EU Pay Transparency Directive: How it affects UK businesses

The EU Pay Transparency Directive (Directive (EU) 2023/970) was jointly adopted by the European Parliament and Council in mid-2023. It imposed a deadline of 7 June 2026 for member states to write the provisions into their own national laws. The Directive formalises the principle of ‘equal pay for equal work, or work of equal value’, providing several measures to achieve that goal. From 2027, companies with 250 or more employees must also publish pay reports to demonstrate their compliance.

The UK is under no obligation to adopt or copy the directive, but that doesn’t mean UK-based businesses can ignore it. If your company is headquartered in the UK but employs staff in the EU, those employees will still come under their country’s version of the directive. It’s also worth noting that, while the UK hasn’t adopted the EU’s specific directive, its own laws are heading in the same direction.

In this article, we’ll explain exactly what changed under the EU’s directive, as well as the UK’s own laws. We’ll also detail what the directive means for UK-based businesses, especially those with employees in the EU, and the steps you can take to make compliance easier.

Key takeaways

• The EU Pay Transparency Directive doesn't directly apply to UK companies, but it does apply if you have an EU subsidiary, branch, or locally based staff.

• If a company's pay data shows an unjustified pay discrepancy of 5% or more between similar roles, and it isn't remedied within six months, the company must run a joint pay assessment with worker representatives. The burden of proof has been reversed, meaning companies need to prove they didn’t discriminate.

• The UK's Employment Rights Act is evolving along similar lines, so all UK businesses should be aware of what pay transparency is and how it could affect them.

• In many cases, failure to comply with pay transparency laws comes down to poor information management, rather than intentional acts of discrimination.

• Rippling’s all-in-one workforce platform brings all employee information, including roles and pay, into one centralised system. This makes it easier to analyse and report on staff pay, wherever they’re based.

What the EU Pay Transparency Directive actually requires

At its core, the EU Pay Transparency Directive aims to reinforce the principle of equal pay for equal work or work of equal value, especially between men and women. To achieve that goal, it introduces several specific measures, which are detailed below:

1. Questions about salary history aren’t allowed

Previously, asking a candidate: “What’s your current salary?” was a routine part of the interview process. This is now expressly banned under the new EU laws. You can negotiate salary only based on the role the candidate has applied for, not based on what they’re earning for another position.

The measure is designed to eliminate systemic discrimination that often locks employees into low pay for their entire careers. Historically, this has been especially problematic for women and many minority groups.

2. Pay ranges must be disclosed up front

Under this rule, which is related to the previous one, employers must also disclose the salary or pay range before any job interviews begin. This can either be an open disclosure, via the job advertisement, or directly to the applicant in written form. Some EU member countries have stricter provisions, requiring the disclosure to be in the job advertisement itself.

Again, the goal is to prevent unfair negotiating tactics and to ensure greater fairness in the hiring process. However, it can also be advantageous for employers. First, disclosing pay ranges can attract more candidates who might otherwise have avoided applying because they assumed the salary would be low. Alternatively, it can also reduce instances of candidates dropping out at a late stage in the process due to the offer being below their expectations.

3. Employees can discuss their salaries with one another

Pay secrecy clauses in employment contracts have been banned, meaning that employees can openly discuss what they earn, and employers can’t prevent them from doing so.

In addition, employees now have the right to ask for a written breakdown of their pay alongside the average pay of people doing work of equal value. This needs to be broken down by gender, and the employer must respond within two months of receiving such a request.

4. A 5% discrepancy triggers action

Businesses with 250 employees or more must begin reporting from 2027, so they have limited time to ensure they’re compliant. If a report shows an unjustified pay discrepancy of 5% or more between people doing equal work, the organisation will have six months to address that discrepancy.

Businesses failing to address any issues within the six-month window will be forced into a joint pay assessment, a joint process with worker representatives aimed at analysing the entire pay structure of the company.

If that process leads to a dispute, the burden of proof lies with the business. It must show that it didn’t discriminate. In terms of penalties, businesses can face uncapped compensation claims for back pay, and they may also be excluded from participating in public procurements across the EU.

The UK is heading the same way

Even if you don’t have employees in the EU, the UK either already has or is planning its own measures to address gender pay inequality. Here’s what’s currently in place and what’s expected in the near future:

• Gender pay gap reporting: Under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172), employers with 250 or more employees must publish data relating to gender pay gaps every year, including the average and median pay gap between men and women, the bonus gap, and how men and women are spread across pay bands. Businesses currently aren’t required to explain their data or do anything about it (see new changes for 2027 below).

• Biological sex reporting (updated in 2026): Following a UK Supreme Court ruling on the meaning of ‘sex’ in the Equality Act 2010, gender pay gap figures now have to be worked out using an employee's biological sex, not their gender identity, even if they hold a Gender Recognition Certificate. This changes how employers need to collect and label their own data.

• Gender pay gap action plans (from 2027): Under the Employment Rights Act 2025, employers with 250 or more employees will need to publish a plan explaining what they’re doing to close any gender pay gaps identified in their reporting.

• Menopause action plans (from 2027): As part of the same law, employers with 250 or more employees will also have to publish a plan explaining the support they offer to staff going through menopause.

• Proposed: The UK government ran consultations in 2025 relating to a ban on asking about candidates’ salary history and a requirement to disclose pay ranges in job advertisements. This would closely align with relevant provisions in the EU’s Pay Transparency Directive.

How the EU Pay Transparency Directive affects UK businesses

Now that you have a better sense of what the EU Pay Transparency Directive covers, let’s consider what it means for businesses based in the UK.

If you employ staff in the EU, you and your EOR need to comply

If you’re employing staff in an EU country, you’ll either be using an entity that your business owns, such as a subsidiary or local office, or you’ll be using a third-party employment arrangement. The latter includes Professional Employer Organisations (PEOs) and employers of record (EORs).

Regardless of the model, the local entity responsible for hiring your employees will be subject to that country’s implementation of the Pay Transparency Directive.

Even if you’re hiring through an employer of record, your own business remains responsible for advertising positions, setting pay levels, and running interviews. So, while the EOR is legally ‘the employer’, you’re making many of the key decisions. Who is liable in this situation remains unclear. However, given the overarching aims of these laws, you shouldn’t assume that you’re immune.

One rule for everyone

If you employ staff in both the UK and the EU, it’s impractical to have two separate approaches to pay equality across the jurisdictions. Not only does this create additional work, but it also raises the prospect that your UK-based staff will feel unfairly treated.

Considering the existing laws in the UK, as well as the proposed revisions, the most sensible strategy is to begin complying with the EU Pay Transparency Directive moving forward.

Your existing staff will see what new hires are earning

Publishing pay ranges when advertising new positions will alert your existing employees to what new hires are being offered. That’s not a problem in and of itself, as long as the advertised rates align with what your current employees are being paid.

In practice, this means you need strong oversight of your current workforce structure and what benefits they receive. Your HR team should be reconciling new positions against the current structure to ensure that there are no discrepancies.

Steps UK businesses can take to prepare

According to a recent survey of UK HR professionals, 45% believe their organisation is behind on pay transparency, with only 18% saying that they’re ahead. The same study found that only 35% of UK businesses regularly publish their salary ranges in job advertisements, and 31% of HR professionals say they lack the clarity needed to explain how pay decisions are made.

Whatever the reasons, those statistics share a common thread: poor information. Here are some examples of how poor data can affect your ability to comply with pay transparency laws:

• Disconnected systems mean you have no unified picture of what people are paid.

• Different offices may have different meanings for the same job title.

• Managers are basing pay decisions on old or inaccurate information.

All of those challenges can be solved, as long as you have the right data management systems and processes. The following steps demonstrate how you can achieve that.

1. Get your data into one place

Our own research reveals how common fragmented data is, with 82% of HR teams saying they use at least four different tools each month. Working with separate systems for payroll, HR, and recruitment creates an immediate disconnect that makes pay analysis and reporting much more difficult.

Unifying your HR information is a logical first move, as it gives you a foundation to build on, making each of the following steps more straightforward.

2. Audit and unify your job architecture

Pay transparency laws are centred on equal pay for work of equal value, so if two very different roles within your business have the same job title, you’ll already be attracting some attention when you create and submit reports.

While it may take some time initially, establishing a consistent way of naming and levelling roles across your entire organisation makes it much easier to compare pay for each employee. But take note: This task will be more difficult if your business is working with disconnected systems.

3. Run a pay equity check before you're forced to

Waiting until your business triggers a 5% joint pay assessment will be expensive, time-consuming, and potentially damaging to your company’s reputation. It’s best to get ahead of the game by running your own internal audits. It will allow you to address any issues on your own schedule, rather than one imposed by regulators, and it will protect your brand.

Plus, if an EU worker requests a written pay comparison, you’ll have completed much of the groundwork, making it much easier to produce a new document.

Carrying out this kind of audit using spreadsheets from several different offices will always be challenging, regardless of whether you do it of your own free will or you’re asked to by regulators. That’s why we recommended data unification in the first step. Modern HR platforms offer analytics and reporting tools that simplify these processes, making it much easier to get on top of your compliance obligations. In addition, AI-driven analytics can continually monitor pay parity metrics behind the scenes to surface vulnerabilities automatically. 

4. Prepare your managers and refine your hiring process

Compliance with pay transparency regulations isn’t solely your HR team’s responsibility. Hiring managers will often determine pay levels for new roles, and your finance team may also feed into that process. It’s also important to inform anyone on an interview panel that questions about previous salaries are now banned in the EU, and potentially will be in the UK, as well.

This may sound relatively straightforward, but if different offices have their own approach to hiring, creating a unified recruitment process can be more difficult than many businesses anticipate. 

How Rippling can help

Rippling is an all-in-one workforce platform that runs HR, payroll, and hiring from one system, addressing many of the challenges we’ve highlighted above. Here's specifically what it allows you to do in terms of UK and EU pay transparency.

Ensure you have one employee record across all business units

When each employee has separate records for recruitment, payroll, and performance management, creating a pay equity report can be extremely difficult.

Rippling solves those challenges by keeping a single record for each person across all business functions, regardless of whether they’re based in the UK, the EU, or any other location. This simplifies organisation-wide analysis and reporting while also ensuring that everyone is working from a single source of truth.

Create the reports you need

Currently, reporting requirements in the UK are slightly different from what the EU Pay Transparency Directive dictates, and each member state within the EU may also enact stricter rules than the directive requires.

It could be challenging to keep up with these variations, but that’s where a system like Rippling really shines. The platform isn’t constrained by one set of rules or regulations. In fact, global compliance laws are built into the Rippling system. Plus, Rippling’s Data Cloud centralises all your employee information, and you can then develop custom reporting processes that draw on that data.   

Take advantage of automation

Rippling AI can automate many of the processes we’ve explained, such as running in-depth analyses, creating reports against specific criteria, and ensuring data is accurate and up to date. When you combine centralised data with powerful automation, maintaining compliance with pay transparency laws becomes a much simpler process. 

The EU’s AI Act also imposes obligations on how AI is used in businesses, and it classifies the HR space as high-risk. Our recent article on this topic explains the key considerations to be aware of.

How vivenu reduced its compliance risk and improved scalability

vivenu quickly grew from 60 employees to more than 200 employees spread across Germany, Switzerland, the United States, and several other countries. As it scaled, so did its tech stack, leaving teams with multiple disconnected tools to manage. This created many of the challenges we’ve discussed, especially those around compliance and data accuracy.

Before Rippling, the company used separate platforms to manage payroll in each market, resulting in an unwieldy spreadsheet being used to capture company-wide information.

With Rippling, vivenu was able to consolidate its German and US payroll into a single platform, helping the organisation transition from a fragmented, manual process into an efficient and audit-ready operation.

Getting ahead of pay transparency laws

Much of the anxiety businesses have over the EU’s Pay Transparency Directive and its UK equivalents is less about the laws themselves and more about remaining compliant and making sense of the data they have.

The key to overcoming the uncertainties that evolving regulations create is solid information management. Employment regulations, both in the EU and the UK, are only going to get more stringent. Having a unified approach to managing your workforce can help you stay on top of these changes, both now and well into the future.

If you want to see how a single, unified platform can help with your own compliance challenges, book a demo with Rippling, and our team will be happy to show you how it fits into your own business. 

FAQs

What is the EU Pay Transparency Directive?

Its official title is Directive (EU) 2023/970. It’s EU legislation that requires employers to disclose pay ranges to candidates, stop asking about salary history during hiring, and report on gender pay gaps. If an unjustified gap of 5% or more shows up between roles of equal work, and isn't fixed within six months, it triggers a mandatory joint pay assessment.

What does ‘work of equal value’ mean?

Two jobs count as work of equal value if they involve a similar level of skill, effort, responsibility, and working conditions, judged objectively and without bias toward either sex. That means two very different-looking jobs, such as a warehouse supervisor and an office manager, could count as equal value if those four factors line up, even though the roles look nothing alike on paper.

Does the EU Pay Transparency Directive apply to the UK?

Not directly. The UK isn't an EU member state, so it doesn't have to write the Directive into domestic law. But any UK business with staff, contractors, or entities inside an EU country is bound by that country's version of the Directive for those employees.

How does the EU Pay Transparency Directive affect UK companies with European subsidiaries?

Employees in an EU subsidiary or branch are covered by that country's version of the Directive, regardless of where the parent company is based. Salary history bans, mandatory pay range disclosures, and gender pay gap reporting all apply to those staff, even if the rest of the UK business isn't directly covered.

What happens if a company's gender pay gap exceeds 5%?

If a company has an unjustified gap of 5% or more between people doing equal work, it has six months to fix it. If it isn't fixed, the employer has to run a joint pay assessment with worker representatives and can face uncapped compensation claims and exclusion from EU public procurement.

Is the UK introducing its own pay transparency rules?

Yes, separately from the EU Directive. Under the Employment Rights Act, UK employers with 250 or more staff will have to publish gender pay gap action plans from January 2027, and gender pay gap reporting must now be based on employees' biological sex, following updated gov.uk guidance.