Readiness for the EU Pay Transparency Directive: Five key actions
With the EU Pay Transparency Directive now taking shape in national legislation, organizations are facing new obligations around reporting, disclosure, and pay equity. For many employers, the new regulation marks a fundamental shift in how compensation is structured, communicated, and governed.
The EU Pay Transparency Directive, which takes effect on 7 June 2026, is designed to close the gender pay gap by increasing transparency around pay levels and pay-setting practices. It will require employers to provide clearer information to employees about pay ranges, prohibit certain forms of pay secrecy, and introduce more stringent reporting requirements for larger organizations.
While implementation timelines vary across member states, the direction of travel is clear: companies will need to demonstrate not only that they pay fairly, but also that they can evidence and explain how pay decisions are made. This creates both a compliance challenge and a broader opportunity to strengthen trust, consistency, and accountability in reward practices.
Against this backdrop, ensuring readiness is an immediate priority. Experts from Aon share five key steps how organizations can prepare for compliance while building a more transparent and equitable pay framework.
1. Define and document the worker category
A cornerstone of the EU Pay Transparency Directive is the categorisation of workers, impacting both pay reporting and employees’ rights to information. Although there is ongoing debate about how to interpret and determine jobs of ‘equal value’, companies should reach a pragmatic, gender-neutral and aligned conclusion on how they classify worker categories and clearly document their decisions.
The adoption of a job evaluation system, while not ‘mandated’ in the Directive, introduces a more rigorous approach that many organisations find very helpful in simplifying the definition and management of category of workers.
2. Build a robust data foundation for pay gap analysis
Once worker categories are established, organisations will need to look at the Total Pay data in order to conduct an assessment of gender pay gaps across these groups. These calculations require multiple data points, so it is important to identify all relevant data sources and define how these will be combined and assessed in a consistent way. All elements of compensation will need to be considered, including fixed pay, variable pay and benefits.
Employee data is typically held in an HR information system (HRIS), and some core compensation data (for example, base pay and bonus) is also often stored there, making it the easiest starting point for analysis. However, other pay elements (e.g. commissions, off-cycle bonuses, overtime payments) may sit in payroll systems, while benefits data may be held in separate platforms.
In addition, legacy systems, differences between countries, and variations across legal entities can all create further fragmentation. A clear data strategy is therefore essential. In practice, this requires close coordination with HR, payroll, benefits teams, IT and other stakeholders to map, integrate and validate the data before it can reliably be used for pay transparency analyses.
3. Understand and address gender pay gaps before reporting
Having gathered the data, organizations are ready to conduct an assessment of gaps on total pay by gender. This will help determine whether any gender-based differences in pay are objectively justified and where remediation may be necessary.
Reporting in 2027 (for in-scope organisations) will be based on 2026 payroll data, making this their last opportunity to identify any systemic issues and remediate them ahead of the reporting deadlines.
The EU Pay Transparency Directive also provides for the possibility of a “joint pay assessment” with workers’ representatives under certain circumstances and if the pay gap is above 5 percent. Carrying out a robust gender pay gap analysis will help prepare for this by ensuring there are already structured, defensible insights on pay outcomes across worker categories.
In addition to reporting, employees will have access internally to average pay levels within their category and will be able to see how their pay compares to peers. It is therefore important to identify any potential outliers (employees whose pay levels are substantially below those of comparable peers) now and ensure there is a clear explanation for these differences (based on objective, gender-neutral criteria) or that they are addressed in a timely manner.
4. Strengthen governance and audit processes
Robust governance and audit mechanisms can play an important role in ensuring pay differences are justifiable and free from gender bias. It is advisable to review and reinforce processes around job leveling, performance assessments, and annual pay reviews.
Strong governance, robust documentation and proper calibration will help explain pay decisions and address any discrepancies that might surface in future audits.
5. Educate and communicate
With the implementation of the EU Pay Transparency Directive, employees are likely to have more detailed and specific questions about pay. It will therefore be important that leaders and managers, who are often the first point of contact, receive sufficiently comprehensive training to communicate the organization’s approach clearly and consistently.
In the lead-up, proactive communication strategies will be needed to inform staff of their rights and explain the rationale behind potential pay differences.
Following the Directive’s enforcement, an increase in employee requests for pay information can be expected. Standardized templates should be developed to ensure responses are timely, accurate and consistent, helping to streamline the process and avoid confusion or miscommunication.
