Earlier this year I was invited to speak at the House of Lords by Sir Stephen Timms and Lord Shinkwin to launch a report backing the UK government’s plans to introduce mandatory disability pay gap reporting. Just like gender pay gap reporting, these ideas are designed to increase pay transparency and encourage employers to close various pay gaps. They help to highlight structural inequalities in pay and promote more accountability. I think these types of proposals will lead to the rise of more transparency in employment, and this begins in earnest for many EU workers in just a few months’ time.
EU Pay Transparency Directive
As we approach one significant event in workplace transparency – the EU Pay Transparency Directive – we must ask ourselves what risks this might pose to our organisations. In June next year, EU members states will be required to make changes in the ways they inform employees about pay. This follows 14 US states, Japan and France in adopting similar changes. And while it doesn’t directly affect the UK yet, for many UK employers with employees in Europe, they will likely adopt the same rules. The UK government has already conducted its own (successful) pay transparency experiment, and has said they are actively considering adopting measures similar to the EU Pay Transparency Directive.
If we look at the data, it – on the surface – appears that pay transparency is a worthy change. Employees tend to feel more confident in leadership when they understand how pay decisions are made. Vertical pay transparency leads to more optimistic beliefs about employees earning potential too. Recent research into pay transparency found that 78% of job seekers in believed that salary transparency is a good thing, with 74% arguing that it creates a fairer environment for both the worker and their colleagues.
Pay transparency in the US in recent years has also shown benefits for the organisation too. Research from SHRM shows pay transparency makes organisations more competitive, leading to an increase in qualified job applicants. Pay transparency doesn’t negatively impact employee productivity, and in some studies, improvedemployee performance.
But the real challenge for employers is not the primary logistics of pay transparency, but I think – and something that hasn’t been spoken about enough – is how an organisation creates a ‘culture of transparency’.
A Culture of Transparency
While the logistical demands of the EU Pay Transparency Directive are significant, the deeper challenge for employers lies in its cultural impact. The reality is that most employees don’t know or understand how their organisation determines pay. Only 1 in 3 have any idea how pay is determined, more than half don’t understand their companies pay philosophy and only half of employers do anything to ensure their people actually understand pay. Employees do not really engage in any activities to understand their pay, how their employer works out their pay or how they compare to others.
Of the five key areas of the EU Directive, two area stand out in the context of workplace culture:
1. Career and Pay Progression: Employers must disclose criteria for pay setting and progression, ensuring they are objective and gender neutral. Employees gain visibility into how promotions and salary increases are determined.
2. Right to Information: Workers have the right to know their individual pay level, be able to access average pay by gender for comparable roles, understand the criteria used for pay and bonuses and employers must inform employees annually about these rights.
These are significant and challenging cultural shifts I think employers will really struggle with. The directive empowers employees with the right to access detailed information about pay levels and career progression, which can disrupt long-standing norms around compensation confidentiality and hierarchy. For many organisations, this shift will demand a cultural transformation.
Employers must create a ‘home’ for pay: a central, trusted space where employees can access tools, education, and context to understand their compensation and growth opportunities. Crucially, this space should sit alongside benefits – not just physically, but philosophically. Pay is only one part of the Employee Value Proposition (EVP), and when transparency is framed within the broader context of wellbeing, flexibility, and reward, it reinforces fairness rather than fuelling comparison or dissatisfaction. Without this integration, transparency risks becoming transactional; with it, it becomes transformational.
A New Opportunity for Total Reward
Integrating a ‘pay space’ alongside benefits also creates a new opportunity for Total Reward Statements (TRS). TRS shows the full value of pay and benefits and in itself, improves transparency and engagement with pay. In one study, after receiving a Total Reward Statement, participants shifted from vague to specific understanding of the investment their employer makes in them. This improved perception led to increased satisfaction and reduced dissatisfaction.
As organisations prepare to implement the EU Pay Transparency Directive, the greatest challenge won’t be logistical—it will be cultural. Pay is deeply personal, and transparency will expose long-held perceptions of fairness, progression, and value. If not handled with care, this shift risks undermining the very culture that underpins business success. Employers must go beyond compliance and build a ‘home’ for pay: a central, accessible space where employees can explore their compensation, benefits, and total reward in context. Communicating pay alongside employee benefits and non-financial rewards—Wallet, Recognition, wellbeing support – as part of a unified EVP is essential.
A recent study found that employees are increasingly using AI to find out salary information and often receiving inaccurate results. As a result, 30% of employees had inflated salary expectations, creating tension. If we get this right, transparency will not only meet regulatory demands, but it will also strengthen engagement, innovation, and trust. If we get it wrong, it could fracture the cultural foundation that drives performance and retention.