“Even if we don’t have employees in the EU, we still need to be doing more to increase our transparency.”
Annapurna was delighted to bring together a VIP group of industry leaders and HR professionals for a fascinating roundtable conversation around the upcoming EU Pay Transparency Directive, set to take effect in 2026.
The directive is a big stride towards closing the gender pay gap, which still sits at an estimated 13% within the EU. It holds companies accountable for justifying the pay for every employee, promoting fairness and equity.
The conversation covered an array of topics as we looked to understand what our delegates and their respective organisations were doing to ensure they were compliant by 2026. The key takeaways were as follows:
Preparation is paramount, and the devil is in the details
Whilst the specifics of various countries’ legislation are still emerging, organisations need to proactively prepare for increased pay transparency across the board, even if they don’t currently have employees in the EU. This includes reviewing job families and profiles, ensuring robust job architecture, and understanding the full scope of “pay” (beyond just base salary). Simply having systems in place isn’t enough; the focus needs to be on practical implementation and clear communication. A key part of this is reevaluating older roles and potentially re-levelling them. What will be the unintended consequences of this? Will we lose some of the discretion vs the transparency?
The question was also raised about how to balance the need for transparency with existing pay-for-performance models. Societal pressure may have been in place prior to the directive but now there is a real must to review.
Transparency impacts talent management and the employee value proposition (EVP)
Pay transparency will likely lead to narrower pay bands, which could have unintended consequences. Attendees discussed potential impacts on internal mobility (fewer job moves due to smaller salary increases), recruitment (difficulty attracting external talent with less flexibility in compensation), and the overall performance culture.
The discussion also highlighted a potential shift in EVP, with benefits and other non-salary aspects becoming more critical for attracting and retaining talent. There was a concern that focusing too much on pay bands might detract from focusing on the skills an organisation truly needs. The group also discussed the need to simplify the rules around compensation (bonuses, salary, etc.) for managers. The reasoning and the process need to have clarity and be easily explainable, whereby a bonus is for X and a salary increase is for Y.
Communication and manager upskilling are crucial, but complex
Effectively communicating pay information to employees and equipping managers to handle pay-related conversations is a significant challenge. Managers will need training on benchmarking, external audits, and how to explain pay decisions fairly and simply. The role of the manager may need to be redefined, especially as employees become more empowered to discuss their pay.
The group also discussed the potential for increased employee inquiries about pay and the difficulty of maintaining confidentiality, especially for senior or specialized roles. There was also concern that too much transparency might actually worsen the gender pay gap if managers aren’t properly trained and supported to have equitable conversations with all employees. The question was raised about whether the EU directive is about pay or equity transparency, and whether a focus on pay transparency might inadvertently lead to a focus on talent rating individuals rather than addressing systemic pay gaps.
With regulations like the Pay Transparency directive coming into play in 2026, it doesn’t matter what amazing HR systems and technology infrastructure you have in place, they won’t help you right now. You must dedicate the time to ensuring your complete offering is there for all. The more information you give, the more people want.
If we actually use the directive as a nudge to review what we need to review and put it to one side, we should be asking the question, “what tools do we want to put in the hands of our employees and managers”.
