What It Means for Employees and Companies
(and How to Prepare by 2026)
What if salary secrecy became a thing of the past?
The European Union is taking significant strides with the introduction of the EU Pay Transparency Directive. Starting in June 2026, businesses across Europe will be obligated to enhance salary transparency, address unwarranted wage disparities, and establish more equitable pay structures.
Whether you’re in HR, managing a business, or looking to understand your rights as an employee, this shift will impact you.
This article explores the meaning of the directive, its potential impact on employees and businesses, and proactive steps you can take to get ready.
What is the EU Pay Transparency Directive?
The Pay Transparency Directive is a groundbreaking European law designed to bridge the gender pay gap and uphold the principle of equal pay for equal work. It establishes new employer responsibilities while empowering employees with enhanced rights.
The directive was formally approved in June 2023, with all EU member states mandated to incorporate the regulations into their national laws by June 2026.
Why this matters
For years, salary discussions have been largely avoided in the workplace. This lack of transparency has perpetuated inequalities, particularly between men and women.
In 2023, the gender pay gap across the EU persisted as a significant issue in numerous member states:
- Belgium: 0.7%
- Netherlands: 13.5%
- Germany: 17.6%
- Italy: 2.2%
Countries such as Belgium and Italy demonstrate smaller disparities, whereas Germany and the Netherlands continue to face significant challenges. The new directive seeks to bridge these inequalities across the EU as a whole.
What changes for employees?
As an employee or job seeker, the directive provides greater transparency and empowerment regarding your compensation.
Key changes include:
1. Salary Transparency in Job Listings
Employers must provide the salary range for a position, either within the job posting itself or prior to conducting the first interview.
2. Salary history questions prohibited
Employers are now restricted from inquiring about your past or current salary.
3. Right to Information
You are entitled to request details about the average pay for your position, with a breakdown by gender.
4. Legal Protection
Speaking up about unfair pay practices ensures you are safeguarded by law from any form of retaliation.
Your personal salary remains confidential. This initiative aims to highlight unjustified role-based disparities, not individual earnings.
What changes for companies?
The directive imposes fresh responsibilities on employers, necessitating a transformation in how compensation is managed, conveyed, and substantiated.
1. Salary Transparency in Hiring
Ensure clarity around compensation by openly sharing the salary range for each position at the very beginning of the hiring process.
2. Reporting Requirements
Organizations employing over 100 individuals must routinely disclose data on their gender pay gap.
3. Action Plans
Organizations with a gender pay gap of 5% or higher, without valid justification, must implement corrective measures to address the disparity.
4. Legal and Financial Implications
Non-compliance with the directive may lead to employee grievances, costly compensation claims, and significant financial penalties.
Timeline and implementation
- Directive adopted: June 2023
- Deadline for implementation in national law: June 2026
While there’s still ample time, businesses should begin preparations now to prevent future compliance challenges.
How to prepare
For companies:
- Conduct a salary audit to identify any pay gaps
- Review and update job descriptions and salary ranges
- Train HR and recruitment teams on the new requirements
- Build a company culture that promotes transparency and equal opportunity
For employees:
- Understand your rights under the new directive
- Ask about salary structures and pay levels in your role
- If something feels unfair, speak up — the law will protect you
Conclusion
The EU Pay Transparency Directive goes beyond being a standard HR regulation; it represents a significant move toward fostering fairness in the workplace and building stronger, more transparent employer-employee relationships.
Organizations taking proactive steps today will not only achieve compliance but also secure a competitive edge in attracting top talent, boosting employee satisfaction, and enhancing their reputation.
If you haven’t started preparing yet, now is the perfect time to begin.