The new EU Pay Transparency Directive 2026 will go into effect on June 7, 2026 and requires greater pay equity compliance and processes for employers operating within the EU. US-based multinationals with European operations will need to comply and this may influence broader hiring and pay practices in the United States. Gender pay gap reporting will not be required until 2027. There are seven drafts currently in discussion - developed by seven different EU countries (Sweden, Belgium, Ireland, Netherlands Poland, Finland & Lithuania) but differences between them are expected to be easily resolved.
Key Impacts of the EU Pay Transparency Directive on US Companies
Experts from Mercer and Syndio recently provided insights on how the EU Pay Transparency Directive will impact US Multinational hiring practices. Here is the CXR take on those insights and how they might be taken up in the United States downstream.
- Establish Work of Equal Value: Employers will be required to use one of the many formal job evaluation processes to establish work of equal value. Most existing systems (ranking, job classification architecture, points, etc.) can be used but they must be adjusted to be gender neutral.
- Calculate the Full Value of Pay & Benefits: The EU defines pay as anything paid in cash or ‘in kind’. Employers will need to establish the value and calculate gender pay gaps (mean and median) for every role at every level across every country. All relevant perks/benefits to be included. Percentage of men versus women receiving the benefits may also be required.
- Cover Every Class of Worker: Employers will be required to include all workers that have an employment contract or employment relationship - contingent, part-time, etc. Discussions are currently taking place about whether staffing agency workers that are assigned to an employer belong in the employer report or staffing agency report.
- Respond to Pay Transparency Requests: Discussions still ongoing but employees and job candidates will have rights to request and receive pay gap information. Career path visibility and transparency around progression pay are also in scope. Worker councils and worker representatives will have rights to data as well.
- Take Action on Gender Pay Gaps: Any gap > 5% will require employers to explain the cause and create a documented action plan. While still in discussion, it is expected that the EU will also settle on a time frame for the resolution - likely to be approximately 1 year.
US-based talent and compensation leaders should begin evaluating job structures and data visibility to ensure readiness by 2026. Consult with global pay equity specialists to assess your organization’s compliance posture. And continue tapping into your peers here in the CXR Community forums as this issue evolves.
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