EU Pay Transparency Obligations for Small Companies

I often hear smaller companies say that the EU Pay Transparency Directive doesn’t apply to them. So, in this article we’ll discuss if that is true and what obligations small companies have.

We have fewer than 100 employees. Does the Directive even apply to us?

Yes, with exceptions. The reporting obligation to calculate and publish your gender pay gap only kicks in for companies with 100 or more employees. Below that threshold, you’re not required to publish a pay gap report, unless local legislation stipulates it.

But several other requirements still apply. Every employer, whether you have 10 employees or 10,000, must make salary information available during the hiring process (often in job postings). Job descriptions must be written in objective, gender-neutral terms. You’re also prohibited from asking candidates about their pay history, and you cannot have contractual clauses that prevent employees from discussing pay with each other. These rules apply to you regardless of size.

The right to request pay information is also universal. Any employee can ask for data on average pay levels broken down by gender for comparable roles. You need to be able to respond to that request meaningfully. If you can’t, that’s a problem worth fixing today.

What does my country have to do with this?

The Directive sets the floor, but national transpositions can go further. And where requirements already exist, the Directive can’t be used to lower them. France, for example, has had its own pay equity reporting requirement (the Index de l’Égalité Professionnelle) since 2019. It applies to companies with 50 or more employees. That threshold is well below the 100-employee mark in the Directive. Other countries have similar provisions. If you’re operating in a country with existing pay equity legislation, the Directive doesn’t replace it, but sits on top of it.

This matters for small companies because you might assume the 100-employee reporting threshold is the relevant number in your country, when in fact local law already requires something from you at 50 employees or lower. Check what already exists in your jurisdiction before concluding you have no reporting obligations. And assume that you must at least continue what you deliver today. I always recommend to check in with your local legal counsel.

Our salaries are set by the owner. How exposed are we?

This is a question I often receive, and where small companies run the most risk. In larger organizations, pay decisions are usually made based on some kind of structure, that includes job levels, salary bands and approval processes. In smaller ones, pay is often a direct negotiation between an owner and a new hire, with no consistent logic behind it.

The result is a patchwork of salaries. An employee hired in 2020 might be earning 15% less than one hired in 2023, not because of a difference in contribution but because the labor market was tight and no one reviewed or raised the old salary. Someone who negotiated hard at offer stage earns significantly more than a colleague doing the same work who didn’t. And tenure often contributes to the largest pay gaps: a long-tenured employee whose salary grew slowly through small annual increases earns less than a new hire who came in at market rate. These gaps show up in almost every small company.

All of these pay decisions were carefully made at the time. But under the Directive, intent doesn’t matter. What matters is whether people doing work of equal value are being paid differently and whether you can explain why. Some countries, like Lithuania, explicitly include a requirement to have formal pay structures would apply to all companies. Others leave it open. In case of doubt, I always fall back on this question: Can we explain why we pay what we pay in objective terms?

We have only two people in the same role. Do we still have to share pay information if someone asks?

This is one of the unresolved questions in the Directive, and small companies feel it more acutely than anyone else. The right to request pay information applies regardless of company size. But when a role has only two or three people in it, publishing average pay data by gender effectively discloses individual salaries. At that point, transparency and privacy are pulling in opposite directions.

Countries are handling this differently. The Netherlands has taken a pay transparency over privacy position in its draft. GDPR does not override the disclosure obligation, even where the data points to an individual. Other countries haven’t resolved the question yet, and I expect most to take a more privacy-protective position. Until your national transposition is finalized, you won’t know for certain which way your jurisdiction lands.

In the meantime, prepare for both outcomes. If your country follows the Dutch approach, you need to be ready to share pay information even in very small teams. Which also means handling the conversation when two people in the same role effectively learn what the other earns. If your country takes a privacy-first stance, you’ll need to document which roles fall below a meaningful disclosure threshold and have a consistent policy for responding to those requests. Grouping a certain number of employees (say 10) seems to be a practical alternative.

Either way, your employees will request this info. It would be good to think through your response before someone asks, so you don’t have to make it up as you go along.

How do we know if there is a pay gap?

You can copy what large companies are doing but with a light touch. I always recommend that you start running pay gap reports as soon as you can. In small companies that is a lot easier, because you might even be able to collect all the data in a spreadsheet. Simply map out what everyone earns, in what role, at what level. Most small companies have never done this in a structured way. It probably only takes a few hours, and it is always illuminating.

Once you can see the big picture, look for the patterns. Are there meaningful differences in pay or benefits between people doing comparable work? If yes, can you articulate an objective reason: different levels of experience, different scope of responsibility, a skills premium you’re paying for a hard-to-hire capability? If the answer is “I’m not sure” or “that’s just how it ended up,” you have work to do.

The salary band requirement is operationally straightforward but forces a decision you may have been avoiding: what is this role actually worth? If you keep salary ranges deliberately vague to preserve negotiating room (or not post them at all), that practice no longer works. You’ll need to define ranges, they need to be real and not so wide they’re meaningless.

We’re a 30-person company. Why should we care what large companies are doing?

Because you are not operating in a vacuum and your employees will care. If you work in an industry where other employers are publishing pay ranges in job postings (and they increasingly are) your employees will start using that information as a reference point. They will see what a comparable role pays at a 200-person company and they will ask themselves whether what they earn is reasonable. Some of them will ask you directly.

This is already happening because salary bands in job ads is becoming the norm. It means that candidates arriving for interviews are better prepared. They’ve seen the ranges on job boards and they know what the market pays. The information asymmetry that historically favored employers in salary conversations has largely collapsed.

There’s another reason too, that is more forward looking. As large companies get better at pay transparency (clearer job architectures, documented salary bands, career progression frameworks) employees will expect that as basic hygiene. A 30-person company that can’t explain its pay structure, or that operates on the basis that pay is a private matter between owner and employee, will find it increasingly hard to hire people who’ve worked somewhere with more mature practices. They will simply not come and work for a company where career progression is opaque or a founder decision.

We’ve never done any of this – where do we start?

Three things, in this order. First, start with the data audit: get everything into one place and look at it honestly. Second, build a simple pay framework: you don’t need a 20-band global grading structure, but you do need something that explains how you think about pay and what drives differences between roles and individuals. Third, update your hiring process so you’re ready to include salary information from the moment the national transposition takes effect.

None of this requires a consultant or a dedicated HR team. It requires a few hours of hard work and the willingness to address what you find (which might take longer). You could even get a copy of my book that shows you the steps in order.

And I’m going to leave you with some straightforward advice: in a small company, all pay decisions are made by the owner or founder. And that might be the hardest part of it all, because it’s their money. But even then, it’s far less disruptive to prepare now than to wait until the deadline. You’ll be prepared to respond when an employee walks in and asks why their pay is the way it is.