Pay transparency is no longer a future challenge but one of the most important HR topics of today. EU Directive 2023/970 marks a new era in building trust between employers and employees, aiming to create open, transparent and verifiable pay systems. Member States are required to transpose the directive into national law, and surveys show that the expected reporting obligations and increased publicity have already prompted many companies to start preparing.
Pay transparency and pay equity: a tool and a goal
Pay transparency and pay equity go hand in hand: one is the tool, the other is the goal. Transparency makes visible those differences that were previously hidden – whether between genders, positions, or business units.
When pay principles, bands and decision processes are transparent, an objective foundation is created for ensuring pay equity. Companies can not only comply with legislation but also proactively identify and reduce unjustified pay gaps, whether based on gender, age or organisational factors.
The pay transparency directive is more than a reporting obligation
Formally, the Pay Transparency Directive applies to all employees, regardless of whether they work full-time or part-time.
While the reporting obligation will initially affect larger companies, the principle of transparency applies to all employers.
Therefore, preparation should not be limited to producing pay analytics and reports. It is equally important for leaders and HR professionals to be ready to answer the employee’s question:
“Why am I paid this amount?”
In the future, not all pay information can be considered a business secret. Employees will have access to much more information about pay principles, which means that credible and consistent communication will be key. Companies that define and transparently communicate their pay logic in time will not only ensure compliance but also strengthen trust and engagement among their employees.
Read our HR experts’ previous blog post on pay transparency as well!
Key pay transparency concepts in HR language
Introducing pay transparency brings new perspectives and terminology into HR. It is essential that all stakeholders – leaders, HR and employees – share a common understanding of these terms to ensure consistent interpretation and practice.
Job analysis
Job analysis is the standard process of mapping out a position’s tasks, responsibilities, required competencies, authority, place, role and impact within the organisation. It provides the foundation for establishing comparable and fair pay structures. The directive also emphasises that job evaluation methods must not be based on traditional gender stereotypes.
Conscious pay and benefits structure and policy
The pay policy is not an administrative document but a strategic compass. It defines:
- the elements of total compensation (base salary, bonus, rewards, benefits, cafeteria),
- the principles of pay decisions (market competitiveness, performance-based approach),
- and the system for pay reviews.
The principle of transparency requires these foundations to be clear and understandable for every employee. At the same time, an essential element of a conscious pay policy is identifying and eliminating gender-based pay differences.
A well-designed pay policy not only supports market competitiveness but also ensures that remuneration is based on objective, comparable criteria – regardless of gender, age or other non-performance-related factors.
Fair pay
Fair pay refers to a remuneration system that ensures equal pay for work of equal value, regardless of gender or any other discriminatory characteristic. It is based on transparent and objective decision-making — where salary levels are determined by competence, qualifications, experience, performance and market conditions. A fair pay strategy is regularly reviewed and adjusted to eliminate unjustified differences and gender-based pay gaps.
HR checklist: what can we do today to support pay transparency
- Establish baseline job descriptions and evaluations for all key positions.
- Collect and structure pay data (base salary, bonuses, benefits) by role and business area.
- Develop and document the main principles of the remuneration and benefits policy.
- Conduct a preliminary gender pay gap and internal pay gap analysis.
- Create a communication plan on what, when and how compensation information will be shared with employees.
- Train managers to respond to pay-related questions empathetically and consistently.
Pay transparency is not only an HR task but also a question of leadership competence. Employees first ask their direct leader the question: “Why is this my salary?” — therefore, it is of key importance that leaders know how to communicate about pay principles in an authentic, empathetic and consistent manner. To this end, it is advisable to develop a targeted training plan that prepares leaders for handling typical employee questions, sensitive situations, and practising transparent communication.
Why is it useful to involve an external consultant?
- objectively examines the company’s pay structure,
- helps identify hidden pay differences,
- and ensures that the process complies with legal and ethical requirements.
Involving an external expert not only supports compliance, but also strengthens the employer brand and increases employee trust.
Pay transparency is an opportunity, not a burden
Pay transparency is not merely a legal obligation, but a strategic HR tool.
Companies that introduce transparent pay systems in time and communicate about them consistently build loyalty, trust and competitive advantage. The goal is not simply compliance, but strengthening competitiveness and employee satisfaction — something HR can leverage as a strategic asset.
