EU Pay Transparency Directive: What Financial Services Employers and Candidates Need to Know

The EU Pay Transparency Directive has now entered into force across Europe, marking what is set to be a significant shift in how financial services firms approach compensation, hiring, and internal pay governance. For employers operating across EU markets, the new landmark legislation introduces greater obligations around salary visibility, pay equity, and the information shared with candidates and employees.

At its core, the Directive is intended to support equal pay for equal work, or work of equal value. In practice, this means firms will need stronger compensation frameworks, clearer salary bands, and more consistent hiring processes.

For financial services firms, where reward structures can include base salary, bonuses, commission, allowances, and wider benefits, the Directive creates a clear need for structured, data-led decision-making.

What hiring managers need to consider

Under the Directive, employers are expected to provide candidates with information about the initial salary level or pay range for a role, either in the job advert or before interview. They are also be restricted from asking candidates about current or previous pay.

This represents a significant change for firms that have historically approached compensation discussions later in the hiring process. Salary transparency must be built into workforce planning from the outset, not treated as a final-stage negotiation point.

Hiring managers may need to review:

• How salaries are defined before roles go to market
• Whether internal pay bands align with external offers
• How compensation will be presented to candidates
• How pay decisions are documented and justified
• Whether comparable roles are being paid consistently across teams, locations, and business lines
• Whether compensation data is consistent across EU offices, particularly for firms operating across multiple markets and jurisdictions
• Why compensation history questions are no longer appropriate:

One of the most significant changes that the Directive enforces is the restriction on asking candidates about pay history. This applies to employers, and in practice should extend to anyone acting on their behalf, including external search partners and talent providers.

Rather than asking what a candidate currently earns, hiring teams should focus on the salary range for the role, the candidate’s expectations, and the objective value of their skills and experience.

This shift places greater importance on accurate market benchmarking. Employers need reliable compensation data to shape offers that are competitive, fair, and defensible.

Joseff Richards, Head of Selby Jennings Amsterdam, commented:

From an employee standpoint, the Directive provides the right to request information on their individual pay level and the average pay levels for colleagues performing the same work or work of equal value. This has potential to open up more internal conversations around pay fairness, progression, and consistency, particularly in firms where salary bands have not historically been visible.

For employers, the risk is not simply regulatory. If employees identify unexplained pay differences, firms may face increased internal challenge, retention risk, and pressure to justify historic compensation decisions. HR leaders and hiring managers should prepare for these conversations with clear pay criteria, documented role levels, and a consistent explanation of how salary, bonus, seniority, performance, and market conditions are assessed.

What this means for candidates

For candidates navigating the financial sciences and services market, the Directive will create greater clarity earlier in the hiring process. Professionals should have access to salary information before investing significant time in interviews, helping them assess whether an opportunity aligns with their expectations and career objectives.

Candidates can also no longer be asked to disclose current or previous earnings, potentially reducing the risk of historic pay gaps being carried from one role to the next.

The Directive will be particularly valuable for professionals moving between firms, asset classes, or geographies, where compensation structures can differ considerably. Greater transparency will support more informed decision-making around total reward, including bonus potential, benefits, flexibility, relocation support, and long-term incentives.

Joseff notes:

Preparing for a more transparent hiring market

The Directive should not be viewed as a compliance exercise alone. It is likely to influence hiring strategy, internal mobility, retention, employee relations, and employer reputation.

Employers with 100 or more employees will also face additional gender pay gap reporting obligations, with reporting timelines phased by company size. Employers with at least 100 employees must publish information on the pay gap between female and male workers, and a joint pay assessment may be required where reporting identifies an unjustified gender pay gap of at least 5%.

Firms that act early will be better placed to align compensation strategy with hiring demand, market conditions, and internal pay structures. This will require clear data, structured decision-making, and close alignment between HR, hiring managers, leadership teams, and external talent partners.

Cross-border employers should pay close attention to how the Directive applies across European operations. UK-headquartered firms with EU offices will need to comply with local rules in those jurisdictions, while EU-headquartered firms with UK operations may need to manage different standards across their hiring processes. For firms operating across London, Paris, Amsterdam, Frankfurt, and other financial centres, the challenge will be creating compensation policies that are locally compliant while still supporting internal equity and international mobility.

Selby Jennings supports financial sciences and services firms with salary guidance, compensation benchmarking, hiring process insight, and access to business-critical talent across permanent, contract, and multi-hire roles. As pay transparency becomes a central part of hiring strategy, informed compensation planning will be a key factor in attracting and retaining high-performing professionals.