate data they needed to create a transparent salary structure that boosts employee trust and retention by ensuring everyone is paid fairly.

How JobTeaser used pay transparency to create a positive company culture

When recruitment agency JobTeaser experienced rapid growth, the HR team needed to recruit many new staff in a short period. But in a fast-moving job market, creating a transparent approach while also offering competitive salaries was key.

The HR team at JobTeaser turned to Figures to access the kind of high-quality data they needed to clearly categorise each role. After each salary was benchmarked, this data is shared with potential new hires and existing employees, to help cultivate a positive company culture based on trust and transparency.

For more inspiration, read our full library of Figures case studies.

What happens if you’re not ready by 2026?

We’ve already mentioned that early preparation is essential. But, what if 2026 rolls around and you’re still not ready?

Unfortunately, the consequences can be pretty serious. These are likely to include fines and sanctions, with the severity of these being set by the country you’re based in. That’s bad enough, but non-compliance will also damage your company’s brand image, meaning that when you need to hire new staff, the top talent may not be interested.

But — the good news is that taking early action reduces these risks and means that when the directive comes into force, you’re already fully prepared.

A call to action for HR leaders

Tick tock, tick tock. The pay transparency clock is ticking — and the time for action is now. Noise about the EU Pay Transparency Directive has been rumbling away in the background for years, but now that ticking sound is impossible to ignore.

Putting the hard work in now, by auditing your pay practices, upgrading systems, and creating a culture of transparency, means you’ll be completely ready when the directive comes into force.  

Ready to get started? Book your personalised demo of Figures and see how the latest market data can help you prepare.