Pay transparency used to be one of those HR topics that sounded theoretical. Important? Yes, but easy to park behind phrases like “market competitive” or “we’ll review it next year”. That luxury is disappearing fast.
Between the EU Pay Transparency Directive and growing pressure from employees, regulators and the public, transparency around pay is moving from nice-to-have to non-negotiable.
The question is no longer if pay transparency is coming, but how prepared are you when it does?
What does pay transparency really mean in practice? Is it about publishing everyone’s salary? Is it just another reporting headache? Or is it a much deeper shift in how organisations think about fairness, structure and accountability?
In this article, we’ll cut through the noise. We’ll look at what pay transparency actually involves, what the new law says, where employers typically hit a brick wall, and how organisations can move from reactive compliance to a more confident, strategic approach.
Feeling HR is a bit of a mine field now? You are not alone
Mmm…not sure where to start? Stick with us. It’s about to get a lot clearer.
What is pay transparency?
Pay transparency is, at its core, about visibility and accountability. It means being clear about how pay is set, how it progresses, and why differences exist. Not just to regulators, but to candidates and employees too.
This is where it’s easy to get the wrong end of the stick. Pay transparency doesn’t mean publishing everyone’s exact salary on your intranet (despite that being the fear that keeps many HR teams awake at night).
Instead, it’s about giving people access to meaningful information: pay ranges for roles, the criteria used to determine pay, and confidence that work of equal value is rewarded fairly.
What does the new law say?
The Directive is about transparency, but not the vague, box-ticking kind of marketing exercise. This is structured, enforceable transparency, with real consequences if employers fall short. So what does that actually mean in practice?
First, gender pay reporting. Member States must introduce gender pay gap reports, and employers with 100 or more workers will fall into scope. Some countries may phase this in, but the direction of travel is clear.
Now, if reporting reveals a gender pay gap of 5% or more in any category, employers will have six months to fix it (unless they can objectively justify the difference). Remember, six months isn’t long.
Then there’s pre-employment pay transparency, a big cultural shift for many employers. Job applicants will have the right to know the pay level or pay range for a role, and they can ask for it at any point during the recruitment process.
At the same time, employers are not gonna be able to ask candidates about their current or previous salary. If your hiring managers still rely on “What are you on now?” as a negotiating tactic, that approach is about to become a compliance nightmare for them.
The Directive also gets into the mechanics of how pay is set. Employers must be able to explain the objective criteria they use to determine pay and progression (including salary and bonus).
Employees themselves gain stronger rights, too. They could request information on average pay levels, broken down by sex, for colleagues doing the same work or work of equal value….for now.
This isn’t about exposing individual salaries, but it does mean employers need confidence in their data and their rationale. If the numbers don’t stack up, they’ll be very visible.
Another clear line in the sand: pay secrecy clauses are out. Workers cannot be prevented from discussing their pay. For organisations that have relied on confidentiality to keep pay inconsistencies under wraps, that silence is ending.
Finally, the Directive introduces enforcement measures that allow workers to claim compensation where equal pay principles have been breached. This isn’t just guidance or best practice: it’s, well, a legal framework with real financial and reputational risk attached.
The message is clear: transparency isn’t optional anymore. The sooner organisations get their pay data, structures and processes in order, the smoother this transition will be.
Real challenges when it comes to pay transparency
Let´s be honest. Pay transparency sounds straightforward on paper. In reality? It’s a cross-functional, and occasionally uncomfortable exercise that touches almost every part of the organisation. Here are the challenges we see employers wrestling with most often:
🟠 The data problem: Many organisations simply don’t trust their pay data. Yet. And for really good reason. Inconsistent job titles, historic one-off pay decisions, missing rationale, spreadsheets living in silos…it’s hard to be transparent when the data isn’t clean, complete or comparable.
🟠 Reluctance to disclose sensitive information: Transparency can feel a bit exposing. Employers often worry that sharing pay ranges, averages, or criteria will trigger difficult conversations (or worse, grievances). But withholding information is increasingly the bigger risk, both legally and culturally.
🟠 An unhealthy dependence on salary benchmarks: Market data is useful, but it’s not a silver bullet. Blind trust in benchmarks without considering internal equity can quickly create distortions. The market might explain what you pay, but it won’t always justify why two people doing similar work are paid very differently.
🟠 Communicating pay internally (without chaos): What does “fair pay” really mean in your organisation? Employees will expect a clear and consistent explanation. Even if it´s a small conversation. HR and managers need to get comfortable explaining pay philosophy, ranges, and progression in plain language, without setting off alarm bells.
🟠 Explaining pay differences within the same range: One of the hardest conversations: why two employees sit far apart in the same pay band. Performance, skills, experience, scope. All valid factors, but only if they’ve been applied consistently and documented properly. Without that clarity, transparency can quickly feel like a challenge to credibility.
🟠 Building solid role and job architecture: Transparency depends on structure. Employers need robust frameworks that explain why certain roles carry more weight than others. That means truly understanding your org chart, how roles are categorised, and how “work of equal value” is defined, not just assumed.
🟠 Hiring decisions under the microscope: New hire salaries are a common source of pay gaps. Every offer now needs a sharper sense-check: is this genuinely fair compared to similar roles internally? Short-term hiring pressure can easily create long-term compliance and morale issues.
🟠 A genuinely cross-functional effort: Now, pay transparency isn’t (only) an HR project. Line managers, CFOs, Reward teams and leadership all need visibility to understand discrepancies and the authority to adjust policies. When everyone owns a piece of the puzzle, progress is faster (and less painful).
🟠 Continuous monitoring: Transparency isn’t a one-off. Pay gaps evolve as organisations hire, promote and restructure. Ongoing monitoring is essential to avoid nasty surprises when employees ask, or reports deadlines land on your desk.
🟠 Staying adaptable as the law evolves: Today, the focus is gender pay gap. Tomorrow, it may not be the only one. The prospect of expanded reporting (for example, by race or age) is already on the horizon. The UK government’s Plan to Make Work Pay, following the announcement of a forthcoming Equality (Race and Disability) Bill in the King’s Speech 2024, signals a clear direction.
🟠 Reluctance to disclose sensitive information: Transparency can feel a bit exposing. Employers often worry that sharing pay ranges, averages, or criteria will trigger difficult conversations (or worse, grievances). But withholding information is increasingly the bigger risk, both legally and culturally.
🟠 An unhealthy dependence on salary benchmarks: Market data is useful, but it’s not a silver bullet. Blind trust in benchmarks without considering internal equity can quickly create distortions. The market might explain what you pay, but it won’t always justify why two people doing similar work are paid very differently.
🟠 Communicating pay internally (without chaos): What does “fair pay” really mean in your organisation? Employees will expect a clear and consistent explanation. Even if it´s a small conversation. HR and managers need to get comfortable explaining pay philosophy, ranges, and progression in plain language, without setting off alarm bells.
🟠 Explaining pay differences within the same range: One of the hardest conversations: why two employees sit far apart in the same pay band. Performance, skills, experience, scope. All valid factors, but only if they’ve been applied consistently and documented properly. Without that clarity, transparency can quickly feel like a challenge to credibility.
🟠 Building solid role and job architecture: Transparency depends on structure. Employers need robust frameworks that explain why certain roles carry more weight than others. That means truly understanding your org chart, how roles are categorised, and how “work of equal value” is defined, not just assumed.
🟠 Hiring decisions under the microscope: New hire salaries are a common source of pay gaps. Every offer now needs a sharper sense-check: is this genuinely fair compared to similar roles internally? Short-term hiring pressure can easily create long-term compliance and morale issues.
🟠 A genuinely cross-functional effort: Now, pay transparency isn’t (only) an HR project. Line managers, CFOs, Reward teams and leadership all need visibility to understand discrepancies and the authority to adjust policies. When everyone owns a piece of the puzzle, progress is faster (and less painful).
🟠 Continuous monitoring: Transparency isn’t a one-off. Pay gaps evolve as organisations hire, promote and restructure. Ongoing monitoring is essential to avoid nasty surprises when employees ask, or reports deadlines land on your desk.
🟠 Staying adaptable as the law evolves: Today, the focus is gender pay gap. Tomorrow, it may not be the only one. The prospect of expanded reporting (for example, by race or age) is already on the horizon. The UK government’s Plan to Make Work Pay, following the announcement of a forthcoming Equality (Race and Disability) Bill in the King’s Speech 2024, signals a clear direction.
Pay transparency isn’t just a compliance challenge, it’s an organisational maturity test. The employers who treat it as a strategic, ongoing capability (rather than a one-off reporting headache) will find themselves in a much stronger position when the next wave of regulation arrives.
When is the law going to be implemented?
If you’re hoping for a neat, fixed date you can circle in your calendar… not quite yet. But the direction of travel is very clear.
The UK government has started to follow the lead of the EU Pay Transparency Directive and is actively exploring how similar measures could work in a UK context. A formal call for evidence on pay transparency ran from 7 April 2025 to 30 June 2025, inviting businesses, advisers and employee representatives to weigh in on the impact of greater transparency.
Who should be responsible for pay transparency in your company?
Short answer: it’s not just HR’s problem.
Pay transparency is a cross-functional responsibility. HR often leads the charge, but success depends on close collaboration across the business.
Managers need to understand and communicate pay decisions clearly.
Finance leaders (especially the CFO) care deeply about cost control, forecasting and risk (pay transparency done badly can be a compliance nightmare).
Compliance and legal teams bring the regulatory lens, while Reward and Compensation specialists handle job architecture, pay bands and equity analysis.
When everyone understands their role and share the same data, it becomes manageable. When they don’t, it becomes messy very quickly.
The best option if you’re a mid-sized or large company
For mid-sized and larger organisations, there are typically two strong (and complementary) options.
The first is to get more out of your HRIS. If your HR system already has robust compensation management modules, extending it makes a lot of sense.
Look for an enhanced HRIS to capture both pay and variable pay (bonuses, commissions, allowances) and turn it into a genuine single source of truth.
Vendors, like OpenHR, now offer pay transparency and reporting capabilities layered on top, which means fewer systems, less reconciliation, and fewer awkward conversations with finance. Sweet music to a finance director’s ears.
The key here is flexibility. Pay transparency requirements will evolve, and your system needs to evolve with them. A highly customisable HRIS that can manage multiple pay sources, evolving structures for future regulatory changes.
The second option is dedicated pay equity technology. These tools are often outstanding at what they do: advanced modelling, scenario testing, deep analytics and regulatory-ready reporting.
For organisations facing regulatory pressure, operating across multiple countries, or managing complex global pay structures, they can be invaluable.
In reality, many larger employers end up using both (a flexible HRIS for core data and processes, supported by specialist pay equity tools for deeper analysis).
Pay transparency isn’t a future problem. And the organisations that act early will find the transition far smoother than those who wait.
