Many might remember the film ’Made in Dagenham,’ which portrays the struggle of women fighting for equal pay while working at the Ford factory in Dagenham, England, during the 1960s. Over six decades have passed since then, yet today in Hungary, women earn on average 17.5% less than their male colleagues, significantly above the EU average of 12%.

This situation is set to change soon. The new EU pay transparency directive will be mandatory in all member states, including Hungary, starting in 2026. The goal of this regulation is clear: to reduce the gender pay gap and establish a system that makes pay more transparent and predictable.

Why Is It Important for Companies?

There are three main reasons:

• Economic Impact: Pay discrimination reduces loyalty, increases turnover, and raises recruitment costs.
• Brand Value: Transparent pay attracts talent, especially among younger generations.
• Cost Planning: Structured pay scales allow for more accurate financial modeling and eliminate ad-hoc raises.

What Changes from 2026?

• From June 2026, pay transparency will be mandatory in all EU member countries, including ours. The simple aim is to reduce the gender pay gap. In our country, this gap is the previously mentioned 17.5%, which is one and a half times the EU's 12% average. For comparison: in Luxembourg, women earn even more (-0.9%), whereas, in Estonia, the gap is 21.3%.
• The new rules bring several changes. First, salary transparency will fundamentally improve. The salary for a position must be disclosed in job advertisements or at the latest before an interview. Asking candidates about their previous salaries will no longer be allowed. Pay confidentiality clauses will also disappear.
• Employees will have expanded access to information. They can request, in writing, information on their salary and the average earnings of colleagues doing the same job, broken down by gender. Companies have two months to respond.

Reporting Obligations

If the discrepancies exceed 5%, a joint wage assessment with employee representation is mandatory within six months.

Impact on Corporate Operations

• Implementing pay transparency will shake up organizational culture. Secrecy will be replaced by openness, boosting commitment and reducing turnover. Leaders will need to switch from subjective to objective, data-driven pay systems.
• Transparent wages make companies more attractive to talent, especially among younger people. With salary ranges in job adverts, there will be more relevant applicants and a filtering of those with unrealistic expectations.
• A transparent pay structure also improves cost planning. No more chaotic, ad-hoc salary increases. Structured salary ranges bring financial discipline and enable more accurate modeling of wage costs. Financial management and HR will need to collaborate closely on a planning model that accounts for adjustments from transparency.
• A structured pay system allows for performance-based compensation. The directive mandates a pay structure that delivers equal pay for equal work based on objective and gender-neutral criteria. Although no specific system is required, a formal job evaluation system may meet this requirement.
• Clear criteria for who earns what boost motivation. Salaries are based on the objective value of a job and individual performance, not on negotiating skills.

Potential Tensions

Transparency will reveal previously hidden differences. For example, it may become clear that a new colleague is earning more than a long-time employee. This could lead to conflicts, which can only be managed with clear communication and corrective plans.

What Needs to Be Done Now?

Preparation cannot be delayed. The first reports will be based on 2026 data. Leaders should follow this action plan now:

1. Conduct an internal pay audit
2. Prepare a draft report based on last year's data
3. Establish a job evaluation system
4. Define salary ranges using market benchmarks
5. Develop a communication strategy to manage internal tensions
6. Conduct leadership training for professional pay discussions

Sanctions

The directive is serious about sanctions. The burden of proof will shift: in cases of pay discrimination lawsuits, employers must prove their innocence. Employees suffering from discrimination are entitled to full compensation with no upper limit.

• Member states must introduce ’effective, proportionate, and dissuasive’ sanctions. Companies that regularly violate these rules may be excluded from public procurement and state support.

How Can an Interim Manager Help?

The introduction of pay transparency is a complex, multi-department project. An experienced interim manager can assist in:

• Gap analysis,
• Developing new processes and pay structures,
• Handling internal communications and change management tasks,
• Providing leadership support and training.

Interim Ltd.'s over 20 years of experience have proven valuable in such transformations. Introducing pay transparency is not just an obligation but an opportunity: it lays the foundation for a fairer, more attractive, and long-term competitive corporate culture.