Preparing for EU Pay Transparency: What Does a Compliant Job Levelling Framework Look Like?

The EU Pay Transparency Directive, effective June 2026, will require employers to share more detailed information internally about pay levels and how pay decisions are made. Externally, EU companies will also need to provide job seekers with information about starting salaries or pay ranges. In addition, there will be mandatory reporting on gender pay gaps within categories of jobs considered to be of equal value.

For many small and mid-sized businesses, this can pose a significant challenge. Companies with fewer than 1,000 employees often lack the necessary data structures to track pay across equivalent job categories. Consequently, assessing the value of jobs - through a process known as job evaluation or job levelling - is a critical step in preparing to meet these new requirements.

If you’re a HR leader working on introducing or updating a job levelling framework, you might be wondering whether your approach aligns with the Directive’s requirements.

This short guide will walk you through the key elements of a compliant job levelling framework. We’ll tackle common questions and share some practical steps to help you align your organisation’s pay practices with the new regulations.

First things first, do I actually need a job levelling framework to be compliant?

The directive does not explicitly mandate job evaluation or job levelling. However, it does require that companies create categories of workers that do work of equal value. This categorisation is necessary to meet various requirements under the directive, such as pay gap reporting and fulfilling employee information rights. The directive also provides for workers to make a case to a governing body if they believe that work of equal value is unjustifiably receiving unequal pay.

In order to fulfil employer obligations consistently, companies need a framework or system to objectively categorise jobs according to their value to the company. For the purpose of this document we will refer to the set of such categories as a job levelling framework. 

What does a minimally compliant levelling framework look like?

A minimally compliant framework can be very simple. It may consist of a list of, say, five levels with a short description of the criteria required for a job to be assigned to this level. Some companies may require levels to be differentiated by business area or job family. However this is not a requirement of the Directive and it is more important to ensure consistent alignment across all roles in the organisation.

How many categories should the job levelling framework have?

The directive does not explicitly set a minimum or maximum number of levels or categories. It does, however, require that for each category of workers performing equal work or work of equal value, gender pay gaps should be below 5%.

For companies trying to figure out the right number of levels/categories, there are two main considerations:

• Too many levels: an argument could be made that jobs in different levels are actually of equal value.

• Too few levels: may result in larger gender pay gaps that exceed the 5% threshold.

What method should be used for levelling each job?

There are several common methods for job evaluation such as ranking, job classification, point factor and factor comparison methods. The Directive does not prescribe the use of any one method but it does say that the selected method must be applied consistently across all jobs and it must be based on objective, gender-neutral factors. Jobs cannot be categorised arbitrarily or subjectively; their classification must be grounded in measurable gender-neutral factors based on an analysis of the content of each job. The best-fit approach will be different for each organisation but it must promote fairness, define clear criteria and provide clarity to employees on progression steps.

How should levels/categories be defined?

The EU Directive suggests that four key factors should be used to define categories of workers: Skills, Effort, Responsibilities, and Working Conditions. Collectively, we refer to these four objective factors as SERW. While the Directive doesn’t provide strict definitions for these terms, it allows flexibility in how employers interpret and apply them, as long as their job evaluation frameworks remain objective and consistently applied. For clarity, we offer the following illustrative definitions:

• Skills: The knowledge, abilities, and attitudes required to perform a job effectively.

• Effort: The physical or mental energy required to meet the workload and demands placed on an employee in the workplace.

• Responsibility: The formal or informal duties an employee holds, which may involve managing people, handling equipment, overseeing financial resources, or managing information.

• Working Conditions: The environment and factors surrounding the job, including the working hours, physical workspace, processes, tools etc.

Importantly, employers can also choose to add other objective factors and/or assign weights to all criteria based on their impact to the business. However, language in the directive suggests that so long as these factors are explicitly considered, the weight assigned to these factors can be set to 0 for some or all levels. For example, a company may omit “working conditions” from its levelling framework if it explicitly documents a reason for omitting it. For example, if all workers work in the same office, same hours, no travel, etc.

Key Points to Remember

To support compliance with the EU Pay Transparency Directive, a job levelling framework must meet three key criteria:

• Objective framework: Levels should be defined using objective, gender-neutral factors. The SERW factors (Skills, Effort, Responsibility, and Working Conditions) should be considered, but other relevant factors may be used if more appropriate to the nature of the company’s business activities.

• Accurate levelling: Jobs must be assigned to levels based on the objective criteria, ensuring no roles are misclassified arbitrarily.

• Consistent framework application: The same framework must be applied across all jobs in the organisation.

The resulting gender pay gap for each job category should be below 5%. Any higher gaps must be justifiable based on objective, gender-neutral criteria or if an unjustified gap exceeds 5%, the employer must take corrective action within six months.

Outcomes Matter Above All.

It's important to remember that the aim of this legislation is to combat pay discrimination and close the gender pay gap. The EU directive specifically mandates that the outcome of a set of policies must be non-discriminatory. Merely complying with the letter of the law is not a sufficient defence if discriminatory outcomes are found. 

Conclusion

Ensuring compliance with the EU Pay Transparency Directive is crucial for promoting fairness and equity in the workplace. By establishing a job levelling framework that adheres to the directive's requirements, you can help monitor and prevent pay disparities and ensure transparency in how pay decisions are made.

Stay tuned for our upcoming posts, where we’ll share practical tips, templates, and tools to help you build and implement a robust job levelling framework, ensuring your organization is ready for the new pay transparency regulations.

Want personalized guidance? Book a free call with our team today to discuss how we can help optimize your levelling framework.