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European employers are preparing for a wave of regulatory changes, including the EU AI Act and the Pay Transparency Directive (PTD), both taking effect in 2026. Survey data from Littler shows that only 18% of respondents feel very prepared to comply with the AI Act, while just 24% feel very prepared for the PTD.Â
Even among those somewhat prepared, many have yet to implement essential steps such as audits, training, or assigning internal compliance responsibilities.
U.S. Policy Shifts Add Complexity
Changes in U.S. immigration and inclusion, equity, and diversity (IE&D) policies are affecting European companies with U.S. operations. About 75% of these employers have already adjusted their U.S. workforce strategies, including reducing business travel, scaling back operations, or pausing temporary assignments.Â
Managing divergent IE&D requirements between Europe and the U.S. is a widespread challenge, with 79% of affected employers reporting difficulties navigating conflicting rules.
AI and Pay Transparency Transform Workforce Practices
Employers are beginning to adjust job responsibilities in response to AI adoption, with 40% reassessing roles and roughly a quarter reducing hiring or workforce size.Â
Pay transparency remains a key concern, as EU employers will soon be required to provide salary information by role and employee category, ensure non-discriminatory recruitment, and disclose pay-setting criteria.Â
Large employers and U.K.-based firms show slightly higher preparedness, but overall compliance readiness remains low.
The Push for In-Office Work Intensifies
European companies are gradually increasing in-person workdays. Among roles that can be performed remotely, 26% of employers have raised or are planning to raise required office attendance to five days a week, while 63% are increasing in-person work while still offering hybrid options.Â
Despite this, 73% agree that flexible schedules remain important for attracting talent, with U.K. employers placing even higher emphasis on remote or hybrid work.
Role of Work Councils and Country Differences
Work councils and unions continue to influence workforce management, particularly on remote work policies (47%), mental health and wellbeing (46%), and AI implementation (44%). Country-specific patterns are evident: the U.K. reports the highest attention to hybrid work and IE&D policies, Spain focuses on mental health, Germany prioritizes AI, and Italy emphasizes workplace safety. Upcoming reforms to the EU Directive on European Work Councils may further shape these negotiations.
As AI and pay transparency requirements approach and remote work preferences persist, businesses face increasing pressure to align compliance, operational strategy, and talent management while navigating a patchwork of legal obligations.
