Skip to main content
Perspective:
Perspective
09 Jan 2025
7 minute read

The EU Pay Transparency Directive

What have we learned from existing global legislation?

Regulation is driving policy changes in relation to equity, clarity on pay, and actions to reduce gender disparity.

EU Member States have until 7th June 2026 to implement the Directive.

Download to read our full analysis
5 MB PDF

 

The EU Pay Transparency Directive (“the Directive”) is part of a global trend in greater pay transparency, with the aim of bolstering equal pay laws and reducing the gender pay gap. As well as introducing gender pay gap reporting across Europe for the first time, it places obligations on employers to be transparent with workers and candidates about pay and pay progression. It also introduces a ban on pay secrecy clauses, and prevents employers from asking candidates about their remuneration history.

The Directive will impact organisations across Ireland as well as all other EU Member States and is reflective of a wider global trend towards pay transparency. Ireland implemented local Gender Pay Gap reporting in 2022, with companies of 50 plus employees required to report from 2025 onwards. As the Directive is mandated by the European Union to EU Member States only, companies based solely in Northern Ireland (as part of the UK) will not be directly impacted by the Directive. However, companies with a footprint outside of the EU should be mindful of the requirements under the Directive too. Meanwhile, globally, organisations are using measures in the Directive as a catalyst for reviewing their ambition in this area. Such steps have the potential to build employee trust and change cultures for the better, making organisations more competitive when it comes to attracting top talent.

After the rollout of other pay gap reporting and pay transparency laws globally, including in Ireland, the UK, the US, Brazil and Australia, what lessons can EU employers learn from these countries?

The global direction of travel

All things Environmental, Social and Governance (ESG) have moved up the corporate agenda, prompted by the increasing regulation in this area, including the implementation of Corporate Sustainability Reporting Directive (CSRD).

The importance of transparency, diversity and equity has increased given the regulatory environment and the potential sanctions for getting it wrong, including negative publicity. Some parties now see these as the foundations of a successful and purpose-driven organisation.

Leading multinationals are adopting the Directive’s rules globally for several reasons:

  • Global adoption of the Directive’s gold standard requirements ensures consistency and simplicity rather than a country-by-country approach.
  • Countries not caught by the Directive may need to compete with overseas organisations, for example near neighbours in the EU, particularly for senior talent.
  • To bring consistency for internationally mobile employees across the organisation.
  • To get ahead of legislation they predict will land in the future.

"By far the most wide-reaching set of obligations for employers, the EU Pay Transparency Directive sets the global benchmark for best practice."

The Directive complements the EU's new Corporate Sustainability Reporting Directive (CSRD). Among other reporting obligations, it requires companies to disclose the percentage gap in pay between men and women, as well as the ratio between its highest paid individuals and the average.

Irish organisations with 50 or more employees must report gender pay gap metrics annually, including the mean and median hourly pay gap and bonus pay gapfrom 2025 (previous 250 or more employee 2022/2023 and 150 or more employees in 2024). Key findings below:
 
Communication is key
The EU has tried to prevent ‘crude’ reporting by requiring businesses to break down pay gaps by job category or value. However, statistics never tell the full story and businesses need to be prepared to explain them. Understanding why there could be disparity, educating managers on the reasons and sharing this with employees, unions, investors, the media and the public, in layperson’s terms, is crucial.

Prepare to harness your data
Extracting the data can be difficult too. Businesses need to start looking at their payroll and HR systems to work out how to collate and consolidate information (possibly across different EU Member States), with as little human intervention as possible. Using technology can drive efficiencies and reduce the risk of error.

Ownership and governance
It's worth designating senior coordination as cross-functional collaboration is required. And logging these decisions is vital, so everyone involved has access to a single, central source of information.
 

Download the report to read more on this case study.

One particularly important distinction between US legislations and the Directive is that the EU rules do not specify what an appropriate range is, or how it should be made transparent. The definition of ‘pay’ is also much broader; under New York legislation only base pay needs to be disclosed. It seems unlikely greater clarity will be provided by Member States implementing legislation. However, our main lessons would be:
 
Train key stakeholders
Transparency can be a great tool for employers in both external negotiations and when managing internal expectations. However, key stakeholders need to be trained to navigate pay discussions in a world of greater transparency. It’s human nature for candidates and internal colleagues to expect or ask for the top end of a salary band, and companies will need the expertise to manage those trickyconversations. Training shouldn’t stop at HR; key decision-makers and managers on the front line of pay discussions need to know about employee rights, company processes and how to navigate difficult conversations with employees.
 
 
Start preparations early
In New York, the prohibition on asking for previous remuneration was implemented first, followed by the requirement to post salary bands a few years later. This staggered approach was welcomed by some companies as it avoided a lot of change in one go. As all transparency rules go live in the EU from June 2026, companies should consider whether they would benefit from introducing some aspects early.
 
Take a sustainable approach
US transparency taught us that the connection between your job architecture and remuneration framework is key and the way in which those HR tools work together should be sustainable. Salary bands and career progression should be set so they can adapt to market changes and internal demand, while still considering implications on gender equality. The key is to develop a suitable approach for your business and job architecture that balances compliance and the company’s desired flexibility.
 

Download the report above to read the full case study.

Organisations that act now will be the best prepared – it’s worth bearing in mind that although reporting doesn’t commence until 2027, employers will be reporting on 2026 data. It’s worth ‘looking under the bonnet’ now to assess your data, ensure your job architecture is fit for purpose, understand any potential challenges and allow yourself time to remediate reward policies and processes before reporting kicks in. Depending on an organisation’s maturity and readiness, these steps could take significant time and commitment.

Did you find this useful?

Yes
No

Thanks for your feedback

Your feedback is important to us

To tell us what you think, please update your settings to accept analytics and performance cookies.

Need help updating cookies?

Contact Us

Billy Burke

Partner, Tax and Legal
+353 1 417 2924

Anne Kelleher

Director, Head of Reward Services
+353 (0) 1 407 4872

Our thinking

EU Pay Transparency Directive

The Directive, which must be transposed into Irish law by 7th June 2026, is aimed at promoting pay transparency and ensuring equal pay for equal work or work of equal value, regardless of gender.
Research
5 minute read

Executive Compensation Advisory

Deloitte's team works with clients to transform their executive compensation plans to motivate talent and support your business strategy.
Service
5 minute read

European Commission proposes transfer pricing directive

On 12 September 2023, the European Commission (“the Commission”) published its long-awaited proposal for a directive introducing a common framework for corporate income taxation in the EU.
Perspective

Reward, Employment Tax and Share Plans

Deloitte's global professionals provide strategic consulting and operational expertise in employment tax and regulation, share plans and employee reward programmes.
Service
12 minute read