Aon: European organizations unprepared for EU Pay Transparency Directive
Organizations in Europe are insufficiently prepared for the EU Pay Transparency Directive, the new European law on pay transparency. That is according to new research from Aon among 1,400 HR leaders and professionals at large and medium-sized organizations.
The study shows that only 19% of organizations say they are ready for the reporting obligations. Almost a quarter report being “not ready,” while around 60% are still in the starting blocks to comply with the new legislation.
The EU Pay Transparency Directive is scheduled to be implemented between 2026 and 2027, with exact timings varying by member state. All companies with more than 100 employees must report on their gender pay gap, although larger organizations (250+ employees) face heavier obligations.
The primary goal of the directive is to tackle pay inequality based on gender through increased transparency and accountability mechanisms. In other words, organizations must ensure “equal pay for equal work or work of equal value” between men and women. Despite years of effort, the gender pay gap in the EU remains substantial, averaging around 12%.
The road ahead
Being prepared for the reporting directive requires significant effort. Organizations need to collect new types of data, adjust reporting systems, roll out new policies, update job evaluations, revise performance management cycles, and involve employees in these often substantial changes.
Aon’s research warns that many organizations underestimate the scope of the transition and are falling behind in their planning. Only 26% of organizations have conducted an independent pay gap analysis in the past 18 months, while 12% have never carried out such an analysis.
Moreover, more than half (52%) have not yet considered how to handle future employee requests regarding how their total compensation (salary, pension, and other benefits) compares with colleagues in similar roles.
The research also finds that the pace of preparation programs is lagging. 29% of organizations have made no significant progress in the past year to improve their readiness for pay transparency (Aon conducted the same survey a year earlier).
Anticipating implementation
Aon notes that this cautious approach partly followed from uncertainty about the exact implementation path of the legislation. For example, some processes are still ongoing that could delay certain obligations, such as the reporting requirement for employers with at least 100 employees.
However, delaying implementation poses a risk to timely compliance. Organizations still have a substantial amount of work to complete before they are fully compliant. Those who fail to meet the rules on time risk not only EU fines and legal claims from (former) employees, but also reputational damage and employee dissatisfaction.
Large organizations may also face complex challenges that are difficult to manage by the time of implementation, such as differences in timing or guidelines across member states, or the need to report differently within the EU than in other regions, such as the US.
“It is not wise for organizations to wait to begin preparations,” says Annelieke van Mens, Managing Director at Aon. “Start by mapping out compensation structures through job evaluation, updating compensation policies, conducting salary benchmarks, and analyzing – and where necessary correcting – pay gaps.”
Beyond compliance
The research further highlights that forward-looking HR directors should not consider see the EU Pay Transparency Directive as a mere compliance exercise, but rather as an opportunity to elevate their HR practices.
“Companies that proactively implement a fair-pay policy promote diversity and inclusion while strengthening their employer brand. Fair compensation helps attract and retain talent and builds trust among employees. Implementing clear job evaluation systems and transparently communicating policies on salary increases contributes to offering employees career prospects,” Van Mens explains.
She adds that it is also important to engage employees during this transition: “By investing now in clear processes and communication around compensation, organizations can increase employee trust and engagement.”
