Short answer: a small business probably doesn't need new software, but it does need clean pay data. Several obligations in the EU Pay Transparency Directive apply to every employer, whatever its size. For most SMEs the hard part won't be producing a report. It will be giving an employee an accurate answer to a pay question within two months. That only works if pay sits in one place and follows one logic, not in the payroll provider's system, three spreadsheets and the managing director's head.
What happened?
Member States had to transpose Directive (EU) 2023/970 by 7 June 2026. According to Lockton's tracker from late September, only five of the 27 had done so fully: Greece, Italy, Lithuania, Malta and Slovakia. Estonia and Poland had partial measures; the rest had not transposed, and several had not even published a draft. Hungary is a typical example: a Hungarian business daily, Piac & Profit, reported on 20 October that a bill was on the government's autumn legislative programme, with adoption planned for October, but no law had been promulgated.
So in most countries the final national rules, including penalties, are not yet known. The directive itself is, and according to the European Commission, Member States may go further in favour of workers, not less far.
The Commission's FAQ lists what every employer must do, regardless of size:
- build pay structures based on objective, gender-neutral criteria (skills, effort, responsibility and working conditions);
- give job applicants the starting pay or pay range, in the job ad or at the latest before the interview;
- stop asking applicants about their current or previous pay;
- answer when an employee asks about their own pay level and the average pay, broken down by sex, for workers doing the same work or work of equal value; the directive gives two months for this;
- inform employees every year that they have this right;
- make the criteria for pay and pay levels easily accessible. Member States may exempt employers with fewer than 50 workers from the part on pay progression.
Gender pay gap reporting only applies from 100 workers: every year from June 2027 for 250 or more, every three years from June 2027 for 150 to 249, and every three years from June 2031 for 100 to 149. The Commission also stresses that "pay" means not just base salary but every benefit in cash or in kind, including variable components.
What does this mean for a small business?
That last point is the important one. When an employee asks for the average pay of comparable roles by sex, the answer has to include bonuses, benefits, the company car and anything else that counts as pay.
A typical situation: the data is scattered. Base pay lives with the payroll provider, bonuses in a manager's spreadsheet, benefits in another, the company car on a third list. There are no job categories, only job titles that everyone types a little differently. You can build an answer from that in two months. But it is manual, error-prone, and by the third request someone starts to feel it has become a part-time job.
When is a spreadsheet enough? When the company is small, benefits are simple, and there is a single sheet where every employee has a job category, base pay and every benefit, with one owner. That is not something to be embarrassed about. It is order.
When is it not? When the data lives in several places, many people edit it, and changes leave no trace. In a pay dispute, what matters is whether you can show how you decided. Under the directive, if an employer has not met its transparency obligations, the burden shifts to the employer to prove there was no discrimination. A spreadsheet anyone can overwrite is a weak argument. At that point it is worth moving HR data into a system where access rights, a change log and categories are fixed. On an earlier project, our team moved a fleet management company's HR processes from spreadsheets to a ZEBEQ-based system. If you suspect you are in the same place, our article on the signs you've outgrown Excel lists them.
A quick self-test
Pick one job category and try to state the average total pay of the women and of the men in it, including variable pay and benefits. Then ask yourself three questions:
| Question | Good sign | Warning sign |
|---|---|---|
| How long did it take? | An hour or less | More than a day |
| How many sources did you open? | One | Three or more |
| Would someone else get the same number? | Yes, the logic is written down | Probably not |
If you land on the right-hand column twice, the problem is not the directive. It is your data.
What should you do now?
- Remove the "what do you earn now?" question from your hiring process, application form and any recruiter questionnaire. You can still ask about expected pay.
- Group roles into categories based on skills, responsibility, effort and working conditions. This becomes the basis for every later answer.
- Collect every element of pay in one place for each employee: base pay, bonus, benefits, in-kind items. Give it one owner, and make sure you can see who changed what and when.
- Run the self-test above. If you can't produce a reliable number in an afternoon, you know where to start.
- Track your national law. Thresholds and deadlines in national rules may be stricter than in the directive, and some countries may extend reporting to smaller employers.
If cleaning up pay data is part of a bigger question about your business systems, take a look at our ERP service.
Sources
- European Commission – Frequently asked questions on the Pay Transparency Directive (2023/970)
- Lockton – EU Pay Transparency Directive: Implementation Status
- Piac & Profit – Többé nem lehet csak úgy titkolni a fizetéseket: a kis cégeknek is lépniük kell (Pay can no longer simply be kept secret: small firms must act too)
