Pay Transparency in the EU – What It Means and How It Affects Employers

Pay Transparency in the EU – What It Means and How It Affects Employers

The European Union’s Directive 2023/970 marks a new era in pay transparency. Its objective is to require employers to adopt more transparent pay practices, regularly report on the gender pay gap, and ensure the principle of equal pay for equal work. Member States were required to transpose the Directive into national law by 7 June 2026. Hungary has not yet done so, which creates an uncomfortable situation for employers.

Below is an overview of the key points of the new regulation.

The essence of pay transparency

The Pay Transparency Directive introduces mandatory rules designed to strengthen the transparency and comparability of pay. Employers must:

· make their remuneration systems objective and transparent,

· provide certain pay data upon request,

· and take active measures to reduce the gender pay gap.

Why were new rules needed?

Significant differences in earnings between men and women persist across the EU: according to the latest data, the gender pay gap exceeds 10%. The Directive aims to make it easier for employees to enforce their right to equal pay and to ensure that employers manage their pay practices responsibly.

New employee rights

The Directive significantly expands employees’ right to information. Workers may request written information on:

· their own pay level,

· the average pay level of workers performing the same or work of equal value, broken down by gender,

· and the remuneration and career progression criteria, which must be objective and gender-neutral.

Who is covered and from when?

From 2026, all employers will be required to:

· include the pay range or its lower bound in job advertisements (or at the latest before the interview),

· refrain from asking candidates about their previous remuneration,

· apply objective remuneration and promotion criteria,

· provide employees with access to certain pay information.

These obligations apply equally to the smallest companies and to employers with thousands of employees.

However, regular gender pay gap reporting applies only to larger employers:

· from 2027: employers with more than 150 employees,

· from 2031: employers with 100–149 employees.

For companies with fewer than 100 employees, Member States may decide whether to introduce reporting obligations — this remains uncertain in Hungary.

Where does Hungarian regulation stand?

Hungary must adopt or amend the necessary legislation by 7 June 2026. At present, no Hungarian law or decree has been adopted, so the detailed rules are not yet known.

Emerging dilemmas and practical challenges

The Directive focuses heavily on the gender pay gap, raising the question of why it does not address other relevant pay disparities, such as regional differences or age-related variations.

While greater pay transparency moves the labour market toward fairness, it also presents significant HR challenges:

· partial pay transparency may create tension among employees,

· employers will have very limited time to address existing pay disparities,

· salary offers converging toward the lower end of pay bands may reduce candidate motivation,

· managers will need new communication and motivation tools.

In addition, Hungary traditionally has a strong culture of pay secrecy, making the transition culturally sensitive as well.
 

Conclusion

The introduction of pay transparency will bring substantial changes to HR processes and employer practices. In the coming years, all businesses will need to prepare for the new requirements, and it is advisable to seek expert support to minimise legal and HR risks.
 

Tower Consulting, a Budapest-based accounting and payroll firm, together with its cooperating partners, is at your disposal for any accounting, payroll or tax advisory matters — in Budapest or anywhere in the country via remote, online channels.

Written by: Gábor Kertész