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
Here are the key requirements that the directive will introduce for employers in Europe:
- Salary disclosures for job postings: To ensure transparency from the very start of the hiring process, companies must provide job candidates with at least a salary range before the interview stage (usually by including it in the job ad).
- Gender pay gap reporting: Companies with 250+ employees must report their gender pay gap every year, while those with 150-250 employees must report every three years.
- Right to pay information: Employees will have the right to request information about their pay and how it compares to others, helping them 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.
.avif)
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 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 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: Assess your current situation
Like 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 key.
Step 4: Develop a compliance timeline
The Pay Transparency Directive will be in full effect by June 2026 — but some countries have already started the implementation process. To make sure you’re on track, use our list of country-by-country overview to understand when and how your country will implement it.
Then work backwards from your compliance 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.
Step 5: Upgrade your HR tech stack
Next, assess whether your current HR systems can handle pay transparency. You’ll need tools that support tracking, analysing and reporting pay data across roles and demographics.
Consider compensation platforms like Figures, designed to help employers make fair, data-informed decisions while staying compliant. 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.
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.
.avif)
Learn more about preparing for pay transparency
The steps above offer a quick overview of how to get your business ready for the Pay Transparency Directive. For a deeper dive, explore our Pay Transparency Checklist, newly updated for 2025 and packed with insights from compensation experts and labour law specialists.
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.
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 robust 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.
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.
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 could 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.
.avif)
.avif)
