Pay transparency: What HR is overlooking - and what the research says

The EU Pay Transparency Directive is expected to enter into force in Denmark on 1 January 2027. Yet only a fraction of Danish companies have got the hang of it. And most people who are at it approach it from the wrong angle.

It's not about paying everyone the same. It's about being able to explain why there's a difference.

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What the EU Pay Transparency Directive requires of HR

The EU Pay Transparency Directive (2023/970) applies as a starting point to all companies, regardless of size, and requires that wages be set on the basis of objective and gender-neutral criteria.

It makes demands in three areas:

Recruitment

Salary range must be disclosed in job postings or before first interview. Questions about previous salary are prohibited.

Employee rights

Employees can request information about their own salary levels and average salary levels for comparable roles — broken down by gender.

Salary statement

Companies with 100+ employees are required to report on gender pay gaps. Exceeding the 5% without factual explanation, action must be taken.

But here's what many overlook:

The directive does not prohibit wage differentials. All it requires is that they can be explained matter-of-factly, objectively and gender-neutral.

The challenge is that many companies have pay gaps - they just never formalized the explanation.

Young people change the rules of the game on pay transparency

Pressure on pay transparency doesn't just come from within the EU. It comes from the next generation of employees.

Mercer's Global Talent Trends survey shows a marked generational shift in attitudes toward pay and openness. 89% of Gen Z are comfortable talking about pay in the workplace versus just 53% of Baby Boomers. And 46% of graduates in general will not look for a job without a salary range in the job posting.

Gen Z and Millennials compare faster, ask more questions and aren't afraid to change jobs if they feel underpaid -- regardless of whether they're objectively well paid.

It's not the compensation alone that drives the experience. That's the meaning and explanation behind it.

And when they discover a pay gap, they seek answers. If managers aren't dressed to explain pay decisions, HR ends up dealing with the problems rather than preventing them.

But what should leaders really be able to explain? The answer requires the company to have done its homework first.

The job structure is what gives managers something to explain with

Pay doesn't have to be the same - but it has to be explainable. And it can only do that if there is a clear structure behind it.

Without a job architecture that links job type, salary level and salary range, the manager has no factual reference point to stand on in the conversation with the employee.

When jobs, pay levels, and pay spreads are consistently linked, HR and managers can explain differences based on structure rather than gut feeling.

This is exactly what the directive requires and what the employees are asking for.

A manager who knows what job family and salary level an employee is placed in and what it takes to advance to the next level can conduct a substantive, confidence-building salary interview.

A leader without that structure can't - no matter how good the intentions are.

AI as a shortcut to job structure and salary transparency

One of the biggest practical hurdles to getting started is the mapping work itself:

What are the names of our jobs? What salary levels belong to which roles? And how do we categorize employees correctly?

This is exactly where Mindkey's upcoming pay transparency module is making a difference.

Drawing on existing HR data, AI can analyze patterns and propose a job and salary structure, which HR subsequently reviews and approves.

AI acts as decision support - not as a substitute for human assessments and is built in line with the EU's AI regulation with a focus on responsible use and transparency.

This means that you don't have to build the job architecture from scratch in a spreadsheet.

For most companies, the data base is already there. Mindkey helps to structure it correctly — thus making the road to compliance considerably shorter.

Salary transparency as a competitive advantage in recruitment

Companies that act proactively on pay transparency don't just win on compliance. They win on employer brand.

Companies that go beyond minimum requirements and use pay transparency strategically experience lower staff turnover, faster recruitment and real productivity gains.

With 46% of graduates not looking for jobs without pay ranges, pay transparency is already a concrete recruitment parameter - not a hypothetical future scenario.

Pay transparency is about trust - not just numbers

The companies that succeed with pay transparency are not the ones that pay the most. They are the ones who can explain best.

The EU directive sets the framework. But the real gain is internal:

Employees who understand the logic of pay are more engaged, more loyal, and ask fewer frustrated questions.

Leaders who can explain differences matter-of-factly build trust rather than lose it. It's not the compensation alone that makes the difference. That's the meaning behind the number.

And that opinion HR needs to create - preferably now, while there's still time to get it right.

Are you ready for salary transparency by January 2027?

Download our wizard and get an overview of what needs to be put in place - from job architecture and salary criteria to employee communication and leadership clarification.