EU member states have until 7 June 2026 to transpose the European directive on pay transparency into national law. This is an important directive for both employers and employees. In future, they will be on an equal footing as regards the level of information on pay levels within the same company or within the same job category. , PWC’s people process outsourcing partner and diversity & inclusion leader, and , head of human resources, describe the shape of this coming revolution.
Pierre Théobald: What exactly is meant by ‘pay transparency’?
Vinciane Istace: It’s an additional mechanism that Europe is adopting to achieve the objectives of non-discrimination between men and women in the remuneration of work of equal value. This principle has been enshrined in national law (in Luxembourg, article L.225 et seq. of our Labour Code) and in the collective agreements applied to certain sectors, yet gaps remain due to lack of access to remuneration data. The idea here is to say that something can change provided that the information is known and published, and therefore that there is transparency. Until now, this information has been difficult to access, or has only been available to those with decision-making power. With pay transparency, everyone becomes more aware of the situation in which they find themselves, and is better able to exercise their rights.
Is the issue of salaries still taboo in Luxembourg?
Delphine Berlemont: There are differences between countries, but also between certain generations. In the Nordic countries and the United States, the notion of remuneration and sharing information is much more fluid and much more natural than in other countries, including Luxembourg. With our French neighbours, for example, it’s much more taboo, much more opaque. Similarly, the younger generations are more able and more eager to share information transparently. This goes hand in hand with developments in technology and the fluidity of information. A number of websites, such as Glassdor, already share information about companies, employers and employee experience. This opens doors and gives us a bit more visibility on certain aspects, including pay. The fact that the salary issue becomes very transparent will allow employers to focus on other aspects in terms of employer branding, on the elements of value that go beyond just remuneration.
Employers will be asked to explain themselves, and will be able to do so.
VI: At European level, the pay gap against women is around 13%. By comparison, Luxembourg excels, generally achieving a gap of less than 1%. The question might therefore be raised as to whether pay transparency is necessary there. Yes, it is necessary. There is too often a tendency to reduce the pay debate to salaries alone. But there are bonuses, benefits in kind, variable bonuses... Not to mention the fact that when we communicate about this kind of discrepancy, we do so on a large scale. So, yes, when you put everyone together in the huge melting pot that is the Luxembourg labour market and boil it, the soup is good. But transparency also means realising that there are categories of workers in organisations where this gap is still glaring and which need to be highlighted to give everyone a means of taking action, especially employers. In management positions in Luxembourg, for example, the gap is not 13%, but 27%. Can we live with that in the long term?
What is the philosophy behind the European directive?
VI: It requires member states to publish information by job category for both the private and public sectors. It does this at two points. Firstly, before the employer and candidate enter into [an employment] relationship. Applicants will be entitled to this information when they apply for a job. For their part, they will be ‘protected,’ in the sense that they will not have to reveal their salary ‘history.’ The salary to which they can aspire in the organisation will therefore be defined in relation to the value of the position, and not in relation to their past career. This information on median salaries by category will also benefit all the employees of a company. Everyone will be able to see where they stand. This will change the dynamics of the market. I’m convinced that it will make it possible to objectivise and better document the decisions taken by employees, and thus to clean up the whole structure of remuneration practices. Employers will be asked to explain themselves, and will be able to do so. Can my remuneration methodology, its founding principles and the criteria I apply be explained in an objective and neutral way?
A major challenge for many companies.
What will this mean in practical terms?
DB: Employers are going to have to equip themselves with a certain number of internal structures and tools, starting with a clear structure in terms of remuneration, with objective criteria for career development and performance, and financial recognition of this. In companies that don't have these kinds of tools, they will have to be designed--there’s no choice. This will allow companies to identify and manage ‘outliers’. The challenge will then be to rebalance things to achieve a more harmonious situation. A major challenge for many companies.
VI: It will be very complicated for many players. The categorisation of functions will be less of a trauma for companies that have already implemented it and claim to be mature. But for many companies, they will have to make an inventory of all the functions, evaluate them using the same scale, so as to be able to compare them and construct a hierarchy of functions that will enable them to say to themselves: ‘The weight of this one being relatively greater than that one, when I superimpose my salary strategy on it, I can objectively argue that I pay a team leader or an IT developer more than someone who would be in a role assessed as less decisive in the functioning of the company, resulting in a lower gradation.’ A colossal exercise. When you’re faced with a question from an employee, you’ll have two months to respond. And if you find a remuneration gap of more than 5%, you’ll have six months to close it. That’s a lot of pressure for the players in the marketplace.
What are the risks involved?
VI: If the pay gap calculated on the basis of the average gross hourly remuneration of women and men for equivalent work exceeds 5% in the same job category, employers will be obliged to undertake a joint pay review. This will strengthen the role of labour representatives, since it will be done in partnership with the staff delegation. Since the burden of proof will be reversed, individual actions by employees, or even group actions by a category of employees who realise that they have not been treated fairly and who could go back several years to obtain compensation, are also conceivable. In fact, the limitation periods may not be less than three years and will not begin to run before the complainant becomes aware, or could reasonably be expected to become aware, of a violation.
Will I finally be able to find out how much the person next to me earns, so that I can compare it with my own?
DB: No. On the other hand, you will be able to find out the median pay for the category in which you work, or for other categories. You will be able to compare yourself individually, but the employee will only have access to his or her own information. The principles of confidentiality are preserved.
Nothing is worse for an individual than to think that they are being treated unfairly.
Should we expect an overhaul of pay scales?
VI: This could lead to adjustments, as well as to interesting discussions both with the labour representatives and with the employees themselves. It would be wrong to reduce this to a question of figures, because it’s not pay as such that encourages an employee’s commitment. What triggers this commitment is the perception of fairness in remuneration and the conviction, even if there are minor differences within an organisation, that everyone is treated more or less equally. Nothing is worse for an individual than to think that they are being treated unfairly. It’s extremely demotivating. So the aim is not to achieve the highest level of pay, but to restore fairness.
DB: Every employer is going to have to find out where they stand and define their philosophy. Do I want to position myself as a ‘median payer’? ‘Top payer’? I'm used to saying that remuneration is not a strong motivating factor, but it can be a very powerful demotivating factor. We all have a value in mind that we believe we have in relation to our position and role. If I’m paid 20% more, I won’t necessarily be more motivated. But if I’m offered 20% less, that can be extremely demotivating. Salary transparency will make it possible to adjust and objectify this value and thus take the focus off the subject, so that we can concentrate on the other elements of the ‘employer-value proposition,’ the prospects for progression, learning, training, work-life balance, etc.
Given that each of us will belong to a given category and that within this category the range of salaries will be known, is this the end of salary negotiations?
DB: I don’t think so. We’re talking about ranges here, so there’s room to go up or down, and the discussion will be about where to place the cursor.
VI: In any case, the discussions will be more effective. The room for manoeuvre will be a little more clearly defined. And it will also save a lot of time. We’ll certainly have to invest time in installing the necessary reporting tools, but we'll also be more efficient in the recruitment process. The salary issue will be speeded up.
How do employers feel?
DB: Not all employers are at the same level of preparation. Not to mention the fact that we're going to have to go further and introduce reporting systems, which will also require time and energy. It will be necessary to equip not only human resources professionals, but also managers. How do you have this kind of discussion about pay? For some, it can be a challenge.
VI: The mindset of employers depends on the size of the company. If you have fewer than 100 employees, you’re calm today. With 100 to 149 employees, you have until 7 June 2031. Beyond that--meaning, starting from 150 employees--it’s 7 June 2027, so you need to be ready to go. In addition to size, the very culture of the professional sector is also a factor. Some sectors will be quicker to take the new requirements on board. Not to mention the regulatory millefeuille. Certain companies are in the process of digesting the reporting that ESG requirements have introduced, notably the CSRD reporting, and now pay transparency has been added to the arsenal. On the face of it, a millefeuille is light. But for some, it carries a certain weight.
Read the original French-language version of this interview