Employers are concerned about the impact the EU Pay Transparency Directive will have on wage bills, competitiveness and the link between individual pay and performance.
Research by think-tank The Conference Board, based on a survey of 78 of Europe’s largest employers, found that 41% have yet to begin preparing for the directive, which was passed by the EU Parliament and Council in 2023. EU member states have until June 2026 to introduce or change regulations that comply with the directive,
Under the EU Pay Transparency Directive, organisations with at least 100 employees in an EU country must publish their gender pay gap. If the gap is higher than 5%, they must take mitigating action or face fines.
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Job applicants will also have the right to receive pay information and employers cannot ask candidates about their previous salary or current pay.
The Conference Board found that 55% of senior HR executives say that they have, or are planning, a single approach to pay transparency across their international operations. Only 30% will restrict it to their European businesses.
Less than 2% of businesses believe that they are already compliant, while 10% believe they are close to readiness.
The findings echo the results of a poll by WTW last month, which found that 21% of organisations had not made any preparations for the directive.
The Conference Board’s Countdown to the EU’s new law on pay transparency report finds that employers are concerned that the new requirements could expose salary information to competitors, while the value of pay differentials as a tool for recruitment and retention will be reduced.
Other concerns included a reduction in the ability to reward top performers and wage inflation as job candidates and employees could have higher expectations.
A poll held at the report’s launch event in Brussels found that 44% of respondents were concerned or very concerned about the impact on wage bills, with only 3% not at all concerned. Of the 75 respondents to the poll, 43% said that the directive could increase their European wage bills by between 2.6% and 5%.
The report finds that CHROs may need to revise their pay structure to ensure it uses reliable data and objective criteria.
Jean-Marc Verbist, leader of the Conference Board Human Capital Center, Europe, said: “Our analysis shows that complying with the directive is data-intensive and requires a high level of cross-functional collaboration, so it is a concern that many businesses have not yet begun to prepare for it.
“Compliance is likely to come with a significant cost. Beyond the anticipated short-term rise in wage bills, businesses will also need to invest in training, data gathering, and internal and external communications.
“Chief human resource officers need to ensure their boards and senior managers are aware of the risks of non- and low-quality compliance: not just potential fines, but also increased workplace tensions and loss of productivity.”
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