Article
The Pay Transparency Directive is not just about being able to meet reporting requirements. It is a unique opportunity to create sustainable and future-fit organisations.
Published
11 September 2024
The Pay Transparency Directive
The Pay Transparency Directive is a set of measures to increase pay transparency, with the aim of combating pay discrimination and helping to close the gender pay gap in the EU.
The requirements in the directive can be divided into two groups:
- Pay transparency for workers, employers and jobseekers (average pay levels broken down by gender, criteria used to determine pay and career progression, gender pay gap report, joint pay assessment (JPA) with workers’ representatives etc.).
- Justice for victims of pay discrimination (including compensation for workers, sanctions for employers, fines etc.).
The directive came into force in April 2023, and EU countries are now in the process of embedding the directive into local legislation before the deadline in April 2026.
The opportunity
With all the urgency and rush to ensure compliance, it is easy to forget the higher purpose of these regulations, i.e. to provide sustainable, transparent and fair people practices that are fit for the future.
Rather than focusing solely on compliance, organisations should embrace the fact that the Pay Transparency Directive is a unique opportunity for organisations to build a sustainable organisation that is fit for people and fit for the planet.
Case
Job architecture and anchor roles
A global company conducts a global job levelling project to support local HR and leadership teams in determining appropriate and fair pay policies.
Discussions with the regions revealed that the understanding of terms such as “specialist” and “coordinator” differs between regions and cultures, leading to the creation of common “anchor roles” with shared definitions of roles and responsibilities to facilitate fair and equitable pay and reward structures across regions and job levels.
The Pay Transparency Directive is an opportunity to build:
- Skills-based, unbiased recruitment policies
- A career system that offers opportunities for both vertical and horizontal career progression – as well as options for different life situations and choices
- Fair and transparent performance evaluations, compensation and promotion practices
- Leaders with strong capabilities in performance enablement, coaching and mentoring
- An approach to diversity and inclusion that goes beyond virtue signalling, creating a culture of equal opportunity, openness and trust
- A well-designed job architecture that supports all of the above
- Data accuracy and availability
Case
Bias in the recruitment process
A company with well-defined job levels and pay ranges experiences feedback from employees that their pay practices are perceived as unfair and favour some employees and managers over others.
A pay equity analysis shows that while employees are treated equally in salary reviews and promotions, male applicants tend to be placed in higher-level positions compared to female applicants with similar education and experience, causing the gender distribution to be skewed with female employees overrepresented at lower job levels and male employees overrepresented at higher job levels.
How to get started
If approached correctly, the Pay Transparency Directive can become a vehicle for transformation, improving the end-to-end employee lifecycle – and a source of competitive advantage.
Implement Consulting Group’s approach to pay transparency.
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4How is your organisation approaching the Pay Transparency Directive? Are you embracing the opportunity to create a future-fit, sustainable organisation?
Reach out if you want to discuss further.
