By June 7, 2026, member states must implement provisions in their national laws to comply with the upcoming EU Pay Transparency directive. Is the fact that UK businesses are not directly affected by Brexit a stroke of good luck or a missed chance?
The EU Pay Transparency Directive: Key Impact Areas
The EU Pay Transparency Directive is a major issue for both employers and employees.
- Recruitment: Employers must provide information about the pay range or level for each position and cannot ask applicants to disclose their pay history.
- Data rights for employees: Workers will have the right to request data on average salaries, broken down according to gender and comparable jobs. Employers must make the information easily accessible, along with the criteria that determine pay, pay level and pay progression.
- Regular Assessment: Employers are now required to regularly assess their pay structures and policies to identify gender bias. Any discrepancies and inequalities must be corrected.
- Reporting on the gender pay gap: Employers with 250+ employees will be required to report information every year about their gender pay gaps. Employers with between 100 and 249 employees will have to provide information every three year.
- Addressing gaps: Employers will have to evaluate and correct any gender pay gap greater than 5% based on gender neutral factors.
Transparency in pay only moves one way.
UK employers lucky escape?
The Labour Government has proposed some new requirements for reporting gender pay. The Labour government has proposed narratives, action plans to close gaps, and new reporting on ethnicity and disabilities. We have yet to see real details, and the requirements will likely lag behind those of the EU.
Those UK organisations that are able to avoid direct impact may be able to look at Brexit positively. Those who must comply (i.e. Those with EU-based businesses are still struggling with the directive’s requirements, which need clarification in many cases. The majority of EU countries have not yet transposed the legislation into their local laws, which leaves many questions.
- Where the law requires comparisons between average salaries by categories of workers, what will be the categories?
- Will summary definitions suffice or is a more analytical framework for job evaluation needed?
- How will data be treated and collated when benefits and pay are both reported?
- What will be the impact of the requirement to publish salary ranges for roles advertised on these companies’ websites?
Face up to the new dawn
Many people will find it a relief to not have to answer these types of questions. This kind of thinking delays the inevitable. Transparency in pay has only moved one way.
In the US, for example (where EDI measures are admittedly under obvious pressure) a href=”https://www.handbooks.io/resources/pay-transparency-laws-by_state/” rel=”noreferrer noopener” target=”_blank>more than 26% of the workforce is covered by Pay Transparency laws. In the US (where EDI is under pressure, it’s no secret) More than 26% are covered by laws requiring pay transparency. These include the disclosure of pay ranges in advertisements or the total compensation and the ban on salary history.
There is a widespread belief that if UK businesses continue to bury their head in the sand about pay transparency, it will affect their ability in the long run to retain and attract talent.
The key reason is that a younger workforce has led a shift in expectations. They are more open-minded than older workers to sharing information, so they expect more transparency in terms of rewards and they will leave if they don’t feel informed.
Pay equity: The road to sustainability
When dealing with legacy structures or anomalies that are hard to explain, it isn’t always easy to be transparent about pay. We can all be more transparent about the way reward is structured in our organizations.
Historical inequities will not disappear, despite the fact that they can be costly to rectify. They will cause more problems if they aren’t addressed, as we can see in the recent cases of local government and retail who have to rectify past discriminatory practices.
Although the EU Pay Transparency Directive does not directly apply in the UK it is still morally right to eliminate pay discrimination. If organisations do not tackle pay transparency, they will face consequences.
