Pay transparency in the EU

The European Union’s new Pay Transparency Directive (2023/970) brings significant changes to the transparency of wages for companies. The aim of the regulation is clear: to reduce the gender pay gap and to strengthen  the principle of equal pay for equal work.

But what does this mean for HR managers, financial decision-makers and payroll professionals – especially in the Central and Eastern Europe (CEE) region?

Why do we need pay transparency?

According to Eurostat data, in 2023 there was an average pay gap of 12% between men’s and women’s salaries in the EU. This gap is even higher in some countries (e.g. Latvia almost 19%), while in Luxembourg it has practically disappeared. The lack of transparency in wages has so far made it difficult for workers to take action against unjustified differences.

The new directive aims to  create a more transparent wage structure, in which employees can clearly see how salaries are developing and employers can account responsibly for their wage policies.

New obligations for employers

The Pay Transparency Directive imposes a number of specific tasks on companies. The most important of these are:

1. Specifying salary ranges in job advertisementsDuring job interviews and advertisements, candidates must be informed in advance about the salary range for the respective job. Any inquiry about previous payment is prohibited.
2. Right to employee informationEmployees can request information about how much others earn in the same or equal job. In addition, the remuneration and promotion criteria should be transparent and gender-neutral.
3. Payroll reporting obligation
   1. Over 250 people: a wage difference report is mandatory annually.Between 100 and 249 people: the report is mandatory every three years.
   1. Less than 100 people: there is no mandatory data supply, but there is a voluntary opportunity.

• Joint wage evaluationIf the gender pay gap unjustifiably exceeds 5%, the company must prepare an action plan together with employee representation.

Legal consequences and remedies

The Directive provides not only obligations, but  also strong workers’ rights:

1. Employees can claim full compensation for unjustified wage differences.
2. The burden of proof lies with the employer: he or she must prove that his or her wage practice is lawful.
3. Member States must apply severe sanctions, including fines.

Deadlines and actions

1. Transposition deadline: 7 June 2026 – by then, all EU countries will have to incorporate the rules into national law.
2. Time to prepare: HR and CFOs should now review their payroll systems, payroll processes, and reporting capabilities.

What does this mean for companies in the CEE region?

For companies in Hungary, Poland, Romania and other Central and Eastern European countries, this brings significant administrative tasks. Many companies in the region do not yet produce detailed pay gap reports, so to be compliant:

1. transparent wage structures will be needed;
2. modernization of HR and payroll systems,
3. and digital reporting tools .

Outsourcing partners, such as accounting and payroll service providers, can play a key role in ensuring that companies comply with the new EU regulations in a timely and cost-effective manner.

Summation

The Pay Transparency Directive is not only a legal obligation, but also an opportunity: companies can strengthen employee trust, improve workplace culture and become a more attractive employer.

HR leaders and financial decision-makers should take action now: prepare for mandatory reporting, restructure payroll structures, and seek support from expert partners who can help with compliance in the field of payroll and accounting. Want to know more about how your company can prepare for EU rules on pay transparency?

Contact us and we’ll show you how we can help you optimize your payroll and HR processes!