With the new EU Directive on pay transparency, companies across Europe are preparing to implement measures that ensure compliance with the new rules; however, we do not yet fully know what the requirements will be, and which deadlines will apply.
The work is ongoing, and the directive is expected to be adopted across Europe starting in the spring of 2023. Once officially adopted by a member state, implementation begins in collaboration with the labor market partners; hence, the country specific rules are, as of yet, unknown. However, the Directive does include economic consequences and sanctions for companies that are not fulfilling the minimum requirements within three years, thus we can expect local rules to include such measures.
What we already know is that if you are a company with more than 100 employees you will need to be able to:
- Show a salary scale for new hires in all your job ads.
- Describe the – gender neutral – criteria that defines the salary and career paths in your company, and let employees get an overview of how their pay compares to colleagues in similar positions.
- Publish information about your gender pay gap. If this exceeds 5% and cannot be justified by gender neutral factors, you have to carry out a pay assessment in collaboration with workers’ representatives and worst case you may need to compensate employees who have suffered gender pay discrimination going back to their time of employment. You might also get fined.
At the moment, many companies are facing a situation where the salary for newly hired entry level and senior positions alike, exceed the salary for similar existing employees. Company seniority and loyalty becomes negative for the employees due to the current market conditions. This could lead to a quitting spur if not anticipated and dealt with.
The first step toward rectifying potentially unfair pay gaps is knowing they exist. We can help you identify these. We also recommend that you prepare for the implementation of the Pay Transparency Directive by implementing a Job Architecture that includes pay ranges / Salary bands. This provides you with a tool that gives you the vital overview of your current pay landscape, and also provides a way to compare salaries with truly similar positions. Additionally, Hiring Managers will be able to define the role incl. responsibilities and expectations more precisely, and include a pay range in the job ad.
We can help you create a suitable Job Architecture that ensures compliance with the EU Directive on Pay Transparency.
Despite the immediate workload this new directive will cause in most HR departments, embracing it early is also an opportunity to brand your company as fair employer, actively working to closing the gender pay gap and advancing diversity. This could be a competitive advantage in a market that currently belongs to the workers rather than the employers in many industries. It’s an opportunity to be market leaders and we are here to help you on your way.
Analyzing the Gender Pay Gap
Finding the difference in average pay between men and women is a more complex undertaking than it might appear. If you simply compare the average salaries between the two groups, you will often find that men are paid more. When taking other factors into account, such as job level, performance and competences, the pay gap will look different. Sometimes it disappears entirely, sometimes not. No organizations have inequality as part of their salary strategy. But unfairness might still hide in the details, and the small individual differences in pay can grow into a big systemic problem, if it is left unchecked, which is one of the motivating factors behind the European Pay Tranparency Directive.
Better achieve fairness and clarity through a thorough Equal Pay audit. We can help you with that.
Equal Pay Audit
The steps will change from client to client - our approach remains the same. We build on a foundation of data, analyzing and reviewing the available variables that are comparable throughout the organization, using gender neutral criteria. We review your data, making sure that the positions compared are of equal importance to the organization. Where possible, we review the data within each category down to the individual level. We apply statistical modelling, building on solid regression analysis which will estimate the casual relationship of differences in pay, and root out possible inequalities. Our findings are presented in a final report, containing both our conclusions as well as the statistical documentation of our process.
Fixing it fairly
Fairness and clarity is central to any modern Reward Strategy. Gender-based inequality in pay is fundamentally unfair, and often the result of lack of transparency. When fixing the issue it is important to increase the fairness, not just swop one unfairness with another. Some issues can be easily addressed in the next yearly salary review, others need to be addressed in stages, to avoid a disruptive effect on the internal Job Architecture and employee satisfaction. Once the problem is fixed, we help put in checks and balances, to keep the problem from reappearing. That is good governance, and we can help you with that too. This way you are also ready when the Pay Transparency Directive enters into force.
We help you fix the problem, fairly and without disruption.