What The EU Pay Transparency Directive Really Means For Day-To-Day Work

Forbes

6 days ago

Hayley Bakker is the Head of Customer Journey & Digital Enablement at beqom, which supports pay equity with data-driven software.
The EU Pay Transparency Directive, formally adopted in 2023, is a landmark law aiming to ensure that workers of all genders receive equal pay for work of equal value. It applies to EU-based companies with 100 or more employees and focuses on two key areas: pay transparency and pay equity.
But this is more than a regulatory shift. It's a cultural one. Provisions like the right to know salary ranges, mandatory gender pay gap reporting and bans on asking about previous salaries are meant to close the gender pay gap. But beyond compliance, what does this mean for day-to-day work, employee-manager conversations and internal pay systems?
Here's how these changes impact every level of an organization.
1. Employees Gain Visibility And Empowerment
For employees, the most noticeable change is access to information. The directive gives them the right to request average pay levels for their job category, broken down by gender. Employers must publish salary ranges in job postings and be clear about pay progression criteria. This transparency shifts the balance of power and changes how employees approach hiring, promotions and salary discussions.
Take Anna, a marketing manager who's spent five years at a tech firm in Madrid. She sees that her company's posted a replacement position, similar to her role. The posting includes a salary range, and when comparing this to her own pay, Anna realizes she's being significantly underpaid. When her next one-on-one with her manager arrives, she confidently raises the issue.
This type of conversation might not have happened before. Transparency empowers employees to ask informed questions and expect informed answers.
2. Managers Have A New Level Of Accountability
Managers must be ready to address tougher, more-informed compensation questions. Pay conversations can't be vague or take place once a year. Under the directive, managers are now accountable for fairness in pay decisions and must justify compensation using objective factors like role scope, performance and internal bands.
Managers must become fluent in pay principles. For example, when Anna asks Daniel, her manager, why her salary is below the midpoint of the posted range, he can't give a generic answer. He needs to have a clear, policy-aligned explanation. Responses like 'That's just what we offered' are no longer sufficient. Companies must train managers to speak factually and consistently about compensation—or risk losing trust and talent.
3. HR Business Partners Are Coaches For Fair Pay
HR business partners (HRBPs) play a vital role in turning pay policies into fair, everyday decisions. Part of their responsibility is coaching managers before pay reviews, guiding them through pay policies and helping identify bias in decisions. HRBPs also run pre-review checks to flag pay decisions that don't align with policy.
For instance, at the tech firm where Anna and Daniel work, John is the HRBP who conducts department-wide compensation audits ahead of a pay cycle. He works to identify employee pay outliers that need justification or adjustment, and he helps managers like Daniel either explain or correct discrepancies.
It's not just about fixing problems. It's about promoting intentional, defendable decision-making and embedding fairness in daily practices.
4. Compensation And Pay Equity Teams Drive Data-Backed Action
The directive requires companies with more than 100 employees to report gender pay gaps. If gaps exceed 5%, then companies must conduct joint pay assessments. So, compensation and pay equity teams will be playing a much more visible role in the future. These professionals must develop grading systems, track analytics and guide corrective actions.
For example, Lisa is a pay equity lead at the tech firm. She's created dashboards to show unexplained pay differences by gender and job. It's a tool that helps HRBPs and managers quickly spot and resolve inconsistencies. When a manager proposes a raise, they can see how it fits within internal pay equity models, ensuring fairness in real time. In a world where employees can ask, 'Why am I paid this?' having credible, data-backed answers is essential.
5. Leaders Set The Tone For Championing Transparency
Executive leadership must actively model transparency and equity. That means setting clear pay equity goals, investing in tools and training across departments and speaking openly about pay structures and criteria.
Some companies are already publishing pay equity goals and hosting internal Q&As where leaders explain pay philosophy and criteria. Others are working with consultants to understand their gaps and improve systems. When leaders are visible in these efforts, pay transparency becomes a shared value—not just a legal obligation.
Compliance Is Just The Start
The EU Pay Transparency Directive takes full effect in June 2026. But the opportunity lies in using it to lead a cultural transformation. Successful organizations won't just post salary ranges. They'll train managers, empower employees and build systems that support fair, consistent and data-driven pay decisions.
Transparency isn't about revealing decisions. It's about standing behind them. Is your organization ready?
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