Pay Transparency: Essential Steps for Companies by June 2026

The year 2026 will bring a fundamental shift in compensation practices for most European companies. This change is driven by the new EU Pay Transparency Directive (EU) 2023/970. Consequently, organizations across the EU must implement new duties regarding salary disclosure, reporting, and fair pay structures. All businesses must comply with these regulations by June 7, 2026, at the latest.

Understanding the Goals of the Legislation

According to the European Council, this directive has two primary ambitions. Firstly, it aims to strengthen the principle of equal pay for equal work. This is essential because the gender pay gap in the EU remains at approximately 13%. Secondly, the rules will improve transparency within salary systems. Therefore, employees and job seekers will finally have access to objective information about pay.

How New Rules Tackle Pay Discrimination

Pay discrimination is often hidden or unintentional due to a lack of transparency. Thus, the directive introduces obligations that allow workers to understand and compare compensation levels. Furthermore, these rules empower employees to defend themselves against unequal treatment. Transparency will now start before the first interview and continue throughout the entire employment period.

Strengthening the Right to Information

The legislation builds on the long-standing principle of equal pay for equal work. However, previous enforcement was often limited because employees lacked the data to prove discrimination. Therefore, the new rules give workers a clear right to request average pay data for comparable roles. As a result, pay systems will become significantly more understandable and fairer for everyone.

Who Does the Directive Affect?

The directive applies to all employers in both the public and private sectors. It covers every worker who has an employment contract or a recognized labor relationship. While companies with fewer than 100 employees may report data voluntarily, member states can still impose duties on smaller firms. Nevertheless, all organizations must follow equal pay principles regardless of their size.

Core Obligations for Employers

Companies must now establish clearly defined salary structures and pay grades. Because of this, candidates will no longer be left in the dark during recruitment. Employers must provide specific salary ranges either in the job advertisement or before the first interview. Additionally, this transparency helps employees identify pay gaps that cannot be objectively justified.

Ban on Salary History Inquiries

Employers are now prohibited from asking candidates about their previous salary history. This rule prevents the reproduction of past pay inequalities in new roles. Furthermore, employees have the right to request average pay data broken down by gender for comparable positions. Consequently, the directive significantly improves legal enforceability and access to justice for workers.

Mandatory Reporting for Larger Firms

Organizations above a certain size must regularly report their pay gaps to state authorities. Specifically, companies with over 250 employees must submit reports annually. Meanwhile, firms with 100 to 249 employees will report every three years. These reports must include the median and average pay, including bonuses and variable components.

Step-by-Step Implementation Checklist

Step 1: Audit Your Current Pay State

Analyze your internal data and categorize roles based on responsibility and skills. You should also determine the criteria for any pay differences, such as seniority or performance. However, ensure these criteria are never discriminatory or based on gender.

Step 2: Create Structured Salary Grades

Build pay bands that reflect both market benchmarks and the internal value of work. Afterwards, integrate these salary grades into your HR system or management platform. This step ensures consistency across the entire organization.

Step 3: Update Recruitment Processes

Add salary ranges to all your job advertisements immediately. Furthermore, adjust your interview process to remove questions about past compensation. You must brief all hiring managers and recruiters on these new legal requirements.

Step 4: Internal Communication and Training

Draft clear policies and make them available to all employees online or in print. In addition, inform your management team about the new rules. You must complete all staff training and system updates before the June 2026 deadline.

Step 5: Set Up Reporting Mechanisms

Identify the specific data points you need to report, such as gender-based differences per role. Remember to include bonuses and variable components in your calculations. Finally, appoint a specific person responsible for regular compliance and reporting.

How Technology Can Help

Sloneek simplifies the creation and management of salary grades for modern businesses. In addition, it automates data collection for mandatory reporting and helps analyze pay gaps easily. The platform uses clear dashboards to support objective decision-making. Therefore, you can reduce administrative burdens while preparing your company for the new legislation.

Strategic Benefits for Your Business

Implementing transparent pay structures offers several competitive advantages. Firstly, it improves internal equity by identifying and removing hidden biases. Moreover, transparency significantly strengthens your employer brand and builds trust with talent. Accurate data also leads to better HR decisions and higher employee engagement. Finally, clear methodologies reduce the risk of costly legal disputes.

Risks of Non-Compliance

Member states will introduce effective and discouraging financial penalties for violations. Furthermore, employees can claim full compensation for unpaid bonuses or salary gaps if discrimination occurs. Interestingly, the burden of proof has now shifted to the employer. Consequently, the company must prove it followed the rules, rather than the employee proving they were treated unfairly.

Official Resources and Conclusion

The full legal text is available in the “Equal Pay” Directive (EU) 2023/970. This document was published in 2023 and must be transposed into national laws by June 2026. You can find more details on the official EUR-Lex website or the European Council policy page.

In conclusion, pay transparency is no longer just a trend; it is a mandatory requirement. Implementation requires careful planning and a proactive approach from HR and leadership. However, a well-managed system brings long-term stability and a better reputation. We recommend using a professional HR system to store and manage your data securely for the future.