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One-year countdown to the EU Pay Transparency Directive

In June 2026, pay transparency regulations will come into effect for organizations with employees in the EU and the European Economic Area. Prepare now to comply with pay transparency regulations.

06/18/2025 · 6 minute read

Are you ready to comply with pay transparency regulations? 

Less than one year from now, pay transparency regulations will come into effect for organizations with employees in the EU and the European Economic Area. On June 7, 2026, employers of all sizes will need to be able to:

Prior to employment:

Provide information on the starting salary range and relevant collective agreement provisions for the position, based on objective and gender-neutral criteria.

Ensure that job postings and recruitment processes are gender-neutral and non-discriminatory to uphold the right to equal pay (and must not inquire about applicants' previous salaries).

During the employment relationship:

Provide accessible, objective, and gender-neutral criteria for determining pay levels, including benefits, and economic progression to their workers.

Respond to workers’ request for written information about their individual pay levels, including benefits, and the average pay levels by gender for similar roles, and inform workers annually about this right and the necessary steps to exercise it.

Achieving readiness requires active collaboration among various internal stakeholders, including:

  • Reward, compensation and benefits teams
  • Legal
  • Communications and corporate change management
  • HR business partners and recruitment/talent acquisition

In preparation for the upcoming EU Pay Transparency Directive, it is crucial to recognize that benefits are a significant component of total compensation and can greatly influence employee satisfaction and retention. Therefore, understanding and effectively communicating these benefits is not just a compliance issue; it is an opportunity to enhance employee engagement and trust.

Key actions for benefits compliance with pay transparency

A comprehensive understanding of your benefits is essential so an audit is strongly recommended. This audit should encompass a thorough review of benefit programs, including individual promises, unharmonized benefits resulting from previous M&A activity, and any grandfathered clauses. Internal benefits policies and supporting processes along with any exceptions, should be clearly documented as they will be needed as potential evidence.

Organizations will need to ensure reward packages are set based on the principle of “equal pay for equal work”, gender-neutral objective criteria and organizational principles. For instance, if an organization promotes a “pay for performance” culture while simultaneously providing higher grandfathered benefits to long-serving employees, it could raise concern about whether performance or longevity is being prioritized, potentially undermining the integrity of the reward policy.

The EU Directive and draft local legislation published to date do not provide detailed requirements for benefits, leaving it to employers to determine how they will comply and the best approach for their company/employees.

Establishing benefits valuation guiding principles on a global/regional basis helps to ensure consistency, facilitates clearer communication, and supports disclosure to local regulatory authorities and worker representatives. Additionally, this enhances efficiency by reducing the need for each country to develop its own separate methodology and principles.

Organizations will need to decide how to communicate benefits to employees. For example, employees may respond more favorably to a message highlighting that the life insurance benefit provides financial support to their families in the event of a tragedy, rather than focusing on the value of the annual insurance premium. Conversely, significant benefits like pensions may be more effectively communicated in terms of their overall value, especially the opportunity to showcase matching opportunities in defined contribution plans or the significant financial value of defined benefit pensions. Additionally, benefits such as employee assistance programs and certain types of caregiving or compassionate leave may be low-cost for the company but are highly valued by employees for the support they provide during challenging times.

Once the methodology is set, organizations will need to decide whether they aggregate quantitative benefit values into total pay or provide a more detailed breakdown of data in a Total Reward Statement or through their flexible benefits platform. Organizations that currently utilize annual total reward statements or flexible benefits platforms are well-positioned; however, it will be necessary to adapt these to ensure compliance with the Directive. Tailoring communications to meet unique employee needs, as well as meeting the transparency requirements, is crucial and presents an opportunity to demonstrate the value of benefits as part of total compensation in both quantitative and qualitative ways.

This is equally an opportune moment to communicate how the employer is investing in benefits and to raise awareness of key programs. Such communication reinforces the employer’s commitment to supporting employees' physical, mental, and financial well-being throughout the organization, while also ensuring transparency and compliance with the Directive.

We strongly recommend you plan ahead and proactively incorporate these pay transparency requirements into an annual process to enhance efficiency, provide a consistent experience for employees and avoid exposure to the varying disclosure timelines mandated by local legislation.

Lastly, a reminder that pay transparency is the first requirement under the Directive. In June 2027, pay gap reporting commences with headcount thresholds set by the EU as follows (noting that local legislation may change / reduce these thresholds):

  • Entities with 250+ employees will have to file a gender pay gap report annually starting in 2027
  • Entities with 150-249 employees will have to file a gender pay gap report every 3 years from 2027
  • Entities with 100-149 employees will have to file a gender pay gap report every 3 years starting from 2031

Employers will be required to explain pay gaps (including benefits) exceeding 5% and take action to address them.

Our team at Mercer, a Marsh McLennan company, can help your organization prepare now for pay transparency reporting in June 2026!

  • Familiarize yourself with the requirements. For more information please visit our EU directive hub.
  • Know your benefits (and value these). Contact your local Mercer consultant or email Kay Leach or Bridget Moser  to get started.
  • Decide on your communication approach. We have a suite of tools and solutions available to assist you. For more information visit Mercer's Impact team, or contact Tricia Maskell to discuss your options.
  • Find out how Darwin can support reporting under the directive and enhance your employee experience.

Speak with one of our pay equity and transparency experts.

Our people

Bridget Moser

Bridget Moser

Pensions and Benefits Expert, Mercer

  • France

Kay Leach

Kay Leach

MMB Multinational Advisory, UK Leader, Mercer

  • United Kingdom