A transparent pay structure is a documented system for organising jobs, pay levels and progression using understandable and defensible criteria. Under Directive (EU) 2023/970, employers need pay structures that enable equal pay for equal work or work of equal value, and workers must be able to access the objective, gender-neutral criteria used to determine pay, pay levels and pay progression. Salary bands, pay grades and job levels can help employers meet those objectives, but the Directive does not require one specific compensation architecture. The stronger approach is to connect job evaluation, salary ranges, placement rules, progression criteria, promotion rules and documented exceptions into one coherent system.
Jurisdiction: European Union
A Pay Structure Turns Compensation Decisions Into a System
A pay structure is the framework an employer uses to organise jobs and compensation. It can include job families, job levels, pay grades, salary bands, geographic differentials, progression rules and governance for exceptions. The purpose is not simply to put every employee into a spreadsheet. A useful structure explains why one role sits at a particular level, what pay opportunity is associated with that level and which factors can move an employee through the range. When those rules are documented, the employer is less dependent on one-off negotiation or manager discretion. This makes pay decisions easier to review for consistency and easier to explain to workers.
The Directive Requires Defensible Pay Structures, Not One Prescribed Model
Article 4 of Directive (EU) 2023/970 requires Member States to ensure that employers have pay structures that support equal pay for equal work or work of equal value. It also requires assessment of work value using objective and gender-neutral criteria, including skills, effort, responsibility and working conditions, with other job-relevant factors used where appropriate. The Directive does not say that every employer must use the same number of grades or adopt salary bands. An employer can therefore choose a structure suited to its workforce, but the resulting system must still allow meaningful comparison of job value and must not embed direct or indirect sex discrimination.
Salary Bands Can Make Pay Boundaries More Understandable
A salary band typically sets a minimum and maximum pay opportunity for a job, grade or level, often with a midpoint used as a reference point. Bands can create useful boundaries for hiring, progression and promotion. They can also expose inconsistencies that would remain hidden if every salary were negotiated individually. A band by itself, however, is not proof of fair pay. Employers still need a defensible reason for the band, consistent rules for placing employees within it and a process for reviewing differences. If two comparable workers are placed at very different points in a range, the existence of the range does not remove the need to explain the difference.
Pay Progression Criteria Need to Be Objective and Accessible
Article 6 requires employers to make easily accessible to workers the criteria used to determine pay, pay levels and pay progression, and those criteria must be objective and gender neutral. This places emphasis on the rules behind movement through a pay structure. Experience, acquired skills, sustained performance, increased responsibility or another job-relevant factor may be used where the design is lawful and consistently applied. Vague standards such as being a good fit or being valued by management are much harder to audit. Employers should define what each progression factor means, how it is evidenced and who approves a movement in pay.
Job Architecture and Pay Architecture Should Work Together
Pay transparency becomes difficult when job titles, levels and responsibilities do not align. A compensation team may create clean salary ranges, but those ranges will be hard to defend if similar jobs have been placed into different levels without objective reasoning. Job architecture provides the role framework, while pay architecture provides the compensation framework. The two should be connected through gender-neutral job evaluation or classification. Employers should be able to trace a role from its responsibilities and required skills to its job level, from that level to the relevant pay range, and from the range to the criteria used for individual placement and progression.
Transparency Does Not Mean Every Worker Must Receive the Same Pay
A structured system can allow legitimate differences in pay while still supporting equal-pay principles. Workers performing the same work or work of equal value may have different pay where the difference is explained by objective, gender-neutral factors that are relevant and consistently applied. Depending on the role and national law, examples may include experience that is genuinely relevant to the work, scarce skills, location, additional responsibility or measurable performance. The key question is not whether every salary is identical. It is whether the employer can explain the difference through a rule that is lawful, job-related, consistently applied and supported by evidence rather than through unexplained discretion.
A Transparent Structure Needs Governance for Exceptions
Compensation systems often become less consistent through exceptions rather than through their formal design. A manager may request an above-range hire, a retention increase or a special promotion adjustment. Employers do not necessarily need to prohibit all exceptions, but they should govern them. A strong process records the reason, evidence, approver, duration where relevant and relationship to comparable workers. Repeated exceptions can reveal that a range is outdated or that a particular group is receiving more favourable treatment. Periodic reviews of compa-ratios, range penetration, promotion increases and out-of-range salaries can therefore help the employer test whether the structure is functioning as designed.
Frequently Asked Questions
Does the EU Pay Transparency Directive require salary bands?
No specific salary-band model is prescribed. The Directive requires pay structures that support equal pay and objective, gender-neutral pay-setting and progression criteria. Salary bands can be one practical way to organise those requirements.
Can experience affect where an employee sits in a salary band?
It can where experience is genuinely relevant to the role and the employer uses the factor objectively, consistently and without direct or indirect sex discrimination.
Is a transparent pay structure the same as publishing every employee's salary?
No. A transparent structure concerns understandable pay-setting criteria, ranges and progression rules. Separate Directive provisions govern individual and average pay information rights.
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Official Sources
Requirements and practices differ by jurisdiction and organisation. Check current local law, official guidance and professional advice for a specific situation.