Gearing Up for Pay Transparency in 2025? Insights from 25 Companies Already Preparing
Michelle Dervan
Dec 6, 2024
• 4 minute read
The EU Directive on pay transparency is set to come into effect in June 2026, leaving companies across Europe with limited time to ensure compliance before disclosures.
To understand how EU employers are preparing and what's proving effective, we interviewed over two dozen HR and reward leaders across industries, from tech and entertainment to financial services, healthcare, and manufacturing.
This diverse sample - from businesses with 80 employees to global giants with ~10,000 - offers a snapshot of how employers are tackling pay transparency ahead of the deadline.
Pay Transparency Preparedness at a Glance
Our conversations revealed a wide spectrum of readiness. Large multinationals with advanced HR systems are often further along, but still wrestle with country-specific compliance complexities. Meanwhile, smaller businesses frequently lack foundational elements like job architecture, making compliance a resource-heavy task.
Here’s a snapshot of the key insights and challenges shaping pay transparency readiness.
Key Insights
Our conversations revealed seven key themes which provide insight into the challenges organisations are facing and the steps they’re taking to move forwards.
1. Company Culture as a Driving Force
Pay transparency motivations vary significantly. For some organisations, cultural alignment and employee expectations—especially among Gen Z—are driving adoption.
At one company, salaries are already openly shared and discussed on a Pay Equity Slack channel. In another multinational business, certain US states have pay transparency laws in place, so other areas of the business expect the same treatment.
For these companies, the train has already left the station. Regardless of the EU Directive, they’re creating a culture of pay transparency without the compliance burden (for now). This work will tie in nicely with their attraction, retention and engagement strategies and, in one case, with their ESG goals too.
In companies driven only by the impending EU legislation, pay transparency is more about achieving compliance than creating a culture of openness around pay. These businesses are often most motivated by avoiding the risk and cost of any future litigation and the associated reputational damage.
2. Country-Specific Legislation and Harmonising Across Markets
HR leaders are concerned about the potential for variations in pay transparency rules across countries, as each Member State needs to transpose the Directive into national law. At a minimum, each national law needs to cover the requirements of the Directive, but they may also choose to increase the level of stringency. The lack of availability of draft national laws is slowing progress, with businesses waiting for country-specific legislation to clarify next steps.
As the Group Reward Manager of a multinational food and beverage company said: “I’ve read the directive, discussed what’s coming with the HR leadership and rewards team, and identified areas we need to work on. But we’re stuck because the directive says the country laws will supersede it. And we don’t know what each country's laws will be.”
Companies operating in both regulated regions (like the EU) and unregulated areas (like the UK and parts of the US) are weighing whether to establish pay transparency as a global standard.
This raises considerations around how to align countries with different levels of pay maturity. The same reward manager noted: “Our company is headquartered in the EU, so our employees in the US expect similar transparency, even though it’s not legally required.” Indicating that the right approach will need to be determined by each business based on its unique circumstances.
3. Building a Defensible Job Architecture and Appropriate Pay Bands
The Directive requires that companies track and report on pay gaps per job category. Many companies, especially small-to-medium employers, lack the frameworks needed to evaluate roles objectively.
A key challenge for the companies we spoke to is building a job architecture that objectively classifies roles in the way specified by the Directive. For example, using objective criteria such as skills, effort, responsibilities and working conditions. HR leaders face ongoing issues with:
Understanding each role in sufficient depth to benchmark it accurately.
Applying and streamlining existing job frameworks consistently - especially tricky for companies that have grown through acquisitions.
Accessing relevant data to set salary bands, especially for niche roles with limited market data.
Documenting the process and aligning HR systems with job structures.
Because job architecture underpins pay transparency, many leaders are wondering how to establish objective criteria for salary band placement—errors here can significantly impact employee engagement.
One entertainment sector director noted: “Without objective measures, it’s hard to confidently place someone in a salary band. Skills-based frameworks would add legitimacy but require data and resources we don't have.”
Companies making headway in this area highlight the benefits of a simple but nuanced framework that supports transparent salary decisions and ensures accurate grading.
4. Stakeholder Buy-In and Budgetary Constraints
Securing executive buy-in for pay transparency is still a struggle for many organisations. While the issue is on the horizon, other priorities often take the lead. For some, pay transparency is viewed as legislative compliance—a ‘must-do’ rather than a strategic move—making it difficult to gain buy-in.
One leader put it bluntly: “The fines aren’t the main motivator for us. The CEO cares deeply about our employees and wants to ensure they’re paid fairly.” Understanding executive teams’ motivations is key to advancing pay transparency projects.
Given the information rights afforded to employees under the Directive, many CEOs are more concerned with the potential for damage to employee morale and employer brand, rather than enforcement through fines.
HR leaders are also worried that pay transparency could reveal pay gaps their companies can’t yet afford to fix. As a Chief People Officer in hospitality noted: “In a low-margin industry, additional salary costs are tough to absorb.”
Then there’s the expense of moving toward transparency, from revising and standardising job descriptions to creating skills frameworks, as some companies aim to do. Budget constraints are also a sticking point as many HR leaders recognise closing pay gaps could impact costs over more than one pay cycle. As a HR leader in global financial services noted: “We have people on vastly different salaries and benefits. If we don’t address this soon, it’ll be a huge problem in 12 months.”
Many companies are choosing to do a pay gap audit per job category now in order to assess how ready they are for the Directive and whether they need to make any adjustments. Under the Directive, any pay gap higher than five per cent in any job category, either needs to be justified by objective criteria or needs to be remedied within six months or a joint pay assessment is triggered.
It’s clear that gaining stakeholder buy-in sooner rather than later to figure out the status of job category pay gaps is key to a smooth transition to pay transparency.
5. Employee Engagement and Communication
Multiple leaders stressed the importance of effectively communicating pay decisions and ensuring transparency to retain employee trust. Their considerations include:
The right amount of information to share
Determining how much compensation information to share as businesses shift from discretionary, confidential pay to pay transparency.
Explainable pay
Plainly explaining how compensation decisions are made and why they’re fair with a clear justification for the positioning of employees within salary pay bands and outlining paths for pay progression.
A Chief People Officer in tech stressed: “Employees need to know the ‘what’ and the ‘why’ behind their pay, and managers need support to communicate it concisely.”
6. Preparing Managers to Build a Transparent Pay Culture
As a reward manager from a pharmaceutical company put it: “Managers are the frontline in pay transparency, and they must be equipped to explain pay in a way that aligns with our company’s values and legal obligations.”
However, with the lack of confirmed Member State legislation, manager training will often be one of the final steps most organisations take.
The companies making headway are educating managers on their current compensation and total reward approach, empowering them to explain pay more confidently. This foundation helps managers clarify total reward, explain how pay is determined, and demystify benchmarking, market data, and pay ranges.
The aim? To equip managers to justify pay decisions to employees simply and intuitively. Perfect preparation for pay transparency. Some leaders mentioned an interest in how technology like AI chatbots or AI-driven simulations could help managers to develop and master the skills around tricky pay conversations.
7. Challenges with the Market Data
Employers with more than a couple of hundred employees very commonly reported buying access to salary benchmarking data and participation in salary surveys. Several HR leaders highlighted a surprising issue: these data and tools often miss the nuances of real roles at the company. Resulting in a situation where the role is the equivalent of a square peg being benchmarked against a round role.
Many companies use major consultancy firms’ job evaluation software and market data. Yet gaps remain in these tools as they don’t accurately and objectively place employees within pay ranges. Drivers of this issue include matching jobs to benchmark data solely based on job title which leads to a weak match. The other frequently raised issue was poor salary benchmarking data outside of the largest metropolitan cities and in non-English speaking or smaller countries.
Smaller businesses see the appeal of these services but struggle with the cost and often find large providers don’t cater to SMEs’ needs. As one chief people officer noted: “We need benchmarking data that reflects our specific demands, but the high costs make it difficult for SMEs to participate.”
Wrapping Up
Businesses face unique challenges in implementing pay transparency: larger companies must harmonize varying country-specific laws, while smaller firms struggle with limited resources for building job architecture and conducting pay equity analyses.
Regardless of company size, a critical first step is identifying any unjustified pay gaps exceeding the Directive's threshold in each job category. Early clarity enables organizations to take informed, strategic action, as pay adjustments take time. Acting now ensures smoother compliance, builds trust, and positions pay transparency as an opportunity rather than a compliance burden.
About SkillsTrust
Our mission is to make it easy for every small and medium-sized business operating in the EU to implement pay transparency through trusted job architecture and dynamic data on skills and salaries. Learn more at SkillsTrust.
This article is part of a series exploring the journey to EU pay transparency. Future articles will focus on actionable solutions to these challenges, guiding HR leaders through this evolving landscape.
