The entry into force of the Wages and Salaries Directive and how to prepare for it

The EU Pay Transparency Directive, which will enter into force nationally in June 2026, will bring significant changes to pay transparency and equality. The new provisions will apply to employers of all sizes in the private and public sectors. The Pay Equality Directive concerns equality between women and men and pay. Action needs to be taken in companies now. Here are key steps to ensure that your organisation is ready to meet the requirements of the Directive and promote equal pay.

1. Designing a pay policy

To prepare, you should assess how open your organisation wants to be about pay issues. The Directive sets minimum requirements, such as the publication of average and median salaries and salary ranges by gender. It is important to consider whether your organisation wants to limit itself to meeting these requirements or whether it is seeking wider pay transparency. This decision will determine what measures need to be taken going forward.

Measures:

  • Assess the organisation's target level of pay equity.
  • Think more broadly about where your organisation stands in the marketplace in terms of wages.
  • Should changes be made to improve the competitive position?

2. Inventory and analysis of the current situation

Before taking action, it is essential to take stock of the current state of pay in your organisation. This means collecting and analysing pay data and assessing whether there are any unjustified pay gaps.

Measures:

  • Bring together your organisation's pay statistics and reward systems.
  • Assess whether the pay survey in the equality plan has been properly carried out.
  • Find out whether up-to-date role descriptions are available for each position.
  • Assess the need for changes to the organisation's recruitment process.

3. Creating a system for monitoring equal pay

Organisations should put in place a system that allows continuous monitoring and analysis of pay levels. This will ensure that any pay differentials are justified and based on objective criteria.

Measures:

  • Make sure that all payroll data is up-to-date and reliable.
  • Check any provisions in the collective agreement.
  • Decide whether to use a commercial system or develop your own system that takes into account the unique characteristics of your organisation.
  • Define clear criteria for assessing pay:
    • Assessment of complexity
    • Performance evaluation
  • All key elements of the salary must be taken into account. Classification by title is not sufficient.
  • Use consistent grades and titles.
  • Identify any pay gaps and the reasons behind them.
    • Legislation allows for differential pay if the difference is based on a person's performance or, for example, a provision in a collective agreement. However, the criteria must be transparent, i.e. organisations must draw up a set of criteria according to which salaries are determined.

4. Evaluation and corrective measures

There may be objective factors behind the pay gap, but it is important to assess whether there are discriminatory practices in pay decisions. Fairness assessments help to identify and eliminate potential inequalities.

Measures:

  • Estimate the pay gap by gender. You can extend the assessment to include age and ethnic group, for example.
  • Be prepared to provide employees with information on the average wage level by gender for groups of employees doing the same or equivalent work.
  • Use the objective and impartial criteria previously established in the organisation to make salary decisions.
  • Document and justify all pay decisions clearly and transparently.
  • Start eliminating unjustified pay gaps. If there is a difference of 5% or more in the average pay of workers of different sexes in any category of workers that cannot be objectively justified, the difference must be corrected within 6 months.

5. A plan to comply with the Directive

The implementation of the Wages and Salaries Directive requires careful and strategic planning. A process plan will ensure that all the requirements of the Directive are met in a timely and appropriate manner.

Measures:

  • Draw up a detailed plan setting out how your organisation will meet the requirements of the Directive.
  • Ensure that the organisation has sufficient resources to implement the plan.
  • Define the responsible persons and deadlines for all actions.

6. Ensuring reporting capacity

The Wages and Salaries Directive obliges companies to report on pay levels and pay differentials on a regular basis. For organisations with 100 or more employees, employers must report to the Authority on the pay gap between men and women (100-249 employees: every 3 years, 250 or more employees: annually). If a pay gap of 5% or more between men and women is found in a group of employees for which no justification can be found, the pay gap must be closed within 6 months or a pay review must be carried out in consultation with staff representatives and an action plan drawn up to remedy the situation.

Measures:

  • Ensure that pay levels and pay gaps can be reported.
  • Produce clear and understandable reports on wage levels and pay differentials.
  • Test the reporting system before deployment.

7. Open communication and training

The implementation of the Directive requires open communication within the organisation. It is important that employees are aware of the content of the Directive and its implications.

Measures:

  • Communicate openly to employees about the requirements of the Directive and the implications for the organisation's pay policy.
  • Make sure employees know how to request pay information and get help with equal pay issues.
  • Provide training on equal pay and wage bargaining, especially for front-line workers.

8. Data protection and processing of payroll data

Payroll data is sensitive information and must be handled in accordance with strict data protection policies. Employers must ensure that payroll data is processed lawfully and securely. When collecting payroll data, it is also important to ensure that the data used is reliable and comparable. External comparisons and statistics can complement internal data and provide a broader perspective.

Measures:

  • Please update your privacy policy and make sure that it also covers the processing of payroll data.
  • Ensure that employees' payroll data is stored securely and used only for its original purpose.
  • If possible, use anonymised salary data.

9. Continuous improvement

Promoting equal pay is an ongoing process. It is important to monitor the implementation of pay policies and make the necessary changes.

Measures:

  • Constantly monitor developments in pay equality and update pay policies as necessary.
  • Encourage an open discussion on pay and equality in the workplace.
  • Provide training and support to employees on issues related to promoting equal pay.

The entry into force of the Wages and Salaries Directive will bring important changes for organisations, but it is also an opportunity to promote equal pay and increase the level of transparency in pay. It should be remembered that pay transparency is only part of the picture. Organisations must also work to eliminate the discriminatory practices and structures that underlie the pay gap.

Contact our experts to book a free initial survey, which is not binding on you. Together, we will go through the current state of your organisation and the steps you need to take to prepare for payroll transparency. Book an appointment for a free initial survey by contacting our experts!

VALO Partners Law Firm provides comprehensive, proactive risk management and partners in challenging situations such as change negotiations, termination of employment, collective bargaining, outsourcing, employment litigation and data protection issues. 

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- Alexa Kavasto, employment lawyer