Workforce Planning for EU Pay Transparency

Workforce planning has traditionally focused on a familiar set of questions. How many employees will the organisation need? Which skills are in short supply? Where should new positions be created? What will the workforce cost over the next financial year?

These questions remain important. But for employers operating in the European Union, workforce planning increasingly needs to account for another consideration: whether the organisation can explain and support the pay decisions that accompany changes to its workforce.

Directive (EU) 2023/970, the EU Pay Transparency Directive, introduces requirements concerning pay-setting criteria, recruitment transparency, employee information rights and gender pay gap reporting. It also strengthens the mechanisms through which workers can challenge potentially discriminatory pay differences.

The Directive required Member States to transpose its provisions into national law by 7 June 2026. Implementation details, enforcement arrangements and additional national requirements must be assessed in each relevant jurisdiction.

For employers, the implications extend into decisions made throughout the employment relationship.

Recruitment offers, job classifications, promotions, market adjustments and retention payments all influence the pay structure that an organisation will subsequently need to explain.

This creates an important connection between workforce planning and pay governance.

A workforce plan may be financially sound while still introducing pay differences that are difficult to justify consistently.

The challenge is to recognise those implications before decisions become embedded in the organisation's compensation structure.

1. Workforce planning and pay decisions are closely connected

Workforce planning is often treated as an exercise in forecasting demand and supply.

Business leaders estimate future requirements, HR teams assess available capabilities and finance evaluates the affordability of recruitment or organisational changes.

Compensation decisions may then be considered separately.

That separation becomes problematic when decisions affecting workforce composition also change the organisation's pay distribution.

Consider a business planning to establish a new digital operations team.

The company may need to recruit specialist employees at salaries above those paid to existing staff in comparable roles. The higher offers may be commercially necessary because of current labour-market conditions.

However, the business also needs to understand whether the proposed roles involve materially different responsibilities, skills or working conditions.

If they do, the distinction should be reflected in an objective job assessment.

If the roles involve equal work or work of equal value, the organisation should examine whether any difference in pay can be supported by legitimate, consistently applied criteria.

The relevant question is not whether every employee must receive identical compensation.

It is whether pay differences can be explained through factors that are objective, gender-neutral and relevant to the work.

That analysis should form part of workforce planning rather than become an issue only when an employee requests information or a reporting exercise identifies a gap.

2. What the EU Pay Transparency Directive changes

The Directive establishes several requirements that affect how employers organise and document pay decisions.

Under Article 4, Member States must ensure that employers have pay structures capable of supporting equal pay for equal work or work of equal value.

Comparability is assessed using objective, gender-neutral criteria. The Directive identifies skills, effort, responsibility and working conditions as relevant factors, alongside other appropriate criteria.

Article 5 addresses transparency before employment. Applicants must receive information about initial pay or the pay range, and employers must not ask about their pay history.

Article 6 concerns transparency of pay-setting and pay-progression criteria, subject to the Directive's provisions and permitted national exemptions.

Article 7 establishes workers' rights to obtain information about their individual pay and average pay levels, broken down by sex, for categories of workers performing the same work or work of equal value.

Article 9 introduces gender pay gap reporting for employers meeting the relevant workforce thresholds.

These provisions operate at different points in the employment relationship, but they depend on related organisational information.

An employer needs to know which roles are comparable, how pay is determined, what influences progression and how compensation data is recorded.

A workforce plan that does not consider these connections may create additional work for HR, reward and compliance teams later.

Reporting thresholds matter

Under the Directive's minimum framework:

For the first two groups, the initial reporting period covers the previous calendar year, 2026.

The precise national obligations and reporting arrangements must be checked against the applicable implementing legislation.

Importantly, the absence of an Article 9 reporting obligation does not automatically exempt a smaller employer from the Directive's other relevant pay transparency requirements.

3. Recruitment planning can introduce future pay disparities

Recruitment decisions are often influenced by immediate business pressures.

A project needs a specialist urgently. A competitor is offering higher salaries. A critical vacancy has remained open for several months.

The organisation responds by increasing the proposed salary.

That decision may be commercially reasonable. But it can also change the relationship between new-hire pay and existing employee compensation.

Suppose an employer has five employees performing comparable work, with annual salaries between €48,000 and €54,000.

A new employee is recruited at €60,000.

The offer may reflect scarce experience or a particular capability that the business needs. It may also create a difference that existing employees will reasonably expect the organisation to explain.

The employer should examine whether the distinction relates to objective factors such as relevant experience, demonstrable skills, responsibilities or other legitimate criteria.

Those factors need to be applied consistently and should not operate as indirect proxies for sex.

The organisation should also consider whether the new appointment changes the value or responsibilities of the role itself.

A recruitment premium should not automatically become a permanent, unexplained exception to the pay structure.

What should change in recruitment planning?

Workforce plans should connect vacancy approval with existing pay structures.

Before authorising a salary outside the expected range, HR and hiring managers should have access to:

• The evaluated role or job category
• The approved salary range, where applicable
• Current pay distribution for comparable employees
• The objective basis for the proposed offer
• Any internal equity implications
• The process for approving and reviewing exceptions

This does not remove managerial discretion.

It makes the reasons for exercising that discretion more visible and consistent.

It also helps recruitment teams meet transparency requirements without creating pay commitments that conflict with the organisation's wider compensation approach.

4. Job evaluation provides the basis for meaningful comparisons

A central requirement of pay transparency is the ability to identify employees performing equal work or work of equal value.

Job titles alone are insufficient for this purpose.

Two employees may have different titles but perform work of comparable value. Conversely, employees sharing a title may have substantially different responsibilities.

The European Institute for Gender Equality (EIGE), working with the European Commission, published updated EU-wide guidelines on gender-neutral job evaluation and classification in March 2026.

The toolkit provides practical guidance for organisations of different sizes and focuses on evaluating jobs through objective criteria.

The assessment concerns the work performed, rather than the characteristics or negotiating ability of the person holding the position.

For workforce planning, this has several practical implications.

New positions should be evaluated before recruitment

When a business creates a new role, its relative value should be assessed against existing roles.

This is particularly important when organisations introduce specialist positions, restructure departments or establish new management responsibilities.

Role changes should trigger a review

Employees frequently acquire additional responsibilities without a formal change in title.

Over time, the actual requirements of a position may diverge from its original description.

Workforce planning should include a process for identifying material changes in job content and reviewing the relevant classification.

Job categories should remain understandable

The categories used to assess equal work or work of equal value should reflect the organisation's objective evaluation approach.

Broad categories may conceal meaningful differences between jobs, while unnecessarily narrow categories may make comparison difficult.

The objective is a defensible structure that reflects the work being performed.

A well-maintained job framework supports recruitment, career development and workforce planning alongside pay transparency.

5. Promotions and career progression need consistent criteria

Workforce planning involves more than identifying vacancies.

Organisations also need to decide how employees will develop, move into new roles and progress through salary structures.

These decisions influence the distribution of pay over time.

A promotion may involve a change in responsibility, a new job classification and an associated salary adjustment.

Other employees may receive increases without a formal promotion, perhaps because of market pressures, specialist skills or performance.

Without clear criteria, similar decisions can produce different outcomes across departments.

One manager may prioritise individual performance ratings. Another may place greater weight on retention risk. A third may award increases primarily to employees who negotiate.

The result may be a pay structure that reflects accumulated managerial discretion rather than a coherent organisational policy.

Article 6 of the Directive requires relevant pay-setting and pay-progression criteria to be objective and gender-neutral.

For workforce planning, this means organisations should understand how employees move between roles, grades and pay levels.

Useful questions include:

• What distinguishes one job level from another?
• Which criteria support promotion?
• How is performance assessed?
• When can employees progress within a salary range?
• How are exceptional increases approved?
• Are comparable decisions reviewed consistently across departments?

The answers need not produce a rigid or entirely formula-based compensation system.

They should establish a framework within which decisions can be made and explained.

6. Workforce restructuring requires a pay-equity review

Organisational restructuring is another area where workforce planning and pay transparency intersect.

Businesses may consolidate teams, create shared-service functions, introduce new reporting lines or transfer responsibilities between departments.

These changes can affect the relative value of jobs.

For example, an organisation might combine two operational functions under a single management structure.

Employees who previously held different titles may now perform substantially similar work. Their historical salary arrangements, however, may remain different.

Alternatively, a restructuring may increase the responsibilities of some roles without corresponding changes to their evaluation or compensation.

A workforce plan that considers only reporting lines and headcount may overlook these implications.

Before implementing material organisational changes, employers should assess whether:

1. Job responsibilities are changing.
2. Existing job classifications remain appropriate.
3. Employees are moving into comparable categories of work.
4. Historical pay differences require further examination.
5. New pay arrangements are supported by objective criteria.

This is particularly relevant when integrating acquisitions or combining previously separate business units.

Different legacy pay structures can persist long after operational integration.

A structured review helps identify where alignment may be necessary and where differences have legitimate explanations.

7. Workforce data must support more than headcount reporting

Many organisations maintain reliable records of employee numbers, departments, locations and payroll expenditure.

Pay transparency requires a more detailed understanding of workforce information.

Employers may need to analyse pay by categories of workers performing equal work or work of equal value, distinguish between fixed and variable compensation and assess differences between women and men.

Under Article 9, relevant reporting metrics include the gender pay gap, median gender pay gap, gaps in complementary or variable components and the distribution of workers across pay quartile bands.

The information needed for these calculations may sit in different systems.

Payroll records contain compensation details. HR systems hold employee information. Performance records may explain progression decisions. Job architecture documents establish the relationship between roles.

Where these sources are inconsistent, preparing reliable analysis becomes more difficult.

Common data problems

An employee may have an outdated job title in the payroll system.

A promotion may be recorded in HR records but not reflected in the job classification.

Variable compensation may be recorded under different payment codes across departments.

Employees may be assigned to organisational units that no longer match the current structure.

Each issue can affect the quality of analysis.

A practical workforce data review should therefore examine:

The exact fields, definitions and calculations must follow applicable legal requirements.

The priority is to establish a consistent data structure that can support both workforce decisions and statutory analysis.

8. Workforce forecasting should include pay-equity scenarios

Traditional workforce forecasting often models the financial consequences of recruitment, attrition and salary inflation.

Pay transparency creates a reason to add another dimension: the effect of planned decisions on internal pay relationships.

Consider a business planning to recruit 20 employees during the next financial year.

The workforce budget may account for expected salaries, employer contributions, recruitment costs and anticipated start dates.

A more complete assessment could also examine whether proposed offers are likely to create significant differences within comparable job categories.

This does not require employers to predict every future pay gap.

It involves testing foreseeable decisions against the existing pay structure.

Illustrative scenario

A company has a job category containing 12 employees.

The current salary range is €42,000–€52,000.

Management proposes recruiting four additional employees at €55,000 because of market conditions.

Before approving the recruitment plan, the organisation could assess:

• Whether the new roles have different evaluated requirements
• Whether the proposed salaries are supported by objective criteria
• How the offers compare with existing employees' compensation
• Whether the recruitment plan creates a need for wider salary review
• The potential financial implications of alternative pay decisions

The analysis may confirm that the proposed offers are justified.

It may also identify an opportunity to reconsider the salary structure or the responsibilities attached to the new positions.

Either outcome is preferable to discovering the implications only after recruitment has been completed.

9. Pay exceptions need an explicit place in workforce planning

Most organisations make exceptions to their normal compensation arrangements.

These may include recruitment premiums, retention payments, temporary allowances, specialist skill premiums or adjustments following internal transfers.

Exceptions are not inherently discriminatory.

Their justification and consistent application matter.

A temporary market premium may be appropriate where a business faces demonstrable recruitment difficulties.

However, the organisation should be able to explain the conditions under which such payments are awarded, reviewed and withdrawn.

Otherwise, repeated exceptions can gradually alter the pay structure without a deliberate policy decision.

Workforce planning can help by identifying which exceptions are likely to recur.

If a business repeatedly pays above its salary range for the same type of role, the issue may no longer be exceptional.

It may indicate that the role has been incorrectly valued, that market conditions have changed or that the salary structure requires review.

A useful exception register can record the decision, business justification, approval, affected role and review date.

This creates a clearer connection between short-term workforce requirements and longer-term compensation governance.

10. Finance, HR and business leaders need a shared process

Pay transparency is often assigned to HR or the reward function.

Those teams have important responsibilities, but many decisions affecting pay originate elsewhere.

Business leaders determine staffing requirements and approve organisational changes.

Hiring managers influence recruitment offers.

Finance establishes budgets and evaluates labour costs.

HR develops job frameworks, compensation policies and workforce processes.

Payroll maintains records that support pay calculations and reporting.

If these functions work independently, inconsistencies can develop even where each team follows its own procedures.

A coordinated approach does not require every pay decision to pass through a large committee.

It requires clarity about when different functions should be involved.

For example:

The specific allocation of responsibilities will vary by organisational size and structure.

The objective is to ensure that significant decisions receive the right review before they become difficult to reverse.

11. What employers should prioritise before 2027

For employers within the first reporting groups, 2026 workforce and compensation data is particularly important because it forms the reference period for the initial reporting cycle under the Directive.

That does not mean employers should focus exclusively on producing a report.

The quality of the eventual analysis depends on decisions and records created throughout the year.

A practical sequence is to:

Review current workforce categories

Confirm that roles are grouped using an appropriate, objective job evaluation approach.

Identify where job descriptions, grades or classifications are outdated.

Examine recent pay decisions

Review recruitment offers, promotions, market adjustments and exceptional payments.

Determine whether the reasons for material differences have been recorded and can be assessed consistently.

Validate workforce and payroll information

Check the completeness and consistency of the data needed for analysis.

Resolve discrepancies between HR, payroll and job records where possible.

Assess planned workforce changes

Consider how recruitment, restructuring and salary reviews may affect comparable employee groups.

Incorporate relevant pay-equity considerations into workforce approval processes.

Prepare for employee information requests

Ensure that the organisation can identify the relevant categories of workers and produce information using the applicable legal definitions.

Establish responsibilities for reviewing and responding to requests.

Test reporting readiness

Where reporting obligations apply, perform preliminary calculations using available data.

Investigate unexpected results and distinguish between data problems, legitimate pay factors and differences requiring further examination.

A pay gap does not automatically establish unlawful discrimination.

Equally, the presence of an explanation does not automatically establish that the difference is legally justified.

Employers need to examine the relevant facts, criteria and applicable legal requirements.

12. A more integrated approach to workforce planning

The longer-term opportunity is to make pay considerations a routine part of workforce decisions.

When approving a new position, the organisation should understand its evaluated value and expected compensation.

When preparing a recruitment budget, it should consider the implications for existing employees in comparable roles.

When planning promotions, it should apply consistent progression criteria.

When restructuring, it should review the effect on job classifications and pay relationships.

When forecasting workforce costs, it should recognise that correcting or adjusting pay structures may have financial consequences.

This approach also strengthens ordinary business planning.

It improves the information available to managers, makes compensation decisions easier to explain and creates a clearer relationship between workforce investment and organisational priorities.

The EU Pay Transparency Directive provides a regulatory reason to strengthen these practices, but their usefulness extends to workforce management more generally.

Conclusion

Workforce planning determines how an organisation acquires, develops and deploys the people needed to achieve its objectives.

Pay transparency adds a requirement for greater clarity about the compensation decisions associated with those choices.

For employers, the practical challenge is to connect job evaluation, recruitment, progression, workforce data and financial planning.

These activities are already part of organisational management. The opportunity is to make their relationships more explicit and their outcomes more consistent.

As reporting requirements develop and employees exercise their information rights, organisations will increasingly need to explain how their pay structures operate.

That explanation will be more credible when it reflects decisions made through established, objective processes rather than justifications assembled after the event.

Effective workforce planning should help employers understand not only what their future workforce will cost, but also whether the pay decisions shaping that workforce are consistent, defensible and sustainable.

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References

1. European Union (2023). Directive (EU) 2023/970. Official Journal of the European Union.

2. European Commission (2026). EU Action for Equal Pay.

3. European Institute for Gender Equality (2026). EU-wide Guidelines on Gender-Neutral Job Evaluation and Classification.

4. OECD (2026). Pay Transparency in Progress: Valuing Jobs, Closing Gender Pay Gaps.

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