Pay Transparency Directive: Pay secrecy is becoming a thing of the past!

Written by

Savana Jaff, Partner People & Payroll Services
T: (+45) 2869 8328
M: sja@atlab.at

The EU Pay Transparency Directive, set to be implemented in Denmark by June 2026, is reshaping the workplace by mandating clear pay structures and promoting fairness for both job seekers and current employees.

It will no longer be necessary to guess what’s fair or negotiate in the dark. Employees will have the right to know if they are paid equally compared to others in similar roles, and they’ll be empowered to request transparent pay data. For employers, this isn’t just about compliance – it’s about rethinking pay practices, addressing hidden disparities, and building a workplace rooted in fairness and openness.

Why this directive is about more than compliance

For companies, the Pay Transparency Directive is a shift toward a workplace culture that’s built on Diversity, Equity, and Inclusion (DEI), creating an environment where everyone, from job seekers to seasoned employees, knows they’re valued fairly.

Historically, salary has been something of a “closed book.” Employees didn’t talk about it, and companies didn’t either. But the Pay Transparency Directive is changing the narrative: it makes pay data available, mandates equal pay for equal work, and requires action where gender pay gaps are identified. The directive pushes us to examine – and, where necessary, adjust – our pay practices, ensuring they are equitable and transparent.

The challenges ahead

The directive places gender pay equality at the forefront, but achieving this goal is no simple task. Many companies may be unaware of existing pay gaps, while others may have ingrained structures that unintentionally contribute to pay inequality. Here are a few eye-opening points to consider:

1. Pay gap consequences

Denmark’s gender pay gap averaged around 12.4% in 2023, which translates into significant lifetime impacts for women’s financial stability and retirement security. Across the EU, these pay gaps contribute to a 30% pension gap, meaning women retire with much less financial security than men.

2. The need for transparency in job offers

Lack of transparency starts at the hiring process. This directive mandates that pay bands are disclosed to job seekers upfront, removing the negotiation guessing game and helping ensure that pay offers are fair from the beginning.

For many organizations, adopting this new level of transparency will involve rethinking the way we approach salaries and how we discuss them with current and prospective employees. It’s more than just compliance—it’s an opportunity to level the playing field and create a fairer workplace.

“Denmark’s gender pay gap averaged around 12.4% in 2023. Across the EU, these pay gaps contribute to a 30% pension gap, meaning women retire with much less financial security than men.”

Breaking down the key measures: What you need to know

The directive introduces several key rights and obligations, each designed to bring transparency to pay structures and close the gender pay gap.

Here’s what this means in practice:

1. Pre-employment transparency

Job seekers can request information about the pay range for a role before the interview stage.
Companies can no longer ask about salary history, ensuring that prior pay gaps don’t follow employees into new roles.

2. Rights for current employees

Employees will have the right to compare their pay to average levels for similar work, broken down by gender.
Pay secrecy will be banned, enabling open conversations about pay and value.

3. Gender pay gap reporting obligations

Companies with over 100 employees must report on gender pay gaps, with requirements rolled out in stages to give businesses time to prepare.

4. Joint pay assessments

If a gender pay gap of 5% or more exists without clear, objective justification, organizations must conduct a joint assessment with employee representatives to actively address the gap.

Taking proactive steps toward compliance and beyond

Adopting the Pay Transparency Directive may seem like a challenge, but it offers an opportunity to align your pay practices with a forward-thinking, people-first strategy.

While the directive will not be implemented into national law until 2026, employers should start considering how they will comply with the obligations. Given the wide range of processes impacted, it is vital to be pro-active in assessing and acting on the pay transparency requirements.

Here’s how we can support you:

Evaluate and redesign hiring practices

We will help redesign your recruitment practices to eliminate questions about salary history and introduce clear salary levels in job postings, helping to attract top talent and build trust from the outset.

Conduct a comprehensive salary analysis

We will conduct an in-depth analysis of your existing pay structures to identify and address any gender-based pay disparities, enabling you to act proactively and avoid costly reactive changes later on.

Develop job architectures and transparent pay structures

Building on the pay analysis, we will develop a transparent, objective pay structure and job architecture, providing a consistent and transparent framework for development opportunities and career paths, while also offering an objective basis for fair and equal job evaluations and salary levels, which can be easily communicated across the organization.

Create compliant pay transparency policies

Beyond job structures, clear policies are essential. We will assist in developing relevant policies that not only ensure compliance with the directive but also foster a culture of openness and fairness within your organization.

Training for HR and managers

Implementing the Directive requires your team’s buy-in and understanding. We offer targeted training sessions to ensure managers are fully equipped to comply with and communicate the Directive’s requirements confidently.

Let's collaborate

The future of work demands more than just compliance—it demands a commitment to fairness, trust, and equality.

We’re here to guide you every step of the way.