With the upcoming EU Pay Transparency Directive and growing expectations around equitable rewards, companies are preparing for compliance and are also rethinking how transparency fits into their broader culture of fairness and belonging.

At the heart of this transformation is a simple but powerful shift recognizing that because pay is personal, it requires greater understanding and empathy to use transparency as a way to reinforce fairness, trust, and employee connection. When candidates or employees talk about compensation, they are evaluating salaries and benefits but also reflect on their worth, their future, and whether they feel valued. This is why pay transparency isn’t just a policy or a spreadsheet update. It’s a conversation. And like any important conversation, it’s influenced by emotion, perception, and how that information is delivered.

Understanding the EU Pay Transparency Directive

The EU Pay Transparency Directive, adopted in June 2023, aims to enforce equal pay for equal work or work of equal value between men and women through enhanced pay transparency and enforcement mechanisms. EU Member States are required to implement legislation giving effect to it by 7 June 2026, the date on which the general obligations in relation to pay transparency and equal pay will become applicable.

A few examples of the obligations under the Directive include:

• Salary disclosures during recruitment: Employers must provide job candidates with information about the initial pay level or its range for the position being offered, either in the job vacancy notice or before the interview.
• Right to pay information: Employees will have the right to request information on their pay level and the average pay levels, broken down by sex, for categories of employees doing the same work or work of equal value.
• Gender pay gap reporting: Companies with more than 250 employees will be required to report annually on their gender pay gap. Companies with 150–249 employees will report every three years.

These measures are designed to foster transparency, accountability, and fairness in the workplace, aligning with the broader goal of closing the gender pay gap across the EU (Council of the European Union, 2025).

Why talking about pay feels uncomfortable

Having effective pay conversations is important so that the employee or a job applicant can leave the discussion with a positive feeling of being informed, motivated and appreciated. This not only means to focus on what information should be communicated, but also how the information is delivered. Focusing on the delivery of information in a way that is both clear and direct and compassionate and respectful will be more effective and appreciated by the majority of employees. However, discussing pay openly can be challenging for both employees and employers. 

This discomfort often stems from a still very unfamiliar level of transparency and established norms around secrecy called a “salary taboo” (Cullen & Perez-Truglia, 2018). In many organizations, compensation practices are not clearly communicated, leaving employees unsure about what’s appropriate to ask or expect. But even if they are transparent, it can be a sensitive topic to discuss. This ambiguity can make salary discussions feel risky or awkward. 

Several psychological and cultural factors can contribute to this discomfort. For example, emotional associations can have a big impact. As salary is often tied to one’s sense of self-worth and value within an organization, conversations about compensation can trigger feelings of inadequacy or fear of judgment (Edwards, 2008). Also power dynamics play a role as employees may fear negative repercussions or being perceived as ungrateful when initiating pay discussions, especially in hierarchical workplace structures. Furthermore, discomfort can be rooted in cultural norms and upbringings. Many individuals grow up in environments where discussing money is considered taboo or inappropriate, leading to discomfort in salary discussions.

Understanding these factors is important for organizations aiming to foster a culture of openness and trust around compensation.

Making pay transparency work with people in mind

The good news? Transparency doesn’t have to mean awkward feelings and discomfort. It can be designed in a way that feels natural, human, and supportive, especially when informed by behavioral science.

For many organizations, this next chapter of pay transparency focuses on the people leading the conversations: recruitment, performance management, and career development. Instead of just giving them data to share, companies can equip them with behavioral insights so they understand how to talk about pay, not just what to say, and confidently and effectively engage in pay-related conversations with candidates from a wide range of backgrounds and expectations.

That includes recognizing common emotional responses (like doubt, discomfort, or hesitation), adapting communication styles to different personality types, and preparing for tough questions with empathy and confidence. It’s about helping people feel ready, not reactive.

Behavioral science frameworks for pay transparency

Integrating behavioral science into pay transparency efforts enables organizations to design conversations that are compliant but also empathetic and effective. There are 100s of principles that could be used and many ways to implement them. In the following there are a few behavioral principles that can be applied to effectively support pay transparency communication:

1. Framing Effect

The theory states that people’s decisions or attributes change depending on how options are framed (Tversky & Kahneman, 1981).  For example, framing salary ranges as growth opportunities rather than rigid limits helps candidates interpret them as fair and flexible, reducing defensiveness and entitlement. It can also be used to explain salary ranges based on internal equity and role scope rather than on personal history, aiming to reframe expectations away from entitlement and towards fairness and growth.

Example actionable: Frame salary as growth potential to reduce entitlement.

2. Cognitive Ease

Cognitive ease bias plays a big role in interviews. The concept states that people prefer to understand and process information without having to deliberately think about it (Kahneman, 2011). People are more likely to trust and recall information that is presented simply and clearly. In interviews that can be applied to use clear, structured interview questions to make it easier for candidates to understand and perform well.

Example actionable: Use clear, structured language to build trust.

3. Anchoring Bias

The anchoring bias describes that individuals rely heavily on the first information available even if more information becomes available afterward (Tversky & Kahneman, 1974).The first number or idea presented becomes a reference point. Providing salary ranges early in the process helps manage expectations and reduces the risk of inflated assumptions based on past compensation or market rumors.

Example actionable: Share salary ranges early to manage expectations.

4. Mental Model Updating

This concept goes hand in hand with the anchoring bias explained before. It refers to the process of modifying one’s internal representation of a system or situation based on new information or experiences (Kenneth Craik). Candidates often arrive with assumptions based on external titles, past jobs, or regional norms. Helping them reframe their understanding, from external benchmarks to internal frameworks, can prevent disappointment and align expectations.

Example actionable: Reframe with internal benchmarks to align perceptions.

5. Equity Theory

Equity theory is a psychological framework that describes that employees need to feel fairly treated in order to be motivated (J. Stacey Adams, 1963). People evaluate fairness by comparing themselves to others. Reinforcing that all candidates are assessed using the same structured processes (e.g., job grading systems, competency evaluations) helps align expectations and reduce perceived bias.

Example actionable: Standardize candidate assessments to ensure fairness.

Conclusion

The EU Pay Transparency Directive represents an important step towards equal pay and more transparency.  Organizations will need to adapt and prepare to not miss its transformative potential. Besides some policy changes that can be done, organizations also need to focus on the human side of things to reinforce fairness, trust, and employee connection.

A helpful approach in this process is to use behavioral strategies to transform pay discussions from transactional to relational and therefore fostering transparency that feels fair, understandable, and human-centered. Organizations that equip hiring/recruiting teams with these insights are better positioned to implement the EU Pay Transparency Directive not just as a legal requirement, but as a culture-building opportunity.

By combining regulatory alignment with insights from behavioral science and compensation research, companies can create systems of communication that enhance transparency, empathy and employee engagement. Pay transparency is best approached in a human-centric way that acknowledges the emotions and perceptions that shape how compensation is experienced.

We hope you found this article on equity and trust through pay transparency useful and that you learned more about why behavioral science is so powerful for managing organizational change. If you’re looking for a behavioral business partner to drive organizational change, we’re happy to schedule a call. Want to learn more about the application of brain and behavioral insights in management, HR, growth and innovation? Read our blog or view our YouTube channel.

About Neurofied

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Since 2018, we have trained thousands of professionals and worked with 100+ management, HR, growth, and innovation teams of organizations such as Johnson & Johnson, KPMG, Deloitte, Novo Nordisk, ABN AMRO, and the Dutch government. We also frequently speak at universities and conferences. For questions or thoughts, please contact us here.

References

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