Most Irish small and medium-sized employers are not prepared for the EU Pay Transparency Directive, according to HRLocker, which said its findings point to widespread compliance risk across the business sector.
The company surveyed more than 160 SME HR and business leaders. Only 4% said they were fully prepared for the rules. Ireland has about 400,000 SMEs, which make up 99.8% of all businesses and employ roughly two-thirds of the workforce.
The gap appears to start with understanding of the directive itself. Just 14% of respondents said they had a strong grasp of the new requirements, leaving most either unclear about or lacking confidence in what the rules will demand.
That weak understanding seems to be feeding into low organisational readiness. Almost half of those surveyed said they were either unprepared or unsure of their level of preparation, while 65% expected the directive to increase HR and people-related costs.
Evidence gap
A central challenge for employers is the need to justify pay decisions with objective, documented criteria. HRLocker's figures suggest many smaller businesses do not yet have the systems needed to keep records showing how performance and pay decisions were made.
Only 8% of respondents said they had fully automated performance review processes. By contrast, 35% still relied on manual systems, 38% used partly digital arrangements and 19% had no formal process at all.
Those figures matter because the directive is intended to increase transparency around how pay is set and make it easier for workers to challenge unfair treatment. Employers may need to produce historical records rather than create them after a dispute arises.
That is where many companies could face immediate difficulty. If records of performance assessments, pay criteria and decision-making are incomplete or inconsistent, employers may struggle to defend their decisions once the law takes effect.
Main concerns
Legal and regulatory compliance emerged as the main concern among respondents. Seven in 10 said it was their biggest challenge in implementing the directive, ahead of staff retention, administrative workload and recruitment.
The findings add to broader concerns raised in other research. Mercer found that just 6% of Irish employers felt ready for the directive, placing Ireland among the lowest-ranked countries in Europe on that measure.
For smaller employers, the problem is likely to be more acute because many have fewer dedicated HR resources and less formalised people management processes. That leaves a large share of Irish businesses exposed if the rules arrive before internal systems are updated.
HRLocker also highlighted weaknesses in everyday performance management. Among respondents, 55% cited slow review cycles, 43% pointed to poor goal alignment and 42% said there was a lack of ongoing feedback. Each of these issues can weaken a company's ability to show that pay decisions were based on clear and consistent standards.
The issue is not only whether businesses understand the law, but whether they can produce evidence. The directive's focus on transparency shifts attention from informal management practices to records, process and consistency.
That is significant in Ireland because SMEs dominate the business population. If the survey reflects the wider market, hundreds of thousands of smaller employers may still lack either the knowledge or the systems needed to respond properly.
HRLocker argued that the risk cannot be addressed retrospectively because employers will need to account for previous pay decisions. A delay in Ireland's formal transposition of the directive would not necessarily remove employees' ability to pursue claims tied to rights under the measure.
Laura Bambrick, social policy officer at the Irish Congress of Trade Unions, was cited by HRLocker as warning that workers with a valid claim under the directive may ultimately be entitled to seek compensation backdated to 7 June 2026.
Crystel Robbins Rynne, chief executive of HRLocker, said the findings should serve as a wake-up call for employers: "The timeline may be uncertain, but the direction of travel is not. Employers already know enough to act. Once the Directive is implemented, it will be too late to build the evidence and processes needed to defend pay decisions."
She said employers should prioritise three practical steps before the rules are enacted. "Organisations should be taking three practical steps now: document performance consistently, define objective criteria for pay, and ensure every pay decision is traceable to evidence. If you can't show your workings, you won't be compliant. Pay transparency is fundamentally about governance and data. Businesses that invest now will reduce risk, control costs, and protect trust. Those who wait will face a compliance scramble," said Rynne.