The EU Pay Transparency Directive will in the coming years change the way many organisations work with pay, recruitment, and documentation.
The directive, which was adopted by the European Parliament in May 2023, aims to reduce gender-based pay gaps and create greater transparency around pay in the labour market. All EU countries must implement the rules into national legislation no later than 7 June 2026.
For Danish companies, the directive means, among other things, new requirements for pay reporting, documentation of pay structures, and increased transparency in recruitment processes.
Although the final Danish implementation is still being clarified, it is already clear that the directive will affect both HR processes, pay policy, and employer branding in many organisations.
In short: the Pay Transparency Directive
The EU Pay Transparency Directive introduces a number of common minimum rules for pay transparency across member states.
The directive includes, among other things:
- increased transparency around pay in recruitment
- employees’ right to access information on pay levels
- requirements to report gender pay gaps
- documentation of how pay is determined
- reversed burden of proof in equal pay cases
The aim is to make it easier to identify and reduce pay differences between men and women for work of equal value.
What is the Pay Transparency Directive?
The Pay Transparency Directive establishes common EU rules aimed at creating greater transparency around pay in both private and public organisations.
The directive is based on the principle of equal pay for equal work or work of equal value and is intended to make it easier for employees to identify and challenge potential pay differences.
For employers, this means, among other things, that pay structures must be based on objective and gender-neutral criteria, and that companies must to a greater extent be able to document how pay is determined.
What requirements does the directive place on companies?
The directive includes several specific requirements for employers.
- =Right to pay information: Employees have the right to receive information about their individual pay level as well as average pay levels, broken down by gender, for employees performing the same or equivalent work. If the information is unclear, employees can request clarification and receive a reasoned response.
- =Requirements for pay structures: Companies must be able to categorise roles into groups where employees perform the same or equivalent work. In addition, employers must describe the objective criteria underlying pay determination – for example experience, responsibility, and performance.
- =Reporting of pay gaps: Companies with more than 100 employees must report on pay differences between men and women. The reporting requirements depend on the size of the company: 250+ employees: reporting annually 100–249 employees: reporting every three years If the reporting shows a pay gap of more than 5% that cannot be explained by objective criteria, the company must conduct a joint pay assessment with employee representatives.
- =Reversed burden of proof: If a company has not complied with its obligations under the directive, the burden of proof in a potential equal pay case will be reversed. This means that the employer must be able to demonstrate that there has been no discrimination.
How does pay transparency affect recruitment?
One of the most concrete changes introduced by the Pay Transparency Directive relates to the recruitment process.
Going forward, job applicants must have access to information about starting salary or salary range for a position – for example in the job posting or early in the recruitment process.
In addition, employers may no longer ask candidates about their previous salary or salary history.
For many organisations, this means that recruitment processes must become more structured and transparent. Clear salary ranges, documented evaluation criteria, and consistent hiring processes will become increasingly important in terms of both compliance and employer branding.
Work on pay transparency is therefore closely linked to other themes such as bias in recruitment and diversity in leadership, where objective evaluation criteria and structured processes play a central role.
What should companies do already now?
Although the directive must be implemented into national legislation by 2026, many organisations are already choosing to begin preparations.
Typical first steps may include:
- mapping existing pay structures
- analysing potential gender pay gaps
- reviewing criteria for pay determination
- adjusting recruitment processes and job postings
- establishing clear salary ranges for roles
Companies that start early often find it easier to adapt processes and communication when the rules come into force.
What does pay transparency mean for HR and leadership?
For HR and leadership, the Pay Transparency Directive means that work with pay is increasingly becoming a strategic issue.
Transparency around pay can influence organisational culture, employee engagement, and trust within the organisation.
Companies that actively work with fair pay structures and clear communication can also strengthen their employer brand and appear more attractive to candidates in a competitive talent market.
Compass follows developments closely
At Compass Human Resources Group, we closely follow developments related to the Pay Transparency Directive.
As a recruitment partner, we continuously work to translate new requirements into practice within recruitment processes, enabling our clients to make decisions on a more transparent and well-documented basis.
Increased transparency around pay will in many cases lead to more structured recruitment processes – and thereby a better foundation for both candidates and companies.
