How organisations can effectively prepare for the EU Pay Transparency Directive

Oliver Coakley outlines how organisations must prepare now for the EU Pay Transparency Directive, which demands major changes in pay reporting and accountability

EU Member States have until 7 June 2026 to transpose the Pay Transparency Directive into their national laws. The main objective of the Directive is to strengthen the application of the principle of equal pay for equal work, or work of equal value, between all people regardless of gender and endeavours to achieve this through greater pay transparency and enforcement mechanisms.

The EU’s equal pay gap is estimated to exceed 9 percent in favour of men. Despite equal pay being a founding EU principle and legal obligation, progress toward closing this gap remains unacceptably slow. Consequently, the EU is taking action.

The Directive will require much greater levels of pay transparency across four areas:

  1. Pay transparency for job seekers.
  2. Right to information for employees.
  3. Transparency of pay setting and progression.
  4. Gender pay gap reporting.

“Of equal value”

A crucial component of the directive is “equal pay for equal work or work of equal value”. Jobs in diverse disciplines can still be considered of “equal value” by an organisation.

For example, in Enderby v Frenchay, the European Court of Justice ruled that significant pay gaps between gender-dominated disciplines, such as speech therapists and pharmacists, require objective justification, even if set by separate pay agreements.

It is critical to establish a solid job architecture, where the value of roles are assessed using objective, gender-neutral criteria such as skills, effort, responsibility and working conditions.

There are two requirements under the Directive which rely on an assessment of roles of equal value across an organisation:

  1. Right to information: workers have the right to request information on the average pay levels (broken down by gender) for categories of workers performing the same work or work of equal value to theirs; and
  2. Gender Pay Gap Reporting: The pay gap between workers by category of worker must be disclosed to employees and their representatives.

A solid job architecture is a key building block required to deliver on both transparency requirements.

Preparation needed

It is highly unlikely that any organisation intentionally uses gender as a basis for determining pay. However, we regularly come across organisations whose processes and programmes lend themselves to unconscious bias. As a result, many organisations have unintended pay gaps.

Before unveiling transparency, organisations need to understand whether an equal pay gap exists in their organisation and take the necessary remedial action to address those gaps prior to full pay transparency. Not doing so exposes organisations to substantial legal, financial and reputational risks.

In particular, if the pay gap exceeds 5 percent in any one category of worker, and it can’t be objectively justified or isn’t remedied within six months of reporting, then the employer needs to conduct what is essentially an equal pay audit. This audit will need to be conducted in close collaboration with workers’ representatives. Most organisations will want to avoid triggering this requirement.

Securing executive support

Preparing for the Directive will require resourcing – likely both external and internal. It represents a significant transformation and change management effort; therefore, the executive team must understand and support the proposed plan of action.

In our experience, many HR leaders struggle to secure this support. At a time of mounting business costs and global market uncertainty, it can be difficult to engage an executive team on a topic which may be perceived as simply adding more cost and risk to the profit and loss.

The Directive will have different impacts across organisations. For some, it’s a brand opportunity; for others, a compliance obligation; and for many, a practical commercial issue to be addressed. Shaping the business case to align with these perspectives is crucial for gaining leadership endorsement.

Do not delay preparation

As of date of writing, several EU countries have published draft legislation to transpose the Directive, including a heads of bill published by Ireland (a partial transposition).

While it is helpful to understand how the Directive is likely to be implemented, the national transpositions are unlikely to answer the big implementation questions that many organisations are struggling to decipher, such as how to define “category of worker”.

We are fast approaching the implementation deadline for the Directive. This is not a lot of time to prepare, but with the right determination and plan, it is still possible.

Suggested first steps

During a recent series of client events hosted by HRM and Citris, we asked participants where they were in preparing for the implementation of the Directive. Almost 60 percent of organisations either haven’t started yet or are in the process of building their internal business case or project plan.

For organisations that have yet to take action, we would recommend the following approach:

  1. Pull together a core team: Not just HR – involve key functions such as legal and finance.
  2. Develop the plan: What is the organisation’s ambition, and how will it be achieved?
  3. Secure executive support: Think about which pitch is most likely to engage the executive team.
  4. Start with job architecture and build from there: Evaluate which roles hold equal value – this serves as a fundamental building block, unless the organisation already has a well-established job architecture.

Oliver Coakley is the Managing Director of Citris, in partnership with HRM