The following roadmap outlines the step-by-step path any company must follow to adapt to the EU’s new Pay Transparency Directive (Directive (EU) 2023/970), which takes effect on June 7, 2026: first, understand the legal obligations, and second, determine the technology and organizational solutions to implement in order to ensure compliance.
What are small businesses required to do regarding pay transparency?
The European Pay Transparency Directive sets different levels of obligation that affect both talent attraction processes and the daily management of the current workforce.
Obligations in recruitment processes and job offers
Mandatory disclosure of salary ranges. Applicant Tracking System (ATS) software must include the starting salary or pay range directly in the job posting, or formally communicate it to the candidate before the first interview.
Job offers with gender-neutral language. Both job titles and the job description must be written in language that is completely gender-neutral.
Prohibition on asking about salary history. It is strictly prohibited to ask candidates about their current compensation or past salaries. This information may not be used to negotiate downward if the candidate volunteers it.
Obligations toward employees on staff
Public access to salary-setting criteria. Companies must define and inform their employees about the objective, neutral parameters that determine their pay level and opportunities for career progression.
Right to salary information. Any employee may formally request to know their pay level and the average pay for their professional category broken down by sex. The company has a maximum of two months to provide this information in writing.
Nullity of confidentiality agreements. Contractual clauses that prevent employees from disclosing their salary or discussing compensation with colleagues or third parties are prohibited.
Do SMEs have to prepare the Pay Gap Report?
The obligation to publish the Pay Gap Report applies only to SMEs with more than 100 employees. For the rest, it is voluntary.
Additionally, only companies with more than 100 employees are required to conduct a joint remuneration assessment with the workers’ representatives if the report detects a pay gap greater than 5% in any professional category that cannot be justified by objective and neutral criteria.
Pay gap reporting timeline by SME size
The obligation to develop and periodically publish an official gender pay gap report is phased in according to staff size:
- SMEs with 150–249 workers: First mandatory report due by June 7, 2027, with updates every three years.
- SMEs with 100–149 workers: First mandatory report due by June 7, 2031, with subsequent updates every three years.
- Companies with fewer than 100 workers: Exempt from publishing this periodic report.
What should small businesses do to comply with pay transparency?
To avoid penalties that can be substantial under current European rules, companies must move from theory to action through practical and scalable solutions.
Align job postings and talent acquisition with pay transparency
To meet salary visibility requirements without sacrificing competitiveness, small and medium-sized enterprises are adopting Agent-as-a-Service (AaaS) models powered by AI agents, such as those offered by HR software like Kronjop or Workday. These platforms automatically configure job postings, embedding appropriate salary ranges and ensuring that the language complies with the supervision and neutrality requirements mandated by the AI Act.
Digitize and integrate HR management
- Solutions for microbusinesses (fewer than 10 employees): The most efficient path is implementing affordable HR software that automatically syncs with the payroll advisor’s system.
- Solutions for SMEs (10–49 employees): They need a scalable or modular solution that allows adding functionality if the company requests it. It is essential that it provides technical and legal guidance.
- Solutions for mid-sized companies (50–249 employees): It makes sense to invest in HR platforms that connect, in a single digital environment, the salary transparency module, the mandatory whistleblower channel, the equality plan, and pay audits.
Design an objective job evaluation matrix
Because the regulation shifts the burden of proof, documenting every decision is vital. SMEs should establish a clear job-policy structure in which salary supplements (seniority, responsibility, shift differentials) are tied to measurable and verifiable metrics.
