European Union (EU) directive on equal pay and pay transparency 

In today’s competitive talent market, fair compensation isn’t merely a compliance matter; it’s a vital factor in employee retention and overall organisational success. This is especially true in the European Union, where the EU Pay Transparency Directive will take effect in June 2026.

Mercer’s 2024–2025 Global Talent Trends Study shows that employees increasingly prioritise pay equity, particularly within the EU, where perceptions of unfair compensation are a leading reason for leaving organisations. Limited career advancement opportunities are also frequently cited as reasons for leaving, emphasising the importance of fostering a culture of transparency through ongoing career and compensation discussions.

A lack of pay transparency can lead to reputational damage, decreased employee satisfaction, and challenges in attracting and retaining top talent. It also exposes organisations to legal repercussions for noncompliance with evolving legislation. 

At Mercer, we help organisations navigate these risks to promote a culture of trust and fairness through transparent compensation practices.

• A gender-neutral job evaluation structure ensures there are no gender-based pay differences between workers performing the same work or work of equal value.
• Pay transparency for job-seekers requires that pay range information be published in all job ads or shared prior to interview.
• Pay and career-progression transparency applies to all employees, regardless of company size.
• The employee right to request information exists for all employees, regardless of company size.

Pay gap reporting requirements begin in 2027:

• Employers (legal entities) with at least 100 employees will have to publish information on the pay gap between female and male workers, with reporting frequency depending on company size.
• Employers will be required to explain pay gaps exceeding 5% and take action to address them.
• The data used for 2027 reporting will be based on 2026 payroll meaning the time to correct risk areas is now

Growing awareness and legislative mandates for pay transparency have made pay equity a priority for many businesses looking to enhance their reputations and attract talent. The EU pay transparency directive is a key step in addressing the gender pay gap.

EU countries are actively working to adapt. So far, we’ve seen updates from Sweden, Belgium, Poland, Ireland, the Netherlands, Finland, the Czech Republic, France and Lithuania. We continue to monitor these developments with the support of legal experts and local legal counsel.

We’ve designed a comprehensive checklist to equip you with essential tools and knowledge for navigating the complexities of pay transparency and assessing your organisation’s readiness for the upcoming EU directive.

It is worth noting that for the first time, multinational businesses with employees in the EU and the European Economic Area will need to consider not just base pay and incentives, but also pensions, perks and other benefits to comply with the Directive. The legislation aims to strengthen the principle of equal pay for equal work between men and women, driving equality in the workplace and enhancing pay transparency, and benefits form part of the analysis. Do you have the right data, tools, and processes in place to quantify your entire suite of benefits, including historical arrangements? Do you have well documented benefits policies and procedures to reduce the risk of gaps?

Mercer has a team of benefits experts to help clients assess their plans and data, enabling them to enhance overall transparency.

In partnership with Fair Pay Innovation Lab, Mercer now offers clients the Universal Fair Pay Check, which recognises organisations dedicated to true pay equity. The three-step certification is a trusted, internationally accepted process that sets a new benchmark for employers and employees. As a recognised EU certification trademark, it meets the highest standards of neutrality, verification, monitoring, and transparency and is valid for both global and local companies. For more information, please view our video, and don’t hesitate to contact us.