How to prepare for the EU's Wage Transparency Directive? Tips for companies

Information and reporting obligations

From 2026, everyone's salary will be public! This is one of the common misconceptions about the European Union's 2023/970 Wage Transparency Directive. Although the expected regulations will play an important role in achieving wage transparency, much will depend on the will of companies. In order to comply with the Directive and take effective steps towards gender equality in the workplace, they need to start preparing early.  

Among other things, the Directive provides that workers may, at their request, ask to be informed of their own pay levels, broken down by gender, and the average pay levels of workers doing the same job or work of equal value, and that they must be informed annually. In addition, companies must report the difference between the average pay levels of male and female workers, which can only be more than 5% higher in a given category of workers due to objective and gender-neutral factors.

In this paper, I summarise the steps that a company with 100 or more employees should take to make the most effective use of the Directive on information and pay gap reporting. The Hungarian legislation is still in preparation, and Parliament has until June 2026 to decide on it.

Preparation. How to get started?

The first step is to draw up a so-called job map, which is a categorisation of the existing jobs in your company according to their type and level of responsibility. This requires that each employee has a job description summarising his or her tasks. Although it may seem time-consuming, it is recommended that this step be carried out jointly by managers and employees. 

Once these are in place, the jobs are placed in a corporate hierarchy by level according to their responsibilities. Importantly, we are not concerned here with the amount of work or the person doing the work or their pay. In this step we can group jobs into job-families and career groups. 

Once the job map has been drawn up, it is advisable at this point to discuss and outline the career paths that exist in the company and that an employee may follow in the course of his or her career. This is an essential step in developing a predictable promotion, pay rise and performance reward system. 

The next step is to determine the salary range for each job (benchmarking). The determination of salary ranges depends on where the company wants to be in the wage market, for example, which industry, which companies, which region it compares its own wages to, and how competitive it wants to be compared to its competitors. 

Once we have a salary range for each job, we determine the salary range of the employees in that job based on their salaries. In an ideal organisation, new entrants with less experience would be at the bottom of the pay band, those with significant experience in the job would be in the middle, and those who are ready to move up to a more senior position would be at the top of the pay band. It is important to note that salary can be influenced by the performance of the employee. At this point, it is worthwhile to map the gender ratio in the different salary bands (at the bottom, middle and top).

In addition, the role of career paths, as outlined above, is also important. So it is important to examine the proportion of women in positions that offer further promotion opportunities. 

Once all the above steps have been completed, it is a good idea to prepare the analyses for the reporting required by the Directive now, so that you are not surprised when you prepare your first pay report. 

However, it should be remembered that the Directive also takes into account fringe benefits (such as bonuses, reimbursement of expenses, overtime) and here too we need to make sure that there is no gender discrimination. 

What else can we do? 

Wages are only one part of the overall benefits package, but it is important to make employees aware of fringe benefits. This can be done through brochures, training, internal advertising on company social media. 

It is also worth paying attention to those having children. There are many good company practices to help parents, such as paid parental leave, reduced working hours with full pay for new parents. 

As the use of pay parity represents a huge paradigm shift in the life of a company, it is crucial that managers are equipped to deal with it. It will be the role of HR to support managers and employee representatives in this through training, data-driven suggestions and, where appropriate, intervention. It is also important that pay discussions are closely linked to employee performance appraisals. 

With the deadline for the implementation of the Directive approaching, it is important that company representatives start to inform themselves as soon as possible and make the necessary preparations. 

You can read the Hungarian version here.