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A new era began in early 2026 in ESG risk management for the European banking sector. The updated guidelines of the European Banking Authority (EBA) make it clear: ESG is no longer a supplementary consideration, but a fundamental element of banking operations. Institutions that delay may face not only compliance risks, but also strategic and financial risks.
The new regulation is mandatory for significant institutions from 11 January 2026, while smaller, non-complex institutions (Non-Complex Institutions – SNCIs) must comply with the requirements by early 2027 at the latest.
- ESG has become a core requirement of banking operations: the European Banking Authority (EBA) guidelines mandate full integration from 2026.
- Compliance is not just a regulatory issue: delays also pose strategic and financial risks for institutions.
- ESG risks must be fully embedded into strategy, risk management, and decision-making processes.
- Banks that act early can build a competitive advantage, while laggards may face lasting disadvantages.
What does this mean in practice?
According to the expectations of the EBA and the European Central Bank (ECB), ESG risks must be fully integrated into banks’ operations:
- ESG aspects must be reflected in strategy and business models;
- ICAAP/ILAAP processes, risk appetite and internal controls must be reviewed;
- forward-looking, short- and long-term scenario analyses become mandatory.
The regulatory approach is clear: the principle of proportionality does not mean exemption. Every institution is expected to maintain effective control over ESG risks.
The MNB recommendation distinguishes between required and best practice levels of implementation. For the required elements (which must be implemented), consequences defined in the relevant legal provisions apply if implementation is missing or inadequate.
The new role of scenario analysis: from compliance to strategic tool
The assessment of ESG risks is no longer limited to theoretical models. Banks must quantify impacts:
- in short-term stress tests (capital and liquidity);
- in climate and nature-related risk analyses with a minimum 10-year horizon;
- in dynamic balance sheet models that take into account transition pathways and changes in client behaviour.
ESG risks affect all traditional risk categories – from credit risk to operational risks – therefore scenario analysis has become a key tool for long-term resilience.
Double materiality: risk management on new foundations
Supervisory expectations require banks to go beyond climate risks and integrate the full spectrum of ESG into their operations.
A central element of this is the principle of double materiality, which:
- requires regular (at least annual) materiality assessments;
- demands deeper understanding of client and sector exposures;
- presupposes data-driven risk assessment and reporting.
This approach provides a more accurate picture of financial exposures and strategic vulnerabilities, while also requiring new capabilities and operating models.
The biggest challenge: data and processes
Experience shows that many institutions are not yet fully prepared. However, from a supervisory perspective, this is no longer an acceptable justification.
Banks are expected, among others, to:
- improve data quality and eliminate data gaps;
- define clear responsibilities for ESG risk management;
- integrate ESG into lending processes, onboarding and monitoring;
- establish transparent reporting structures and KPI/KRI systems.
Supervisors will actively assess whether institutions are truly capable of managing these risks.
There is a tight deadline of approximately four months between the publication and application of the final MNB recommendation (except for the transition plan, which has a deadline of 1 January 2027). The new recommendation has a strong risk management focus and is geared towards preparing transition plans. Institutions whose parent banks already have such plans will find it easier to meet the expected deadlines.
Why act now?
The message is clear: institutions that invest in a robust ESG framework in time:
- reduce supervisory risks;
- strengthen their strategic position;
- and build a competitive advantage in a rapidly changing market.
Delay, on the other hand, may result not only in compliance issues, but also in business disadvantages in an environment where regulators, clients and investors are raising their expectations.
The Government Decree No. 87/2026 (IV. 23.), published on the evening of 23 April, once again amends the application of the advertising tax and, with reference to the state of danger due to the Russian–Ukrainian war, would maintain the current 0% rate of the advertising tax even after 1 July 2026.
The purpose of the Decree is to ensure that businesses do not face additional burdens resulting from the reintroduction of the advertising tax, in particular due to the prolonged economic effects of the war. However, it is important to note that the application of the favourable tax rate is expressly linked to the existence of the state of danger, meaning that the 0% advertising tax rate will remain in force only as long as the state of danger is in effect.
Based on Government Decree No. 424/2022 (X. 28.) declaring the state of danger, the current state of danger will cease on 14 May 2026. This means that, unless a further extension or legislative amendment takes place, the advertising tax would still return from 1 July 2026, which could result in a significant additional burden for the affected taxpayers.
As a number of currently effective legal measures (e.g. food price caps, regulated fuel prices) are linked to the state of danger, it is likely that it will be extended; however, the exact details are not yet known. It is conceivable that a concrete decision on the extension (both its fact and duration) will only be taken in early May, following the establishment of the new Parliament. In the coming period, it is therefore advisable to closely monitor any potential extension of the state of danger or amendments to the advertising tax legislation, as these will determine whether the advertising tax will in fact be reintroduced in mid-2026.
Should the above raise your interest, the experts of Grant Thornton are at your and your company’s disposal.
***
This newsletter has been prepared based on information available on the date of publication and is intended for general information purposes only; it does not constitute personalised tax advice in any respect and does not replace such advice.
Advertising Tax returns in 2026
After a seven-year suspension, the advertising tax will re-enter into force in Hungary from 1 July 2026. According to our latest analysis, the return of the regulation imposes critical administrative obligations on both advertisers and publishers. As the tax is reintroduced during the tax year, companies must already prepare their internal processes and contractual frameworks in the spring in order to avoid significant default penalties and the risk of double taxation.
- The advertising tax will re-enter into force from 1 July 2026, and due to its mid-year return, companies must prepare their processes already in the spring.
- The tax affects not only publishers but, in certain cases, also advertisers, especially where declaration management is insufficient.
- The key to compliance is the timely review of contracts, internal controls and administrative processes in order to minimise penalty risks.
- The reintroduction of the advertising tax is not merely a technical tax issue: it will also affect the operation of the media market, advertisers and advertising agencies.
Historical background of the advertising tax – disputes, legal proceedings, suspension
The suspension of the advertising tax began on 1 July 2019, after the European Commission classified certain elements of the regulation as unlawful state aid. The legal dispute ultimately confirmed the Hungarian position: in 2021, the Court of Justice of the European Union also ruled that the Hungarian advertising tax is in line with EU law. Nevertheless, the government extended the suspension year by year.
However, the autumn tax package of 2025 marked a turning point: the suspension was extended by only half a year, effectively signalling that from 1 July 2026 the advertising tax and all related administrative obligations will return.
Who is subject to the tax? Both publishers and advertisers are affected
Under the current regulation, the suspension expires on 30 June 2026, and from 1 July 2026 the advertising tax will again become applicable. The return therefore takes place mid-year, which always creates additional administrative burden for businesses, as internal processes must be established during the year.
The advertising tax defines two main categories of taxpayers:
Publishers of advertisements: media service providers, publishers of press products, operators of outdoor advertising media and Hungarian-language online platforms.
Advertisers: they become taxpayers if their monthly advertising expenditure exceeds HUF 2.5 million and they do not possess a declaration from the publisher confirming that the tax has been paid.
The absence of the declaration does not automatically result in a tax liability; the advertiser does not become a taxpayer if
- the publisher is included in the register published on the website of the Hungarian tax authority (NAV),
- or if the advertiser can prove that it has requested the declaration, has not received it within 10 working days, and has reported this fact to the NAV.
What qualifies as advertising tax-liable activity?
The advertising tax applies exclusively to advertising publication for consideration; own-purpose advertising is not subject to tax. The regulation covers a wide range of appearances, from television and radio advertisements through press products and outdoor surfaces to advertisements displayed on vehicles, real estate, printed materials and online platforms.
Tax base and rate of the advertising tax
For publishers, the tax base is the annual net revenue derived from advertising publication.
For publishers, the tax rate is uniformly 7.5%, while the first HUF 100 million of the tax base is tax-exempt. This exemption qualifies as de minimis aid, which must be recorded and taken into account by the company in accordance with the relevant EU rules. The HUF 100 million threshold may fully exempt a significant proportion of smaller media companies from taxation, while for larger players it results in a meaningful tax burden.
It is important that where the publisher operates through a related-party advertising sales agency, special rules must be applied when determining the tax base.
If advertisers cannot rely on any exemption (publisher declaration, publisher listed on NAV website, notification of missing declaration to the NAV), the tax liability arises when monthly advertising expenditure exceeds HUF 2.5 million. A 5% tax must be paid on the portion exceeding the HUF 2.5 million threshold. When determining the advertiser’s tax base, there is no annual proportionality, meaning that in the months following 1 July 2026 the full monthly expenditure must be considered. This rule may create additional burden particularly for companies carrying out high-volume, campaign-based advertising spending.
Publishers are required to declare and pay the advertising tax annually, by the last day of the fifth month following the tax year (for calendar-year taxpayers, this is 31 May). In addition, they must pay tax advances twice (for calendar-year taxpayers: 20 July and 20 October), and the obligation to top up advances remains in place by the 20th day of the last month of the tax year (for calendar-year taxpayers, December). The difference between advances paid and the annual tax must be settled together with the annual return.
Advertisers, by contrast, are subject to monthly filing obligations: the return must be submitted and the tax paid by the 20th day of the month following the reporting period (this practically coincides with the deadline for monthly VAT returns). This more frequent filing obligation may impose a significant administrative burden on companies handling a large number of advertising invoices or working with multiple publishers.
Changes in penalty rules – more lenient, but still strict
The penalty rules related to the advertising tax have undergone significant changes in recent years, partly following the judgment of the Court of Justice of the European Union in case C-482/18 (Google Ireland). The previous sanctions, which could reach up to HUF 1 billion, were considered disproportionate, particularly for foreign service providers, therefore the legislator introduced a gradual, multi-stage penalty system. The essence of the new regulation is that default penalties should only be applied as a last resort and must in all cases be preceded by a call from the tax authority.
Publishers not yet registered with the NAV must register within 30 days of commencing advertising publication activities using the appropriate form. If they fail to comply, the tax authority first issues a notice with a 15-day deadline. If the notice remains ineffective, the NAV may impose a default penalty of up to HUF 10 million, followed by repeated notices. Each further failure may result in an additional penalty of up to HUF 10 million. An important mitigation is that if the taxpayer complies upon notice, the most recent penalty must be waived and earlier penalties may be reduced.
In case of failure to provide the declaration, a similar logic applies, but with different penalty amounts. If the publisher fails to provide the advertising tax declaration to the advertiser, the NAV first calls for its completion and warns that a penalty of HUF 500,000 will be imposed in case of non-compliance. If the obligation is repeatedly not fulfilled for the same advertiser and not remedied within the deadline set by the NAV, the penalty increases to HUF 10 million, which doubles with each further missed deadline. Here too, fairness applies: if the taxpayer complies, the most recent penalty is waived and earlier penalties may be reduced.
If the filing obligation is not fulfilled, the consequence differs: the NAV does not impose a penalty initially but initiates a tax audit and determines the tax by estimation. This may be particularly disadvantageous, as the tax authority determines the tax base and payable tax based on available information, typically using a conservative approach.
Overall, the new penalty regime is more lenient and proportionate than the previous system, but it still poses a significant risk for those who do not pay sufficient attention to registration, declaration and filing obligations. With the return of the advertising tax, it is therefore particularly important to review declaration management processes, contractual documentation and the administration of advertising expenditures.
Practical steps in spring 2026
Due to the return of the advertising tax on 1 July 2026, companies should begin preparations already in the spring period, particularly because the tax enters into force mid-year, which always entails additional administrative burden and interpretational issues.
Review of contracts: companies should review advertising expenditures, contracts with advertising agencies and media partners, as well as internal processes for requesting and managing declarations. The advertiser’s tax liability arises only in the absence of a valid declaration from the publisher, therefore proper declaration management is critical.
Separation of complex services: particular attention should be paid to complex services that may include multiple elements (e.g. creative services, media buying, production, consulting). Companies must determine which parts qualify as advertising publication and which do not fall under the scope of the advertising tax. The separation must be properly documented, as the NAV may examine whether the tax base has been determined lawfully during an audit.
Establishment of internal controls: companies should review their administrative processes: who requests declarations, who verifies their existence, how advertising invoices are recorded, and what internal controls ensure that advertiser tax liability does not remain hidden. The return of the advertising tax may require the designation of responsibilities and the formalisation of processes.
The return of the advertising tax imposes a significant administrative burden on market participants, but timely preparation can minimise financial and legal risks. Should the above raise your interest, the prepared experts of Grant Thornton are at your and your company’s disposal.
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This newsletter has been prepared based on information available on the date of publication and is intended for general information purposes only; it does not constitute personalised tax advice in any respect and does not replace such advice.
What tasks remain for the 2025 tax year?
The first three months of 2026 have already flown by, and with this the period of closing the previous year from a tax perspective has arrived. This process is the first and perhaps most important step in publishing the annual report. In this newsletter, we review the most important tax obligations related to the year 2025 and the taxpayer tasks associated with them.
The goal of year-end closing remains unchanged: to ensure that the company’s financial and tax data are organized, reconciled, and in a condition suitable for preparing the financial statements.
Tax account
The first step of the year-end closing process is reviewing the tax account, as the records of the National Tax and Customs Administration (NAV) provide the starting point to which the accounting data must be aligned. During the beginning-of-year reconciliation, it is advisable to review payments, overpayments, and any outstanding amounts, and initiate settlement or transfer as needed. Ensuring an accurate tax account status allows later tax returns and the financial statements to be in harmony with the authority’s records.
Local business tax (HIPA)
Preparing the HIPA return is one of the defining tasks of every year-end closing. In 2026, the return must again be filed through the NAV using the form valid for the year in question.
Businesses must review whether any changes occurred during 2025—such as establishing a new site, expanding activities, or changes in headcount—that affect the allocation of the tax base. For companies operating in multiple municipalities, applying the allocation method correctly is particularly important, as it directly influences the amount of tax payable. Before submitting the return, it is also worth checking for any outstanding debts owed to local tax authorities.
Corporate income tax and small business tax (TAO and KIVA)
When preparing the corporate income tax return, businesses must review the economic events of 2025 and determine the tax base increasing and decreasing items. These include, among others, forming or using development reserves, accounting for depreciation, and examining available tax allowances.
For companies subject to KIVA, year-end closing requires determining the cash-flow-based tax base, assessing the impact of wage costs and dividend payments, and checking whether the eligibility criteria for KIVA remain met. This includes verifying that the company did not exceed the thresholds associated with KIVA exclusion (such as average statistical headcount, revenue limits, or thresholds calculated together with related companies). If the company no longer meets the conditions for choosing KIVA, the tasks related to the termination of tax status must be performed.
Transfer pricing
For related parties, preparing transfer pricing documentation and the related data reporting is now an integral part of the corporate income tax return, meaning that substantiating related-party transactions requires special attention.
At the end of 2025, the first step is identifying related parties and the relevant transactions, as these form the basis of transfer pricing obligations. Next, previously applied benchmarks must be reviewed to ensure that the prices and profitability ratios used in the transactions fall within the arm’s-length range. If discrepancies arise, it becomes necessary to assess whether year-end transfer pricing adjustments are required and, if needed, correct the result.
To meet documentation requirements, it must be evaluated whether the taxpayer is subject to Local File, Master File, or CbCR reporting obligations, taking into account statutory thresholds and the new regulations entering into force in 2026. It must also be ensured that the ATP data reporting in the corporate income tax return is fully aligned with the transfer pricing documentation, particularly regarding transaction values, methodological justification, and segmentation.
Finally, as part of the year-end closing, it is advisable to prepare for the new transfer pricing requirements applicable from 2026, particularly the more detailed content requirements, increased documentation thresholds, and stricter data reporting obligations.
Reviewing tax incentives and grants
During the closing of the 2025 tax year, it is advisable to review the tax incentives, grants, and development tax allowances used by the company, paying special attention to meeting eligibility criteria. Reviewing the documentation, records, and deadlines associated with the incentives is essential to avoid potential subsequent tax authority findings. Reviewing indicators, headcount requirements, and investment obligations related to grants is also an important part of the process. Properly documented and substantiated incentives can result in significant tax savings, making their careful review particularly important.
Tax planning and strategic decisions for the upcoming year
Year-end closing is not only an administrative task but also a strategic opportunity to lay the foundations for tax planning for the coming year. Companies should review planned investments, financing decisions, corporate structure changes, and their tax implications. Choosing among different tax regimes (e.g., corporate tax, small business tax), planning development reserves, or optimizing the use of incentives can all contribute to effectively shaping the company’s tax burden. Thoughtful tax planning helps ensure that businesses operate in a stable and predictable tax environment in the following year.
Invoicing compliance and NAV Online Invoice
Reviewing invoicing processes is an essential part of year-end closing in 2026 as well. The NAV Online Invoice system continuously monitors submitted data, so businesses must ensure that the invoicing software properly transmits data and that invoices include all mandatory elements.
At the start of the year, it is worth reviewing incorrect or incomplete data submissions and correcting them if necessary. It is also advisable to compare the revenue calculated from invoices reported to NAV for 2025 with the actual revenue recorded in the accounting, and identify the causes of any discrepancies. These discrepancies often stem from technical errors, missing data submissions, or incorrect invoicing practices, making timely identification crucial for compliance.
Global minimum tax (GloBE)
Under the Hungarian global minimum tax framework, no filing obligation arises for 2025; however, it is already advisable to begin estimating the potential tax amount. This is especially important because if minimum tax becomes payable for the 2025 tax year, it must be accounted for in the 2025 financial statements, regardless of the later timing of filing and prepayment obligations.
The first global minimum tax return for the 2024 tax year is due in summer 2026, so businesses should begin preparations in time. This includes reviewing previous preliminary calculations, finalizing the necessary computations, and checking that all relevant data are available for the filing. It is particularly important to review whether the necessary information is available internally or must be obtained from other group members or foreign subsidiaries. Proper preparation ensures that the corporate group can fulfill its filing obligations efficiently, without delays or subsequent corrections.
Summary
Closing the year 2025 is a comprehensive task affecting the company’s tax, accounting, and administrative processes alike. Accurate tax account reconciliation, preparing HIPA, TAO, or KIVA returns, fulfilling transfer pricing obligations, ensuring invoicing compliance, and carefully performing the accounting close all contribute to ensuring that the financial statements are reliable and compliant with regulations. This period also provides an opportunity for companies to review their processes and, if necessary, improve them for more efficient operations in the coming year.
If the above has raised your interest or if you need support in calculating annual taxes, preparing transfer pricing documentation, or ensuring your invoicing processes are in order, the prepared experts of Grant Thornton stand ready to assist you and your company.
***
This newsletter was prepared solely for general informational purposes based on information available on the day of publication and does not constitute personalized tax advice, nor does it replace such advice.
An important deadline is approaching: during the year-end closing, businesses must complete a number of accounting and administrative tasks in order to prepare accurate and compliant financial statements. The preparation of inventories, the completion of valuation processes, the verification of cash registers and the review of equity are all key steps. In addition, updating internal policies and ensuring compliance with new tax regulations also require special attention.
Preparation of year-end inventories and settlement of inventory differences
For closing the books at the end of the financial year, preparing the financial statements and supporting balance sheet items, an inventory must be prepared that contains the assets and liabilities existing on the balance sheet date in a detailed and verifiable manner, both in quantity and value.
If continuous quantity records are maintained, it is sufficient to verify the accuracy of the assets included in the inventory through physical stocktaking every three years. If such records are not maintained, stocktaking must be performed annually.
Any quantity differences identified during stocktaking (shortages or surpluses) must be accounted for as other expenses or other income. In addition, items to be scrapped must be reviewed and removed from the books in accordance with applicable regulations.
Performing balance sheet date valuations
Updating the valuation of assets and liabilities included in the balance sheet involves the following main steps:
- Recognition of impairment above planned depreciation: for intangible assets and tangible assets where the book value is permanently and significantly higher than the market value.
- Recognition of impairment: for investments representing ownership interests, long-term securities, inventories and financially unsettled receivables where the market value has permanently decreased.
- Possibility of revaluation: if the market value of assets significantly exceeds their book value, the entity may decide to apply revaluation.
- Updating foreign exchange rates: revaluation of foreign currency and foreign exchange assets and liabilities using the exchange rate on the balance sheet date.
Year-end closing of cash registers
The actual existence of the cash balance recorded in the cash register must be verified through stocktaking. The tax authority closely monitors the recording of cash movements, therefore special attention must be paid to the management of cash balances in order to avoid excessive cash holdings.
Year-end reconciliations and checks
- Reconciliation of the general ledger accounting with analytical records.
- Review of the tax account and reconciliation with accounting records.
- Timely settlement of tax advances and tax liabilities.
Provisioning
- Mandatory provisions must be recognised for statutory obligations (e.g. guarantees or litigation).
- Provisions may also be created for significant future costs that recur periodically.
- Provisions may be recognised to cover deferred foreign exchange losses.
Creation of restricted reserves
Restrictions from retained earnings must be made for development purposes or other purposes required by law.
Accruals and deferrals
Income and expenses must be allocated to the appropriate period, with particular attention to items affecting multiple financial years.
Going concern principle
When preparing the financial statements, the ability of the company to continue its operations must be assessed and any related risks must be documented.
Examination of equity
The necessary steps must be determined to ensure that equity remains above the statutory minimum level (e.g. capital contribution, capital restructuring or capital reduction).
- Updating policies and documentation
- Updating the accounting policy, inventory policy, valuation policy and other internal regulations.
- Preparation and updating of transfer pricing documentation.
- Verification of Country-by-Country (CbC) reporting obligations (above the EUR 750 million revenue threshold).
- Application of the global minimum tax: from 2024, multinational enterprise groups must ensure an effective corporate tax rate of at least 15%. Under Hungarian legislation, affected companies must calculate their effective tax rate and, if it is below 15%, additional tax liabilities may arise. It is advisable to seek tax advisory support to clarify administrative obligations and tax burdens.
It is advisable to start completing year-end tasks in time in order to make well-informed decisions about the future of the company.
The EU Pay Transparency Directive (2023/970) introduces new obligations for employers, particularly regarding the disclosure of pay gaps, salary information in job postings and employee information rights. Member States must transpose the directive by 7 June 2026. As a result, companies need to review their compensation systems, HR processes and internal policies.
This guide explains who is affected by pay transparency, what obligations companies face, and what concrete steps are required to ensure compliance.
What does pay transparency mean in practice?
- mandatory disclosure of salary ranges in job advertisements
- regular reporting on the gender pay gap
- employees’ right to request pay information
- implementation of objective and gender-neutral pay systems
What should employers know about pay transparency?
The objective of the Pay Transparency Directive is to strengthen the principle of “equal pay for equal work” and reduce gender pay gaps. Member States must transpose the Directive into national law by 7 June 2026.
For companies, pay transparency primarily introduces changes in the following areas:
- regular reporting obligations on the gender pay gap
- joint pay assessments with employee representatives in certain cases
- the development and communication of transparent salary bands
- the application of data-driven HR analytics
- more structured leadership communication around remuneration
Pay transparency therefore represents not a single HR process, but the coordinated functioning of several organisational areas.
The following summary presents the key insights from our six-part article series.
How will pay transparency be implemented in Hungary?
The Pay Transparency Directive introduces new tools to increase transparency in remuneration systems. Among other elements, the regulation requires:
- the communication of salary ranges in job advertisements or during the recruitment process
- the prohibition of questions about previous salary
- regular measurement and reporting of the gender pay gap
- joint pay assessments in certain situations
The Hungarian implementation is expected to affect several areas simultaneously, including:
- the Labour Code
- equal treatment regulations
- data protection practices
For employers, pay transparency therefore represents primarily an integrated HR and legal challenge.
Read more about the expected Hungarian implementation:
Pay transparency part 1: Where does Hungarian implementation stand?What reporting obligations apply to companies?
One of the key elements of the Directive is the regular analysis and reporting of the gender pay gap.
Companies will be required to report, among other indicators:
- the average and median gender pay gap
- differences in variable remuneration
- the proportion of women and men across job categories
If the pay gap within a given employee category exceeds a defined threshold and cannot be explained by objective factors, the employer must conduct a joint pay assessment with employee representatives.
In practice, this means a comprehensive review of the compensation system, including:
- job requirements
- salary bands
- performance evaluation systems
- promotion practices
Read more about reporting obligations and joint pay assessment:
Pay transparency part 2: Joint pay assessment and reporting obligations in practiceHow can companies prepare for pay transparency?
A key condition for implementing pay transparency is the establishment of a clear and consistent job architecture.
Its main components include:
- defined job families and career levels
- standardised job descriptions
- objective classification principles
These provide the basis for job evaluation systems and salary band structures that determine the appropriate remuneration range for each position.
In international practice, a readiness audit is increasingly used to assess how prepared an organisation is for the requirements of pay transparency.
Read more about readiness audits:
Pay transparency part 3: Readiness audit for Hungarian employersHow can gender pay gaps be measured?
One of the most important elements of pay transparency is the proper analysis of pay data.
Gender pay gaps are typically analysed on two levels:
Unadjusted pay gap
The simple difference between the average pay of men and women.
Adjusted pay gap
A statistical analysis that controls for factors such as job role, experience or location.
These analyses are not only required for compliance purposes but also support leadership decision-making.
Many organisations increasingly rely on dashboards and HR analytics tools to monitor compensation structures and identify potential risk areas.
Read more about pay equity analysis:
Pay transparency part 4: What do the data show?What should be communicated to employees?
Communication is one of the most sensitive aspects of pay transparency.
The Directive introduces information obligations on three levels:
- towards authorities, through gender pay gap reporting
- towards employees, through regular information on pay equity
- on an individual level, when employees request information about their own pay and comparable roles
Effective communication helps prevent misunderstandings and maintain organisational trust.
Read more about communication requirements:
Pay transparency part 5: What, when and how must be communicated?What is the role of leadership in pay transparency?
Ultimately, pay transparency becomes visible in everyday leadership conversations.
Typical employee questions often focus on:
- how salary bands work
- what determines placement within a band
- why differences exist between teams or roles
Leaders must be prepared to answer these questions consistently and based on objective criteria.
Typical leadership questions and response frameworks:
Pay transparency part 6: Consistent leadership responsesPay transparency as an opportunity for organisational development
Although pay transparency is primarily introduced as a regulatory obligation, it can also represent a broader organisational development opportunity.
Transparent salary structures, data-driven HR decisions and consistent communication can help organisations:
- strengthen employee trust
- improve retention
- create more predictable and transparent operations
If you would like to assess how prepared your organisation is for the requirements of pay transparency, our experts can support you with readiness audits, job architecture design and compensation structure reviews.
In the past five parts, we explored the different dimensions of pay transparency: the EU legal framework and the expected directions of Hungarian implementation, the practical issues of joint pay assessment and reporting, the preparation of HR systems, the role of data-driven analyses, as well as the operational risks of mandatory information provision and employee communication. Together, these provide the professional and organisational foundation on which pay transparency can be built in everyday operations.
Leadership communication in real situations – questions and response frameworks in daily organisational life
The closing part of the series focuses on one of the most sensitive areas of pay transparency: how all of this appears in everyday leadership conversations. The EU Directive, the forthcoming Hungarian regulation, and corporate pay structures can only function sustainably if leaders are able to represent them credibly, consistently and clearly. In this part, we present typical questions and response frameworks that provide practical support.
Questions about the purpose and operation of the system
“Why is all of this necessary?”
Response framework:
To ensure that remuneration is predictable, understandable and consistent. The same principles should apply to the same position, and salaries should not be determined by individual negotiations or coincidences.
“Does this mean I am underpaid?”
Response framework:
The purpose of the system is transparency. It shows the value of the position and the corresponding band. If you would like, we can review together how your current classification relates to your competencies and level of responsibility.
“Why does the system change from time to time?”
Response framework:
The market environment and the needs of the organisation also change. In order for the system to remain fair, salary bands and the underlying data must be updated periodically.
Questions about classification, salary bands and differences between teams
“Why am I not in a higher band?”
Response framework:
The band reflects the value of the position. Placement within the band is determined by experience, competencies and level of responsibility. If you would like, we can review what development steps lead to the next level.
“Why is everyone not placed at the top of the band?”
Response framework:
The top of the band represents a target state that assumes sustained outstanding competence and responsibility. It is not a default position, but performance-based.
“Why are there differences between teams?”
Response framework:
The market value, complexity and business significance of positions differ. Salary bands reflect these differences.
“In the market others pay more – why don’t we increase salaries?”
Response framework:
We regularly monitor market data and incorporate it into the review of salary bands. When we see a persistent deviation, we make adjustments, but sustainable operation is also considered in our decisions.
Handling emotionally charged situations
“X said they earn this amount – is that true?”
Response framework:
We cannot discuss the salary of other colleagues because it is personal data. However, we are happy to discuss your own situation, your band and your development opportunities.
Situation: someone complains that another person earns more
Recommended steps:
Acknowledgement: “I understand that this may cause uncertainty.”
Framework: “We do not discuss specific salaries, but we can discuss the position and the bands.”
Action: “Let’s review together what is required to reach the next level.”
“Does this mean an immediate salary increase?”
Response framework:
The objective of the system is consistency. Where we see unjustified deviations, corrections take place over time, but this is not automatic and does not affect everyone simultaneously.
Communication compass for leaders
To be avoided:
- direct comparisons between colleagues,
- promising salary increases without a decision,
- confirming salary information at rumour level.
Recommended:
- providing clear frameworks (on what principles decisions are made),
- using objective criteria (competence, responsibility, performance),
- applying a consistent narrative (predictability, fairness, consistency),
- remaining open to further questions.
The role of leadership communication in pay transparency as a whole
By the end of the series, pay transparency becomes a manageable practice at leadership level as well. Difficult questions are not situations to be avoided, but opportunities for the organisation to demonstrate consistency and build trust. Well-prepared leadership communication connects regulatory expectations with everyday operations.
The introduction of pay transparency is not only a matter of compliance, but also a long-term leadership decision. If you would like to review where your organisation stands in its preparation and what steps may support conscious and predictable operations, our experts are happy to assist in defining the next steps.