Vital steps for Irish employers to prepare for EU pay transparency

The EU’s Pay Transparency Directive will create a more equitable pay landscape, says Aon Ireland expert

Mairead O’Mahony, head of human capital at Aon Ireland, says Irish employers should begin taking steps to prepare for the EU’s Pay Transparency Directive.

Employers all across Europe are engaging with significant legislative changes that will accompany the EU’s Pay Transparency Directive, and Irish employers need to follow their lead, advises a leading human resources expert. 

Mairead O’Mahony, head of human capital at Aon Ireland, says that pay transparency regulations are sweeping the globe — and Ireland is no exception. A landmark set of rules that will ensure greater equity among employees, the EU's directive will come into force in June 2026, but employers have a lot of ground to cover before that deadline. 

In Spain, the government has introduced legislation that requires every company to maintain a salary register categorised by profession and gender, while France is advancing on its journey having codified gender pay calculation and disclosure into law in 2018. 

"Here in Ireland, an ever-increasing number of businesses are now required to report on the gender pay gap each year while new legislation is on the horizon which will solidify the principle of equal pay for equal work, where ‘pay’ also includes benefits and pension," says Mairead O’Mahony.  

"For many businesses already navigating an evolving set of business challenges, preparing for these measures will not be straightforward. However, there are major benefits to be unlocked by making them a key focus and developing a more engaged and resilient workforce." 

With many measures increasing transparency around pay, changes can help businesses to attract and retain the best talent — a crucial challenge facing firms in Ireland in a tight labour market.

One of the most significant legislative changes ahead is the EU’s Pay Transparency Directive, a landmark set of rules that will ensure greater equity among employees. Given the seismic changes necessary ahead of its fast-approaching implementation, preparing for this transformation should be a business imperative today for every organisation.

"The directive will be crucial to creating a fairer and more equitable pay landscape across Irish businesses," says Mairead. "The rules will support firms in understanding and addressing the factors causing inequities. For example, identifying imbalances in representation across senior levels or specific areas of the business, which can often be a significant driver of a firm’s gender pay gap. 

"These new pay structures will help to close the gender pay gap in Ireland — and not before time. The gender pay gap, which currently stands at 11.3% in Ireland, has a long-term impact on the quality of a woman’s life, their risk of exposure to poverty and financial security in retirement. The positive impact on addressing other gender inequalities across pensions and health will also be significant." 

While gender pay gap reporting has been in operation at a national level for the past two years, the pay transparency directive goes much further in requiring broader and more detailed reporting. In time, companies of all sizes will need to comply with many pay transparency obligations, with uncapped fines facing those who fail to comply with the rules.

With the rules set to come fully into force in Ireland in June 2026, the countdown to the new system is accelerating. Given the complexity of the proposed legislation and its wide-ranging impact across legal, finance, HR, risk and payroll, it is crucial that employers start preparing now to ensure a seamless transition.

Mairead O’Mahony advises that a multi-year programme of change will be required for many companies to successfully transform critical people policies and procedures and make the most of this opportunity for their entire workforce.

"Acting now can and will ensure that employers are prepared for the significant changes ahead," advises Mairead. "Employers should first focus on updating their job architecture. This will serve as the foundation of pay equity in the organisation and make sure that jobs and people are in the right roles in the first place.

"Conducting an internal pay equity audit will determine the root causes of any significant equity gaps. Once the status of pay equity within the organisation has been established, a clear roadmap for change will need to be implemented. Actions will be required to counteract any potential imbalances, including establishing who is eligible for adjustments, and how much closing the gaps will cost." 

Reassessing the design of salary structures is another critical step in the process. Employers should ensure objective processes, guidance, and governance are in place to support reward and promotion decisions. This will help avoid pay and promotion decisions that are based purely on managerial discretion and limit the risk of bias. Pay benchmarking — using fully up-to-date data — can help to make sure that pay policies are aligned within their industry and wider jobs market. 

Mairead adds: "As we move towards the June 2026 deadline, proactive communication with the workforce will be key to positively positioning changes. Employers should take a proactive role in educating employees about new HR policies and benefits of increased transparency. 

"In particular, it is crucial that people managers are well informed about new processes for setting and moving pay. Offering simulations and role-playing different scenarios can ensure that managers are well prepared to communicate to employees on the new structures and handle any potentially difficult conversations with employees.

"With much change on the horizon, now is the time for action. There is no time for delay. Two years out from the implementation of the directive, many employers will need to move quickly to manage the major transformation necessary across policy, people and operations. The size of this shift should not be underestimated.

"By working together across Government, business and employee representative groups we can fully harness this moment and create a fairer and more equitable pay landscape for everyone."