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?

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 also included a 10-step list of what you need to do. 

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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 EU Pay Transparency Directive

Directive (EU) 2023/970 introduces nine binding obligations for employers operating in the EU. Here’s what each one covers.

• Salary range disclosure in job postings: Employers must provide candidates with the salary or salary range before the interview stage – usually in the job advert itself. Pay history questions during recruitment are prohibited.
• Ban on salary history questions: Employers cannot ask candidates about their pay at previous roles. This is designed to stop historic pay gaps following workers into new jobs.
• Gender-neutral job titles and adverts: Job postings and titles must be drafted in gender-neutral language, and the recruitment process must run on non-discriminatory criteria.
• Employee right to pay information: Workers can request their individual pay level and the average pay levels – broken down by gender – for colleagues doing the same work or work of equal value. They can also request the objective, gender-neutral criteria used to set pay and progression. Employers must respond within two months and remind all employees of this right annually.
• Pay secrecy bans: Employers cannot prevent workers from disclosing their pay or stop them from seeking pay information. Pay confidentiality clauses in contracts are unenforceable for these purposes.
• Definition of 'work of equal value': Comparisons must be based on gender-neutral criteria, including education, professional training, skills, effort, responsibility, working conditions, and the nature of the tasks involved. Employers need objective job classification systems built on these criteria.
• Gender-neutral job classification and pay structure: Pay-setting and progression systems must rest on objective, gender-neutral criteria. Subjective discretion is the main route to unjustified pay gaps, so structures need to be auditable.
• Gender pay gap reporting: Companies with 100 or more employees must report their gender pay gap, phased by company size:
  
  • 250+ employees: First report by 7 June 2027, then annually.
  • 150–249 employees: First report by 7 June 2027, then every three years (some member states are extending this deadline to 2028).
  • 100–149 employees: First report by 7 June 2031, then every three years.
• Joint pay assessments: If a company’s gender pay gap exceeds 5% in any category of workers and cannot be objectively justified, the employer must run a joint pay assessment with worker representatives. 
  
  • The assessment has to analyse the causes of the gap and identify remediation measures. 
  • 💡 Figures data shows 82% of companies joining the platform have pay gaps exceeding the 5% threshold – most employers will trigger a JPA somewhere in their workforce.

Burden of proof, compensation rights, and anti-retaliation protections are covered in the Employee rights employers must prepare for section below.

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 pay transparency 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.

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Challenges employers may face

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

• Data collection and analysis: Finding data for salary benchmarking can be a big challenge, 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 reliable 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.

Employee rights employers must prepare for

The directive doesn’t just set obligations for employers – it also creates new enforceable rights for workers. Three of these change the risk calculation for any company that hasn’t put its pay practices in order.

Burden of proof shifts to the employer

If a worker brings a pay discrimination claim and presents facts suggesting discrimination, the burden of proof shifts. The employer has to demonstrate that no breach of the equal pay rules took place. 

⚠️ In practice, that means companies need defensible, documented pay decisions – gender-neutral criteria, salary bands, audit trails, and a clear rationale for every pay outcome. If the data isn’t there, the default assumption goes against you.

Workers can claim full back pay and compensation

Employees who have been underpaid because of pay discrimination are entitled to full compensation. That includes back pay for the period of discrimination, plus interest and compensation for any other losses. Member states must also provide for compensation covering missed bonuses, in-kind benefits, and lost career opportunities. 

✅ Running a thorough pay audit now is a far cheaper way to find and close gaps than discovering them through a claim later.

Anti-retaliation protections

Workers who exercise their rights under the directive – requesting pay information, raising concerns, supporting a colleague’s claim – cannot be penalised for doing so. That covers dismissal, demotion, denied promotions, and any less obvious form of detriment. Internal processes need to be set up so that managers know these conversations are protected, and that records exist of how requests and complaints were handled.

💡 The practical takeaway: Treat every pay decision as if you might have to justify it in front of a tribunal. Document the criteria, document the comparison, and keep a clear record of why the number landed where it did.

How to prepare for the EU Pay Transparency Directive: 10 steps 

Convinced that the time to start preparing is right now? Follow these 10 steps to get started.

Step 1: Assess your current situation

As with any process, the first step is to assess where you’re starting from. That means ensuring your systems can capture the data needed for pay equity assessments. This preparatory stage is about finding out what you already have in place and what you’ll need to implement by the time the directive is in effect.

At this stage, it’s also a good idea to run an initial pay equity audit. These compare employee salaries across roles and departments, to identify and resolve any gaps. 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.

Step 2: Build a business case

If you’re serious about pay transparency, you’ll need your company’s leadership on board. That means you need to build a compelling business case that highlights the benefits of transparency – which go far beyond legal compliance. 

Start by scoping the tools you’ll need, estimating costs and defining how transparent your company wants to be. Then, draft an implementation plan. Need help? Our full guide walks you through how to win leadership buy-in, with practical advice and examples.

Step 3: Assemble a taskforce

Pay transparency isn’t something that can be handled by HR alone. For the best chance of success, put together a cross-functional working group to manage your transition into the pay transparency era, including representatives from: 

• HR 
• Talent acquisition
• Compensation and benefits 
• Finance
• Payroll 
• Legal 
• DEI
• CSG
• IT

Having input from all of these different groups will be invaluable as you prepare for compliance with the directive – and getting them on board early is a must. 

Step 4: Develop a compliance timeline

The directive sets out a phased timeline that goes well beyond the headline 2026 date. Plan against the specific milestones that apply to your company:

• 7 June 2026: Member state transposition deadline – national laws giving effect to the directive must be in force.
• 7 June 2027: First gender pay gap report due for companies with 250+ employees (annual thereafter) AND companies with 150–249 employees (every three years thereafter – note: some member states are extending the 150–249 deadline to 2028).
• 7 June 2031: First gender pay gap report due for companies with 100–149 employees (every three years thereafter).

⚠️ Several member states have already pushed transposition past 7 June 2026 – the Netherlands has shifted to January 2027, Denmark to September 2028, and Sweden is pushing for an EU-level renegotiation. Reference Directive (EU) 2023/970 for the binding text, and track national implementation in our country-by-country tracker.

Work backwards from your earliest applicable deadline to build a phased timeline. Break it down by key actions: policy updates, systems upgrades, reporting prep, and internal communication. If time allows, draft a gender pay gap report template now, so you’re not scrambling later.

Multinational companies: Prepare for divergence

If you operate across multiple EU member states, you’ll face different transposition timelines, different national thresholds, and in some cases different reporting templates. Three practical moves:

1. Track national legislation in every country where you have employees – the directive is a floor, not a ceiling, and several states are going further.
2. Centralise your pay data and reporting capability so you can run a single audit and slice it by country, rather than running a separate process in each market.
3. Prepare for the earliest national deadline first, then adjust for the rest. Companies with operations in countries like France or Ireland, which have moved quickly, will need to be ready before peers operating only in slower-moving states.
   

Step 5: Upgrade your HR tech stack 

Next, assess whether your current HR systems can handle pay transparency. You’ll need pay transparency software that supports tracking, analysing, and reporting pay data across roles and demographics – and that can generate the reports the directive requires.

Figures’ pay transparency solution is built specifically for EU compliance. Platforms like Figures help employers build salary bands, run pay equity analyses, and generate the reports required under the directive – backed by Mercer’s 3.5 million+ data points, with monthly market updates and SOC 2 Type 2, ISO 27001, and GDPR certifications built in.

The fit is strongest for fast-growing companies between 250 and 5,000 employees that need:

• Benchmark data with EU coverage, refreshed monthly.
• Salary bands generated from market data by job, level, and location.
• Pay equity analysis identifying gaps above the 5% threshold, with Oaxaca-Blinder decomposition separating explainable gaps from unjustified ones.
• Compensation review workflows that bring managers, finance, and HR into a single audit trail.
• Compliance-ready reports for member-state regulators.

For help choosing the right solution, check out our guide to top compensation software, which includes breakdowns of features, usability, and pricing.

Step 6: Revise policies and processes 

Once the directive is in effect, employers will need to be much more open about their approach to compensation. Getting your policies in place now ensures you’re prepared. Start with your compensation philosophy, which should underpin all decisions about compensation within your organisation. You’ll also need to refine your compensation policies, which put your compensation philosophy into action. 

But don’t stop there – the directive will impact a wide range of workplace policies and processes, so these will need to be revised and updated. For example, consider reviewing your:

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

Step 7: Establish job categorisation methods

To meet the directive’s requirement of ‘equal pay for work of equal value’, employers will need clear, objective criteria to assess jobs. There’s no one-size-fits-all method, but factors like responsibilities, required skills, effort and stress levels are common starting points. If you have one, your job levelling framework is also a great foundation. The goal is to ensure consistency and gender neutrality when comparing roles across your organisation.

Step 8: Create or refine your salary bands 

Salary bands help ensure pay decisions are fair, consistent and based on clear, objective criteria. They’ll also be essential for compliance, as the directive requires employers to publish pay ranges in job ads.

If you don’t yet have salary bands in place, now is the time to set them up. This used to be a long and complex manual process – but Figures makes it a breeze. Get started by reading our full guide to creating your first set of salary bands. 

Step 9: Complete a full pay audit 

While you already carried out an initial pay audit as part of Step 1, now is the time for a deeper dive. A full pay audit will reveal any salary band outliers and highlight gender pay gaps across different teams and departments.

Once the directive is in force, employers with over 150 employees will be required to share detailed statistics on their workforce every three years, and those with 250 employees or more will have to report every year. Completing a full audit now gives you time to address any issues before they’re made public.

📋 Working tool: Our Pay Transparency Checklist, updated for 2026 and built with input from compensation experts and labour law specialists, walks you through the full audit process step by step. 

Step 10: Communicate internally and externally

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. 

This is also the moment to build trust and clarity by sharing key information with your employees. You can choose to be as transparent as you like, but as a minimum, you should share details about your compensation philosophy and policies. Employees should also understand their own salary band and where they sit within it. 

Externally, you’ll need to publish salary ranges in job descriptions. You can also choose to go further by sharing your approach to compensation on your careers page to strengthen your employer brand.

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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.

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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 a few examples to get you started.

How Phiture used salary bands to transition towards pay transparency 

At mobile growth consultancy Phiture, a rigid salary structure and limited benchmarking tools were holding the team back. They wanted more flexibility – without losing clarity or consistency. They also wanted to add more transparency for both managers and employees. 

💡 Using Figures, the HR team built a strong salary band system that made pay discussions easier for managers and more transparent for employees. Education was central to their approach: they ran workshops with managers, followed by a company-wide presentation. Together, these steps created the foundation for Phiture’s shift to pay transparency – improving communication, alignment and trust across the organisation.

“Figures has been fundamental in structuring new roles, especially during a major company restructuring. It allows us to easily compare market data and adjust salaries accordingly. While we’re not aiming for the highest percentiles, we now have a structured, data-backed approach that simplifies decision-making.”

– Emma Herrero, Director of People and Culture 

How Welcome to the Jungle applied their company culture through transparent compensation 

Before 2023, Welcome to the Jungle hadn’t formalised its compensation strategy. To bring more clarity and fairness to pay, the People team developed a salary policy rooted in company values, then used Figures to build a transparent, role-based salary band system.

💡 The process was collaborative, involving leadership, finance, and HR, and paired with manager training and internal comms to explain how salaries were benchmarked and structured. The result? Employees gained trust in a system that’s consistent, fair and easier to understand – with data-driven conversations replacing guesswork.

Salary bands now guide recruitment, internal mobility, and salary reviews, helping the team align pay decisions with performance, market data and internal policies.

“For us, employees don't need to be promoted or manage a team to get a raise. They can evolve as individual contributors, stay in the same position for several years and see their salary grow as a result of their performance and expertise.” 

– Mathilde Fontaine, People Operations Team Lead 

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.

“With reliable data for many roles, Figures offered the potential to save hours of work. “Now, a colleague can fill in the majority of the benchmarks for salary reviews in an hour or two and we know they are up-to-date.”

–  Elsa Berg, People Lead

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.

“Instead of making a ‘best guess’ when setting a salary, JobTeaser uses Figures’ recognised model to categorise their posts into six levels. Each level is clearly defined and in this way, JobTeaser quickly identifies its hiring level and offers appropriate compensation.”

–  Expert, Job Title

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

What happens if you’re not compliant by June 2026?

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

The practical risks fall into three buckets.

1. Financial penalties. The directive requires every member state to set penalties for breaches that are ‘effective, proportionate, and dissuasive’. The exact fines vary by country – some will tie them to turnover, others to fixed bands per breach – but the framework is designed to make non-compliance more expensive than compliance. National regulators will also have the power to require specific remedial action, including ordering joint pay assessments.
2. Legal exposure. Because the burden of proof shifts to the employer in pay discrimination claims (see the Employee rights employers must prepare for section above), companies without defensible pay practices are exposed to back-pay claims, compensation orders, and the cost of defending tribunal cases. The cheapest moment to find and fix a pay gap is before a worker discovers it.
3. Reputational and hiring impact. Salary ranges in job adverts make pay practices visible to every candidate. Once national pay gap reports start landing in 2027, the numbers will be public for everyone with 100+ employees. Companies that move early get to shape the story; companies that don't get judged on the data without context.

The good news is that taking early action reduces all three risks. Putting the work in now means that when the directive comes into force, the audits are done, the bands are in place, and the reports are ready to go.

EU Pay Transparency Directive: Country-by-country status

Member states had until 7 June 2026 to transpose the directive into national law – but in practice, the picture is patchy. Some countries have moved early and gone further than the minimum. Others have already signalled they’ll miss the deadline.

A short summary of where things stand:

• Ahead of schedule: Ireland and France have moved early on salary range disclosure and pay reporting, with national rules already in force.
• On track for June 2026: Germany, Spain, and the Nordics (with the exception of Sweden) are running transposition legislation through national parliaments.
• Delayed: The Netherlands has formally shifted its transposition to January 2027. Denmark has pushed to September 2028. Sweden is pressing for an EU-level renegotiation of the timeline.
• National variations: Several states are extending the 150–249 employee reporting deadline to 2028, and some are setting stricter national rules – lower employee thresholds, shorter response windows, or tougher reporting requirements.

For the live position in each of the 27 member states, see our country-by-country tracker, updated as national legislation lands.

What about UK companies?

The directive is EU law, so UK companies are not directly bound by it. But the practical scope is wider than the legal one.

• UK companies: Post-Brexit, the UK is not in scope of the directive. However, any UK company with EU subsidiaries or EU-based employees must comply for those operations. Domestically, the UK is also moving in a similar direction. The Employment Rights Act 2025 introduced equality action plans alongside gender pay gap reporting, and in April 2025 the government launched a call for evidence on measures such as salary history bans, pay ranges in job adverts, and employee rights to pay information.
• Beyond regulation, workforce expectations are shifting. As EU transparency rules take effect, employees in the UK are increasingly likely to compare standards across borders and expect similar levels of openness. This creates a competitive pressure on UK employers – aligning with emerging EU norms may become important not just for compliance, but for attracting and retaining talent. Overall, the gap between EU and UK practices is more likely to narrow than widen.

Practical takeaway: If you have employees in any EU member state, the directive applies to your EU operations – regardless of where the company is headquartered. Plan accordingly.

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.