The EU’s pay transparency directive is set to go into effect by June 2026, but it appears that employers are far from ready for the changes to come. The European Union Pay Transparency Directive (EUTPD), a set of rules that were charted out back in 2023, goes into effect next year, setting a clear standard of communication on the terms of pay while also marking a step forward in the areas of pay equity.
A new study by Trusaic on employer readiness for the EU’s pay transparency regulation found that less than one in five organizations that operate in the area are ready to comply. With the date fast approaching, employers have just a little time left to coordinate with their HR and legal teams about the changes that need to be enforced across their organizations.
The EU pay transparency directive goes into effect in June 2026, but less than one in five of the organizations in the region are prepared. (Image: Pexels)
Employers are Unprepared for the EU Pay Transparency Regulation: There’s Still Time to Comply
The EUTPD regulation, the EU’s pay transparency directive, was designed by the Council of the European Union.to “combat pay discrimination and help close the gender pay gap in the EU.” The regulation doesn’t just require businesses operating in the region to be upfront about the pay being offered for a new position, but also requires them to revisit the pay being offered to all employees and ensure that any wage gaps are effectively closed.
With the new regulations, employers must analyze their base pay again and conduct the necessary pay equity analysis to close any apparent gaps within a year. When the directive was formalized in 2023, women in the region earned 12% less than men on average. The new regulation could help to narrow down and eventually close the gap. Reportedly, only 24% of organizations are fully transparent with compensation terms, and now the data shows that readiness for the EU’s pay transparency is still low.
Some regions, like Sweden and Slovakia, have actively begun to establish their own regulations for adhering to the EU change early. The Swedish government already has policies in place for salary audits and fair wages for all. Instead of creating new regulations, the Discrimination Act in the region will now be amended to comply with the changes.
Why are Employers Not Ready for the Transparency Regulations?
Employers’ low readiness for the EU’s pay transparency change isn’t merely a matter of reluctance to comply or pursue change. While that does make up a significant portion of the problem, there are also other factors at play. The potentially high cost of pay correctness is the focal concern for 64% of employers. Additionally, there are also worries regarding the accuracy of job grouping and addressing the root causes of the problem.
Other considerations, such as the reliance on the manager’s discretion and the management of employee reactions, are also at play. With the pay transparency regulations, employees will soon learn about the differences in compensation between them and their colleagues, and become more aware of what the organization is willing to pay new hires.
Each of these changes comes with the potential of some fallout, making employers wary of pursuing them. These are only a few of the many reasons that employers are not ready for the transparency changes that are on their way.
What Can Businesses Do to Adhere to the EU’s Salary Transparency Push?
Employers who are not ready for the transparency regulations will open themselves up to considerable legal challenges in the coming year. With regulations tightening, employees will be more likely to find work at organizations that are compliant with these new rules. The new pay transparency rules may require additional work to adhere to, but it is a task that must be undertaken at once. This is especially considering the promise of trust and honesty between employer and employee.
Adhering to the EU’s salary transparency push isn’t something that can be achieved overnight. It requires considerable internal preparations and fiscal planning. Some places to start on guaranteeing readiness for the EU’s pay transparency include:
- Analyze base pay for every role and compare it to the industry standards
- Check for wage gaps within the organization
- Check with the legal teams for the exact nature of the EU pay transparency regulation and what compliance means
- Create clear records of current pay for employees who may request the information
- Determine whether adjustments are needed to the current pay scales
- Updated job descriptions for each role and established a pay scale for each of the positions that will be used for future postings
- Work with HR teams to communicate with employees who may be curious about what their organization is doing to comply with the regulations
- Train HR teams and managers to prepare for the pay-related conversations and questions that will soon be directed towards them
Compliance is Better than Facing the Consequences of Failure
When the EU pay transparency regulations go into effect, employees will become more vocal about their demands for open and honest conversations on pay. HR teams need to be prepared to maintain this transparency in their communications with employees and prospective job candidates with clarity. The nature of conversations during the recruitment process may change with the directive, but it is easy enough to prepare for this when the necessary data and documents are in place.
Employers who are not ready for transparency once the regulations roll around are likely to face lawsuits and other employee-driven legal consequences as a result. The issue of pay discrimination, whether on the basis of gender or otherwise, has long since been frowned upon, but with the new regulations, employees will be able to stand against it with greater ease. The EU pay transparency is advantageous when the challenges of implementation are set aside, aiding organizations in building a relationship with employees that operates on honesty.
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