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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.
The previous parts of the series guided readers from the legal framework of pay transparency to practical implementation: we discussed the expected directions of Hungarian implementation, reporting obligations and joint pay assessment, the measurement of organisational readiness, as well as the decision-support role of data-driven pay equity analyses.
However, these steps only function sustainably if the related information reaches the relevant stakeholders in an appropriate manner. The fifth part therefore focuses on the communication requirements of the Pay Transparency Directive: how information towards authorities, employees and individual stakeholders must be organised, and how this can be supported by a conscious, HR-led communication practice.
External, internal and individual-level communication
Mandatory information provision appears at three clearly distinct communication levels.
External communication
Employers must make reports on the gender pay gap and related measures available to authorities and supervisory bodies in accordance with legal requirements. In certain cases, regulation may also prescribe public disclosure.
The primary objective of external communication is to ensure transparency and accountability; therefore, the accuracy of data, consistent interpretation and proper contextualisation are of particular importance.
Internal communication
Employees must be regularly – presumably at least annually – informed about their rights under the Directive, the company’s pay equity position, and the measures initiated or planned.
The objective of internal communication is to ensure that employees understand how pay transparency functions and do not encounter the results as isolated figures, but as part of a broader corporate effort.
Individual-level communication
Under the Directive, individual employees are entitled to request written information about their own pay level as well as the average pay of colleagues of the opposite gender performing the same or work of equal value. The employer must provide this information within a prescribed “reasonable” deadline.
This level requires the greatest caution, as it simultaneously involves data protection, legal and trust-related considerations.
Employees’ rights to information
The Directive strengthens employees’ right to information. Employees may request that the employer:
- provide written information on their individual pay level,
- disclose the average male–female compensation within comparable employee categories.
National regulation is expected to also prescribe automatic, regular (annual) information provision, offering a summary picture of the company’s pay equity situation and the measures applied.
Employees may, through their representatives, access additional information, such as:
- the pay evaluation methodology,
- the categorisation applied,
- complaint handling and enforcement channels.
This justifies the establishment of structured dialogue with trade unions, works councils or employee delegates.
Communication risks: when the system “explodes”
Based on international experience, communication risks related to pay transparency often become unmanageable when an organisation reacts solely under external pressure. Several large corporate cases demonstrate that unprepared data disclosure resulted in reputational damage, legal disputes and prolonged organisational restructuring.
In contrast, organisations that conducted internal audits prior to mandatory regulation, established transparent salary bands and consistently communicated their pay equity results tend to face more manageable legal risks and enjoy stronger employer trust.
Thus, communication risk lies not primarily in the numbers themselves, but in their interpretation and timing.
HR communication strategy and practical steps
HR plays a key role in ensuring that pay transparency does not appear merely as a compliance obligation, but as an organisation-wide, trust-building process.
In practice, this may be built on the following elements:
- clear leadership messages explaining why pay equity is important and how it connects to corporate values,
- clear and visual materials (infographics, Q&A documents, intranet pages),
- dedicated channels and responsible persons for handling salary-related questions and complaints,
where necessary, - the provision of anonymous reporting options.
One of the prerequisites for successful communication is that pay transparency is presented not as a “salary problem”, but as an organisational development programme built on fairness and consistency.
The role of communication in sustainable compliance
In the long term, pay transparency operates stably if mandatory information provision becomes integrated into the company’s daily communication practice. Consistent, understandable and forward-looking communication reduces the likelihood of misunderstandings, supports the acceptance of managerial decisions and contributes to maintaining employee trust in a changing regulatory environment.
Data-driven pay equity analysis and decision support
In the previous three parts, we examined the EU legal framework of pay transparency, the expected directions of Hungarian implementation, as well as the key steps of practical preparation: from reporting obligations and joint pay assessment to the role of job structures, salary bands and readiness audits. The next step is to connect all of these at the level of data. In order to meet the requirements of the Pay Transparency Directive, organisations must develop data-driven analytical capabilities that are not only operational from a compliance perspective, but are also capable of providing reliable signals about risk areas and supporting meaningful managerial decisions.
Unadjusted and adjusted pay gap
In practice, the gender pay gap should be examined at least at two levels.
Unadjusted pay gap
The simple difference between the average or median pay of men and women within a given organisational unit or employee group.
Adjusted pay gap
The result of a statistical analysis (for example a regression model) that takes into account relevant explanatory factors such as job, level, region, length of service, education or competency level.
From an HR perspective, it is important that the roles of the two indicators are clearly separated. The unadjusted pay gap is a useful “red flag” indicator that draws attention to potential problems. However, assessing differences that may indicate discrimination is only possible after isolating explanatory variables. This helps avoid excessive reactions and also prevents real risks from remaining hidden.
Explanatory variables and data strategy
The quality of pay equity analysis largely depends on which variables are included in the analysis and at what level of data quality. Typical explanatory factors may include:
- gender, organisational unit, place of work,
- age, education, employment relationship,
- length of service at the company and in the position,
- job and career level,
- performance evaluation results, promotions,
- competency levels,
- longer absences (for example illness, maternity leave).
HR should develop a conscious data strategy:
- which variables must be collected,
- what quality control procedures are applied,
- who is responsible for data integrity,
- how long historical data are retained,
- how GDPR-compliant use can be ensured (pseudonymisation, aggregation, access control).
Employee categories and sample size
One of the critical points of pay gap calculation is the definition of analytical categories. Groups that are too large may conceal local problems, while groups that are too small may compromise statistical reliability.
In practice, the following considerations help to find the right balance:
- categories should be homogeneous in terms of job level, responsibility and operational area,
- they should contain a sufficient number of employees to ensure stability of average and median values,
- they should fit the organisation’s natural management structure so that responsibility can be assigned for the results.
A good approach is for HR to test several categorisation methods in a pilot manner and select the one that provides interpretable and actionable results.
Pay structure modelling and benchmarks
Pay equity analysis can always be interpreted in the context of the overall pay structure. Modern compensation systems are built on regularly updated salary bands defined by job and function, supplemented with market benchmark data.
Among HR’s tasks are:
- comparing the midpoints of internal salary bands with relevant market medians,
- examining how different groups are positioned within the bands,
- identifying areas where women are typically positioned lower within the band than men.
This approach helps to separate market competitiveness issues from equal opportunity risks.
Analytical tools, dashboards and HR decision support
In larger organisations, dedicated pay equity platforms and BI-based dashboards are increasingly common, visually displaying pay gaps, risk groups and possible intervention points.
As an HR leader, it is advisable to:
- establish a unified pay equity reporting package (executive summary, detailed breakdowns, trends),
- jointly design the reporting architecture with finance and IT,
- integrate regular (annual or semi-annual) pay equity reviews into strategic workforce planning.
Analytics create real value when results are linked to concrete decisions: targeted salary adjustments, modification of promotion practices, supplementing leadership bonuses with equal opportunity indicators.
HR controlling and accountability framework
In the long term, pay transparency becomes a sustainable practice if it is integrated into HR controlling routines. This requires a clear allocation of responsibilities:
- who is responsible for the data,
- who is responsible for the methodology,
- who monitors legal compliance,
- who prepares managerial decisions.
Pay equity indicators incorporated into leadership scorecards signal that the organisation treats the topic as a strategic issue. In this way, pay equity analysis does not remain a one-off project, but becomes a continuously developed, data-driven operational practice.
The place of the data-driven approach in organisational operations
Pay equity analysis fulfils its real function when it provides regular, reliable and interpretable information to decision-makers. A data-based approach creates the opportunity for compliance, employee experience and employer branding to become mutually reinforcing elements within a more transparent operational framework.
Readiness audit for Hungarian employers
The application of the Pay Transparency Directive does not represent a single legal step for organisations, but rather the conscious transformation of interlinked HR processes. The focus of the third part is on how the requirements of the Directive can be embedded step by step into everyday operations. The emphasis is on the readiness audit: those few critical HR areas where timely, structured development can prevent rushed implementation and later compliance risks.
Job system – putting the structure in order
One of the fundamental conditions of the Directive is that equal or work of equal value must receive equal pay. This requires a clear, objective and consistently applied job structure.
Its main elements:
- defined job families and levels (for example junior–senior, expert and managerial career paths),
- uniform job descriptions that record tasks, areas of responsibility, decision-making authority and required competencies,
- transparent classification principles that can be applied regardless of gender, age or length of employment.
In practice, this often means a “job system clean-up” for many organisations: restructuring fragmented positions developed over the years, eliminating duplications and establishing a unified naming logic.
Job evaluation and the establishment of salary bands
One of the key steps in preparation is selecting a methodologically sound job evaluation system. In practice, several approaches exist: ranking, classification, analytical point systems or factor analysis based on external benchmarks.
HR’s task is to establish a solution that:
- fits the size and complexity of the organisation,
- is internally well communicable and understandable for managers,
- can be consistently applied to define “work of equal value.”
Based on the results of job evaluation, it is advisable to establish a banded salary table. Each band includes minimum–midpoint–maximum values, as well as a clear set of rules explaining why and how an employee is positioned within the band (entry salary, market correction, enhanced responsibility, scarce expertise).
Remuneration practices and reporting
Pay transparency affects the entire remuneration structure. Therefore, preparation includes a comprehensive review of existing practices and strengthening reporting processes.
It is worth paying particular attention to the following areas:
Objectivity and transparency
Do bonus and incentive systems create indirect pay gaps, for example due to KPIs that disadvantage one gender in certain roles?
Gender differences
Does the allocation of allowances, overtime pay, on-call fees and bonuses show disproportionality?
Data availability
Are HR and payroll systems capable of automatically generating the indicators required by legislation (average and median pay, benefits, headcount distribution)?
Reporting and monitoring
In preparation for mandatory reports from 2026, it is advisable already now to establish:
- standard dashboards for tracking salary and benefit data,
- time-series analyses to examine trends and the impact of corrections,
- automated reporting processes so that mandatory reports become the natural output of the system.
Recruitment, selection and employee communication
Pay transparency also places processes related to candidates on new foundations. HR must prepare to:
- communicate the starting salary or salary band in a predefined manner for each position,
- prepare hiring managers to handle salary-related questions without addressing prohibited topics,
- revise employment contract templates, offer templates and internal regulations.
Internal communication is also a key factor: it must be clearly explained what pay transparency means in practice and where the boundary lies between the protection of individual salary data and the right to collective information.
Readiness audit – where does the organisation stand?
In international consulting practice, a quick 20–25 question readiness audit focusing on five main areas is a widely used tool: job system, job evaluation, remuneration, reporting, recruitment and communication.
During an internal self-assessment, it is worth considering, for example, the following questions:
- is there an up-to-date, unified position architecture,
- is there a documented, objective job evaluation methodology,
- are regular gender-based salary and benefit reports prepared,
- do recruitment processes already reflect the principles of pay transparency.
The earlier deficiencies are identified, the easier it is to prepare in a scheduled and business-manageable manner for the obligations of 2026 and beyond.
The picture of organisational readiness comes together
Preparation for the introduction of pay transparency becomes a manageable process when the organisation is aware of its own level of maturity. The job structure, job evaluation, remuneration, reporting and communication together form the system on which legal compliance and long-term operational stability can be built. A conscious readiness audit can serve as a compass in this transformation.