The EU Pay Transparency Directive – the New Normal in Europe

Yes, you read it right. Pay transparency in Europe has become the new normal. Although some can argue that this is not entirely new,  as a significant number of job ads in Europe already contained the position’s salary range for a while now. Many popular job boards did not allow posting a job ad without a pay range. Moreover, some companies have been offering transparent salary ranges for all employee levels.  This is changing with the implementation of the EU pay transparency directive, which is reshaping the way companies approach revealing salary information.

Revealing compensation to attract candidates 

Historically, pay transparency was a strategy a company could decide on its own.  It started as a trend, especially in engineering and marketing orgs, forced by a high competition for experienced professionals. This was part of an escalating benefits arm rate, including remote work, unlimited paid time off, best-in-class L&D resources, company events in exotic destinations (Bali anyone?), and more.  The cherry on the top was a crystal clear salary range for the position. So what has changed?

EU pay transparency directive – new legislation in force

In the European Union, pay transparency is now regulated by the law. In May 2023, directive 2023/970 was introduced and came into effect in June 2023. The main aim of the European pay directive is to strengthen the application of the principle of equal pay for equal work between men and women through pay transparency and enforcement. According to the data, the gender pay gap between men and women in Europe is 13%, while the pension gap is 30%. The European Parliament is aiming to decrease those numbers significantly by introducing this new legislation. So what does it mean in practice? 

The EU pay transparency directive in practice

1. The main implication is that equal compensation will be required for the same work. The salary will need to be established based on objective criteria, including educational requirements, level of responsibility, etc. 
2. It will be compulsory to publish the salary range, or at least the minimum salary, for a given position. 
3. During the hiring interview, it will not be allowed for employers (aka recruiters) to ask about candidates’ current or past remuneration.
4. Transparency will not only be ensured during the hiring process, but also through the entire course of the employment. The remuneration criteria, as well as criteria for salary changes will need to be transparent and accessible by every employee.
5. It will be forbidden to use clauses in employees contracts (or internal regulations) enforcing salary confidentiality. On top of that, the employees will have the right to receive information about the average salary for their role in the organization (including the gender breakdown). 
6. There will be an obligation for companies hiring more than 150 employees to report their wage gap between hired men and women. If the gap is bigger than 5%, it will be mandatory to implement an action plan to decrease it. 

Although the directive is already in force, all European countries have time to introduce proper local laws until June 2026. This means, there may be some differences between different countries, however the main course will be the same. Wait, so this is not law yet? Not legally but there is only one direction now – pay transparency is becoming a fact, with no going back. And engineering is on the front line. Why?

Transparent salary ranges for developers

Even in our current economy, the most experienced developers are still highly desired. With high demand, the candidates are in a position to keep their expectations high. While sourcing for developer candidates in Europe, omitting the salary range in a message typically leads to no response. Put a salary range which is too wide – you will again end up with a similar result. Not to mention that if you do not provide a salary range in a direct message to your potential new hire you will not only be ignored, but you also risk appearing to be a dubious employer.

Let’s say you are promoting your opening on the job board – you still can find places where you may post an offer in Europe without remuneration information. But most of the boards have already added an option to show the salary. And let’s be honest, it will be hard for your posting to stand out among other offers if yours does not include the ranges. It is not that uncommon that some companies are posting the ranges on their own pages under the career tab. Seems like they have nothing to hide, right? They must have a good rewarding policy in place! Maybe they do, maybe they do not. But the employer branding looks better for sure. 

Salary reports are also becoming more easily accessible. Many are prepared by job boards or hiring agencies, since they have access to the data from their customers.  Did I mention online options to compare your salary in a given country with others in the same role, or asking ChatGPT about providing information on the average wage for a given position?  Last, but not least, the No FluffJobs campaign in Europe has captured the imagination of developers. Even though it is organized by a private company, it is quite popular in several countries now.  It’s promoting a transparent recruitment process, including feedback after the interview, asking only job related questions, and a transparent salary range in the offe.

Pay transparency in the UK and outside the EU

Even though the pay transparency directive will officially have an impact on the countries belonging to the European Union, it does not mean its effect ends there. It will indirectly affect other European countries as well. 

First of all, some countries that do not belong to the EU are angling to become a part of it, including Ukraine, Turkey, Albania, Montenegro, Bosnia and Herzegovina, Moldova, Serbia, North and Macedonia. In order to do so, they will need to adopt EU legislation. This leaves only a few countries operating outside the EU, including the United Kingdom, which decided to proceed with their exit (Brexit). 

The UK has its own gender gap laws in place, which differ from the directive mentioned in this article. However, with UK companies looking for developers (and other professionals) across all of Europe,  candidates’ expectations will force some changes to remain competitive. In order to close vacancies in a timely manner, displaying salary ranges in job ads, providing clear information on pay systems and criteria for pay raises during recruitment, and not asking about the current earnings will likely become a must anyway.

EU pay transparency is here to stay

At this point, European companies can’t escape from pay transparency. Local talent pool sizes are often very limited, so looking for candidates in other countries is the natural next step. As mentioned, there is still some time before the laws will be established.  With or without this directive, European candidates, especially within the developer, IT and marketing industries, expect transparency during the recruitment process already. This is a new normal now and the EU directive only makes the changes inevitable.