Pay Transparency: The End of the Salary Secret
My 50c On EU Pay Directive Impacts on IT
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Hopefully, if everything is on track, this article will be published on a curious public holiday: Workers’ Day.
To be aligned with the theme of the day, I will address one of the pieces that will shake Europe’s professional markets in the coming months. The Pay Transparency Directive is around the corner and has several goals:
Increase transparency on salaries for job postings.
Allow employees to share their salary with their colleagues.
Disclose salary averages for different roles within the company.
Reduce the pay gap between men and women.
This topic is curious because if I speak with someone in the US or Switzerland, they are sometimes shocked to learn that salaries in the EU are confidential information inside a company.
Meaning, if someone is working in an EU-based company, he or she should not disclose their salary conditions with their peers since is considered confidential information.
This new EU directive will rock the boat in the coming months, and all State members should reflect it into law by June this year.
What Is The EU Directive On Pay Transparency About?
Today in the EU, the “salary negotiation” is like a game played blindly from the candidate’s perspective.
Candidates would probably lie about questions regarding their current earnings to inflate the next salary proposal. Employers would receive a wide range of salary expectations, which provides maneuver for offering a low salary to a good profile.
And once the contract was signed, the salary conditions were confidential.
Discussing one’s paycheck at coffee with co-workers was often a disciplinary risk, hidden behind strict confidentiality clauses that are now being rendered legally void across the EU starting from June 7, 2026.
The EU Pay Transparency Directive will rewrite the social contract between employer and employee.
The change is felt during the selection process. Under the new rules, the candidate can be informed either in the job posting or before the job interview about the position’s salary range.
Recruiters won’t be allowed to ask about the candidate’s current salary, which could lead to discriminatory values, even when switching companies.
From June onwards, the directive would also allow any worker to receive the average pay levels for colleagues doing the same work or work of “equal value”, broken down by gender.
What is equal value?
This will be the tricky part to implement correctly. Every role in the company will need to be classified in four main areas:
Skills: Education, professional experience, and training.
Effort: Mental, physical, and emotional, etc.
Responsibility: Responsibility for people, assets, or data.
Working Conditions: Factors like stress, environment, or “on-call” requirements.
Each of these areas can have sub-areas that can help better profile a given role.
These attributes would receive a value based on the level of requirements (let’s say 1 for “Basic” to 5 for “Expert”). The role itself would then have a global score based on the classifications across all areas.
The goal is to be able to compare two different roles inside the company, even in different departments, which will provide a view of equal value for the company.
Let’s look at an example: A Project Manager in Marketing and Systems Engineer in IT might have different daily tasks. However, if their roles require equivalent Skills, Effort, Responsibility, and Working Conditions, they are of equal value.
If a 5% gender pay gap emerges between these categories and cannot be justified by objective factors, it will trigger a Joint Pay Assessment (JPA). This must be conducted in cooperation with workers’ representatives, and if the gap is not rectified within six months of the reporting, fixing the gap becomes mandatory.
Even though this targets the gender gap, it will impact other areas of the market.
For example, if a startup wants to pay “whatever it takes” to land a star developer, that decision now needs to be moderated by the need for internal equity, depending on the company’s size.
To fight the pay gap between genders, the EU is now betting on a new set of legislation to increase transparency and mandatory reporting to countries’ agencies dependending on their size (the copy+paste from the directive below):
Employers with 250 workers or more shall, by 7 June 2027 and every year thereafter, provide the information set out in paragraph 1 [the gender pay gap data] relating to the previous calendar year.
Employers with 150 to 249 workers shall, by 7 June 2027 and every three years thereafter, provide the information set out in paragraph 1 relating to the previous calendar year.
Employers with 100 to 149 workers shall, by 7 June 2031 and every three years thereafter, provide the information set out in paragraph 1 relating to the previous calendar year.
Member States shall not prevent employers with fewer than 100 workers from providing the information set out in paragraph 1 on a voluntary basis. Member States may, as a matter of national law, require employers with fewer than 100 workers to provide information on pay.
The Good Stuff
The spirit behind this new regulation is well-intentioned, aiming to close the EU’s gender pay gap, which currently averages around 12%. It is a serious attempt to address one of the biggest challenges in the professional world, and the IT sector is no exception.
For candidates, salary ranges in job postings and interviews will finally make the process transparent. This saves everyone time by preventing candidates from pursuing underpaid positions that they would only discover later in the process.
In the same line of reasoning, it will be easier for underpaid professionals to identify and apply to more competitive listings.
The impact will also reach beyond gender. Immigration is a vital aspect of Europe’s IT fabric, and these measures will allow those who have immigrated (even withing EU) to factually compare their earnings with native professionals.
Companies can also use this transparency to benchmark against their competitors more easily. In some cases, this will help them offer competitive wages for tactical positions on critical projects.
Finally, star employees will now have the means to understand if they are being paid fairly for the value they deliver. This provides them with a factual, data-backed argument to leverage during negotiations.
The spirit of the law comes from a good place. If implemented correctly, it could solve many of the long-standing moral and professional frictions in the EU’s IT landscape.
The Main Challenges
Putting this regulation into practice is a nightmare, especially for bigger companies.
It is very common to find salary discrepancies among people doing the same work (regardless of gender) due to legacy internal procedures and unique employee stories.
HR and their processes
For example, one of my biggest HR challenges involved a developer who migrated to IT from an Operations team.
He was part of an operational (non-IT) team, but because he did some Excel macros on the side, someone had the “wonderful” idea to transfer him to an IT development team.
Unfortunately, the development skills were not there, and neither HR didn't update his salary when transferring between departments with completely different realities in terms of work and pay expectations.
One day, he learned how much the colleagues seated next to him were being paid. Even though some colleagues were freelancers (not even an apples-to-apples comparison) he realized in shock that his salary was far below his peers’.
There are multiple examples like this in any single company.
Added to these are cases where the conditions under which people signed their initial contracts weren’t updated fast enough to match market values and new hires with the same seniority.
Even if HR has off-cycles processes to address these issues, those processes often take years to properly resolve.
The directive will provide an increased transparency, as companies will have less leeway to make process mistakes.
The Performance Conversation
Salary disputes have always existed, and people have always shared salary values secretly.
The difference now is that Leadership will be faced with factual data. In some cases, they will need to properly explain why two people in the same role are not being paid the same because of mismatched results.
This becomes critical when underperforming staff start to compare their salaries with those of top performers and demand higher pay. The root cause is that in the EU might not be easy to fire underperforming staff, which creates challenges over several years with continuous conflicts and expectations management.
I expect to see a rise in salary disputes initially, but eventually, the dust will settle, and performance can return to the center of the conversation.
Roles Comparison
Another big challenge is to structure and differentiate the roles inside the company under the umbrella of “roles with equal value”.
It will be very interesting to explain to someone leading an non-IT team that their position might receive less pay than an IT Developer. If the company is technological in nature, there is little challenge. However, in other industries, these problems might be exacerbated when comparing IT with other areas.
In order to differentiate these roles, companies will need to build matrices that evaluate different roles based on four factors: Skills, Effort, Responsibility, and Working Conditions.
Errors will be made for sure. One of the most evident is a major pain point with HR: they love their paper credentials, while IT is a practical knowledge and skill set area.
I really don’t care if someone has a PhD if a developer with a Math bachelor’s degree is doing better work.
I won’t be surprised if credentials are put in the matrices just to differentiate roles, potentially harming key employees when being compared with different unrelated roles inside the company.
Averages vs Medians
Eventually the analysis will be centered around averages.
While some star employees will naturally have higher pay, this can become a contentious point. When these employees push the average high while the rest of the team is well under the median, it creates a distorted picture.
This might give the false impression that someone is being underpaid, when in reality, one “outlier” is simply pushing the average up.
It is not uncommon when launching new business segments or opening new branches that tactical staff are relocated. These moves often require much higher pay to incentivize the transition. Even though these situations make sense strategically, they open the door to more points of contention regarding fair payment within the local team.
The new directive won’t simply allow co-workers to speak about their salaries (in reality, this was already happening). The main challenge is that companies must now provide the actual figures when requested.
This allows an employee to see exactly where their paycheck fits inside the company’s organization. This transparency inherently creates conflicts that will have to be managed directly by Leadership.
The Outsourcing Loophole
This is the Trojan horse for many companies, especially those in non-technological sectors.
The use of outsourcing is widespread. Even if a consultant is working 100% for a specific client, that client is currently not held accountable for any pay gaps within the vendor’s team.
In practice, this will put immense pressure on outsourcing vendors whose services are priced consultant-by-consultant.
If a pay gap needs to be fixed within a vendor, there are only two ways to handle it:
Internal Absorption: The vendor eats the extra cost and increases the consultant’s salary without raising the rate.
Rate Hikes: The salary increase is reflected in the rate, and the client is asked to pay the difference.
In the second scenario, the client will assess if the service is still worth the price. They may simply choose to replace the consultant if they aren’t satisfied with the new costs.
Overall, this will be a very interesting regulation to follow its implementation and study the impacts on the labor market.
For sure, we will read a lot about this subject that is a massive cultural shift happening in the IT workspace.
That’s it. If you find this post useful, please share it with your friends or colleagues who might be interested in this topic. If you would like to see a different angle, suggest it in the comments or send me a message.
Cheers,
Artur
Great to see someone else substacking on the PTD!