Talking about pay has traditionally been seen as taboo but we are now seeing steps being taken that require greater openness from employers. Specifically, global lawmakers and governments have either enacted or are considering enacting legislation to mandate greater pay transparency.
EU Pay Transparency Directive
It all began with the EU Pay Transparency Directive (the “Directive”), which came into force 7 June 2023 and must be implemented by EU Members States by 7 June 2026.
The Directive mandates:
- Gender pay reporting: Member States are required to establish gender pay gap reporting regimes. The Directive provides that employers with 100 or more workers must meet the reporting thresholds, but Members States can implement reporting requirements on a phased basis should they wish. Where pay reporting reveals a gender gap of at least 5% in any category of worker, this must be remedied within six months unless such gap can be objectively justified.
- Pre-employment pay information: Applicants will have the right to know the pay or pay range for the role they are applying for, and they can ask for this at any time during the recruitment process. Employers are also banned from asking applicants about their previous / current salary.
- Criteria for calculating pay: Employers are obliged to disclose the objective criteria they use to decide pay (salary and bonus) and progression.
- Pay information for like work or work of equal value: Employees will have a right to receive information on average pay levels (broken down by sex) for “categories of workers performing the same work as them or work of equal value to theirs”.
- Ban on pay secrecy clauses: Workers cannot be prevented from discussing their pay, whether in their employment contract or otherwise.
Whilst the UK is no longer an EU Member State, and therefore, not obliged to implement the Directive, it seems that UK employers may choose (either for consistency or due to pressure from their employees) to meet this gold standard on pay transparency, particularly those multinational employers with a presence in both the UK and the EU.
We have already seen various Members States implement the Directive and a number of states have implemented more stringent requirements than those prescribed by law, such as Sweden, Belgium, Poland and Ireland. No doubt a number of multinational employers will need to be considering the impact of such national legislation.
Even outside of the EU, pay transparency is sweeping the globe. Nations such as Australia and a number of states in the US have implemented their own regulations with regard to pay transparency.
Pay transparency in the UK
What may be less well known, is that the UK government is starting to follow the lead of the EU Directive. It issued a call for evidence on pay transparency and the impact of pay transparency measures, which was open from 7 April 2025 until 30 June 2025. Specifically, with considerable overlap with the EU Directive, the current UK government asked for evidence on the following measures:
- Providing the specific salary or salary ranges of a job in the job advert or prior to interview.
- Restrictions on asking candidates their salary history.
- Publishing or providing employees with information on pay, pay structures and criteria for progression.
- Providing employees with information on their pay level and how their pay compares to those doing the same role or work of equal value.
- Identifying actions that they need to take to avoid equal pay breaches occurring or continuing.
In this case, pay would include both salary and bonuses.
Whilst we have not yet seen any results from the call for evidence, we can see how, if implemented, such measures would have a significant impact on UK employers. In particular, proposal four (comparing pay for work of equal value) will require significant preparation. Employers will need to consider what work they consider of “equal value” and categorise employees. We have already seen well publicised equal pay cases such as the Mrs S Brierley & Others v Asda Stores Limited judgment, which compared shop floor assists with distribution centre roles. Such requirements would give employees significantly more information and consequently ammunition to bring equal pay claims. Employers will need to start thinking now about any disparities in place and (where they cannot be objectively justified) and seek to remove them before any pay transparency measures come into force.
This call for evidence is just the start, and it seems likely, that as a next step the government will formally consult on the proposed measures and/or initiate a first draft of a bill on the same.
Notably, the Employment Rights Bill also seeks to push for further transparency, as it proposes to create a new provision under s78A of the Equality Act 2010 which introduces regulations requiring employers with 250+ employees to publish gender equality action plans – such provisions are intended, in part, to further help address the gender pay gap.
Whilst the EU Directive focuses on gender pay disparities, the UK government has made it clear that their focus is broader and they want to include such provisions in relation to ethnicity and disability pay disparities with their proposals for the Equality (Race and Disability) Bill.
Ethnicity and Disability reporting
The prospect of a forthcoming Equality (Race and Disability) Bill was announced in the King’s Speech 2024 with a focus on addressing discrepancies in pay for ethnic minorities and disabled people. This led to the ‘Plan to Make Work Pay’ published on 24 May 2024, where the government committed to expand pay reporting requirements. A further update entitled ‘Next Steps to Make Work Pay’ was published on 10 October 2024 in which the government promised to consult in advance of the publication of the Equality (Race and Disability) Bill provisions.
In tandem to the call for evidence, the UK government issued a consultation in March 2025 on how to introduce mandatory ethnicity and disability pay reporting for large employers. The consultation closed in June 2025, and we await the outcome.
Six measures were proposed in the consultation:
- Mean difference in average hourly pay.
- Median difference in average hourly pay.
- Pay quarters (the percentage of employees in four equally sized groups, ranked from highest to lowest hourly pay).
- Mean difference in bonus pay.
- Median difference in bonus pay.
- Percentage of employees receiving bonus pay for the relevant protected characteristic.
These largely mirror the same requirements as gender pay reporting.
The proposal is for ethnicity data to be captured using the classifications in the Government Statistical Service (being Asian or Asian British; Black, Black British, Caribbean or African; Mixed or multiple ethnic groups; White; or Other ethnic group).
Employers would also be required to report on the overall breakdown of their workforce by ethnicity and disability, as well as the percentage of employees not disclosing their personal data for these characteristics.
The consultation also asked whether public bodies with 250 or more employees should be required to report:
- Ethnicity pay differences by grade or salary bands.
- Data relating to recruitment, retention and progression by ethnicity.
Data privacy concerns
There will always be an ongoing tension between greater transparency and data privacy concerns.
If salaries can be linked to a specific individual, it becomes personal data. If the salary data allows conclusions to be drawn about individual persons, there must be a legal basis for its disclosure – usually this is ‘fulfilment of a legal obligation’.
Companies should be using anonymisation and pseudonymisation, where possible and data should only be shared in aggregate form so that individual salaries are not recognisable.
Both the EU directive and UK government have sought to consider this tension as part of their proposals. For example:
- The Equality (Race and Disability) Bill
The UK government has proposed that there should be a minimum of ten employees in any ethnic group that is being analysed. For less diverse, smaller workforces, this may require a binary classification of White employees or Non-white employees.
Similarly with disability, the current proposal is that reporting would only show the comparison of disabled and non-disabled employees to ensure that individuals cannot be identified. It remains to be seen whether such surveys will give employees any guidance on the definition of disabled, such as advising participants of the definition of a disability for the purpose the Equality Act 2010.
- EU Pay Transparency Directive
The Directive explicitly states any data processing under its framework must remain GDPR compliant, and it remains probable that any UK legislation will mirror such language. It gives Member States scope to restrict access to sensitive data e.g. specific salary information of individual employees may only be disclosed to employee representatives, supervisory authorities, or equality bodies.
Implications for employers
As is apparent from the forthcoming EU Directive and the UK Government’s future proposals, there is scope for significantly higher levels of pay transparency going forwards.
UK employers should be thinking about:
- Get your statistics now – Consider running your own internal reports before the reporting requirements come into force, this will enable you time to identify any red-flag issues and potentially remedy them.
- Updating decision makers – Inform senior management about incoming reporting requirements, so that they can keep this in mind when making decisions about pay going forwards.
- Categorising workers – Start thinking about how employees could be categorised for the purpose of “work of equal value”. It is possible that a re-organisation of group structure could bring clarity to the alignment of the relevant categories.
- Culture management – Employers should be considering whether increased transparency will lead to increase tensions between its workforce and management. What will be the potential impact on the organisation’s culture?
- Litigation risk – It is highly likely that, armed with more information, employees will be empowered (and have the necessary information) to bring more equal pay or discrimination claims. What can be done to mitigate this risk ahead of time?
- Employee representatives – representatives will also feel empowered by the additional information, consider how the relationships with the representatives may need to change in light of this.
- Update documentation – Update template employment contracts or employee handbooks to remove any pay secrecy restrictions and budget for any associated legal advice accordingly.
In summary – your pay isn’t going to stay secret for long.
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