1. Background
The EU Pay Transparency Directive (Directive (EU) 2023/970) introduces a new framework aimed at strengthening the principle of equal pay between women and men for equal work or work of equal value.
The Directive seeks to improve pay transparency and enhance the enforcement of equal pay rights through measures relating to recruitment practices, access to pay information, gender pay gap reporting and equal pay assessments.
Although EU Member States were required to transpose the Directive into national legislation by 7 June 2026, the transposition process in Cyprus has not yet been completed and the relevant draft bill has not yet been enacted into Law.
Nevertheless, organisations should begin evaluating the potential impact of the forthcoming requirements on their remuneration practices, governance structures and reporting capabilities.
2. Key Requirements
The Directive introduces, amongst others, the following measures:
Pay transparency during recruitment
Employers will be required to provide job applicants with information regarding the initial pay level or salary range applicable to a position before employment begins.
In addition, employers will generally be prohibited from requesting information regarding an applicant's current or previous remuneration.
Employees' right to pay information
Employees will have the right to request information regarding:
- Their individual pay level; and
- Average pay levels, broken down by gender, for workers performing the same work or work of equal value.
Gender pay gap reporting
The Directive introduces gender pay gap reporting obligations for qualifying employers.
Reporting requirements include information relating to various gender pay indicators, including pay differences between female and male workers and the distribution of employees across pay levels.
Equal pay assessments
Where reporting identifies pay gaps that cannot be objectively justified, employers may be required to conduct further assessments and implement corrective measures.
Enhanced eforcement
The Directive strengthens the enforcement framework through increased transparency, improved access to information and enhanced employee rights.
3. What should organisations be considering?
Organisations may wish to assess whether their existing reward frameworks can meet the anticipated requirements.
Consideration should be given to the following areas:
An effective underpinning structure
- A robust job architecture and grading structure underpinned by analytical gender-neutral methodology.
- Pay structures supported by reliable market and internal pay data.
A strong governance process
- A process to manage any additions (new jobs) or changes to the existing structure.
- Appropriate sign-off levels.
- Training / upskilling of HR and line managers.
Equal pay analysis
- Equal pay analysis.
- Pay transparency readiness assessment for each country.
- Detailed analysis of identified pay gaps and discrepancies.
Good Communication
- Develop a communication plan to spread the world.
- Share the compensation strategy with both existing and prospective employees.
Transparency regarding pay progression and remuneration frameworks.
Effective Use of Technology
- Utilise data and analytics to stay on top of pay position.
- Invest in technology that enables real-time data modelling.
- Support reporting obligations.
How can KPMG in Cyprus help?
We can assist organisations in assessing their readiness for the implementation of the Directive and identifying areas requiring enhancement.
Our services include support in relation to:
A. Effective underpinning structures and strong governance processes
KPMG in Cyprus suggests starting with the pay transparency workshop to ensure alignment.
Followed by legal advice and a review of the following areas to identify gaps:
- Job architecture and grading structure (including mapping of employees, identification of core roles and roles descriptions.
- Pay structures and objective criteria for justification of pay differences.
- Robust policy and guidelines of discretionary reward practices, if any (such as discretionary bonus).
B. Equal pay analysis
- Help define ‘’categories of workers’’ across any organization.
- Conduct a full equal pay analysis using our proprietary technology.
- Recommend an approach to address any gaps found and what is defensible.
C. Good communication
- Clear articulation of the total reward package.
- Communication and education of leaders, managers, and employees on managing pay.
- Making information about pay, pay levels, and pay progression criteria accessible to employees.
- Clear articulation of the governance process.
D. Effective use of technology
- Use of technology to manage pay decisions.
- KPMG in Cyprus can conduct a full equal pay and benefits analysis using proprietary technology.
Important Note
Employers should consider the potential impact of the forthcoming requirements on their remuneration policies, pay-setting processes, and internal procedures.
