Transparency is coming. Are you ready?
EU’s new pay transparency directive will bring fundamental change to how you engage with your people. It will pose new challenges for many, while also offering benefits to those who embrace it. What used to be the final step in the long process of implementing a fair pay philosophy will now be a requirement for all companies. Whether they are ready or not.
We have extensive experience in all steps needed for a successful transition to transparency. We help you avoid very public problems. And we guide you in this new environment, where old problems get replaced with new dilemmas.
We help you get ready
We make a thorough analysis to determine how fair your pay levels are, how they align with the market and how well they reward your top performers. This identifies which issues that need to be addressed before they become a public problem.
Our review includes:
Equal Pay Review
- We determine if differences in pay levels are justified by factors such as job level, performance or caused by bias
- Determining the accurate pay gap is not a simple process. An unadjusted pay gap will often show too big a difference.
- Our process will provide the accurate measure, which in most cases will be smaller
- Transparency will boost focus on pay levels. Will your high contributors make more working for your competitors? Make sure you are their best option
- Transparency will expose your internal pay differences. Make sure your rationale makes good business sense.
- Individual salaries won’t be made public, but you should act as if they were. Both fair and unfair pay differences will be challenged strongly
- Make sure that you reward the right people for the right contribution to your business
For any issue that needs your attention we will suggest how you fix them. Our solutions are simple, dependable and easy to understand and implement. We also assist you with all required reviews and reports and can also provide you with outside expert opinions.
Working with transparency
Adopting pay transparency is a profound change for an organization. It will have both predictable and surprising consequences. Thorny issues of the past stop being a problem as new dilemmas arise. We help you navigate the new environment to ensure that you remain competitive and agile, and you reap the benefits offered by this fundamental change.
The final details of the directive have yet to made into law. Key elements are expected to include the following.
- Pay transparency for job-seekers
- Employers will have to provide information about the initial pay level or its range in the job vacancy notice or before the job interview
- Employers will not be allowed to ask prospective workers about their pay history
- Right to information for employees
- Employees will have the right to request detailed information from their employer on average pay levels. This right will exist irrespective of the size of the company
- Reporting on gender pay
- Employers with at least 100 employees will have to publish information on the pay gap between female and male workers
- Joint pay assessment
- When an unjustified gender pay gap of at least 5% is revealed, employers will have to carry out a pay assessment in cooperation with workers’ representatives
- Burden of proof on employer
- It will be for the employer, not the worker, to prove that there is no discrimination in relation to pay
- Sanctions for non-compliance
- Sanctions are yet to be put in place by the member states. We can expect them to be effective
The main effect of the directive is indirect: the steps you need to take to before you make your pay policies public. These steps will all increase fairness, reduce bias and build trust with your people. They will know you as a fair and transparent employer, who rewards better than the competitors for their contribution to the organization. All effects that are of benefit to you as an employer.
They will also bring about a focusing of all your reward disciplines. Your pay policies will be increasingly challenged internally for fairness and justification, forcing you to focus on your structure and your benchmarking. This will reduce bias, improving clarity of goals and strengthen your market alignment, all classic reward virtues.
Last, but not least, the direct benefit of transparency is that not only your own people, but also everybody else, will know that you are a fair employer, that rewards your people well and have nothing to hide. Fairness and openness is one of the most sought after values when people choose a new employer.
Prepare for new dilemmas. The publicizing of pay policies leads to increased scrutiny of the way the policies are practiced. Expect to be challenged by both individuals and groups. Both merited and unmerited challenges have the potential to become public problems. With the increased publicity they can have harmful effects, even beyond your brand as employer.
Watch out for pay level compression. Outlier salaries will be challenged, leading to a gradual narrowing of the salary bands. Remember that there can be perfectly valid reasons for even very high differences in pay. Make sure you reward your high contributors rightfully according to your pay policy and their value to your company.
Expect to be challenged. Benefits could become outsized when people negotiate for alternative, individualized compensation. Salary adjustments becomes a draining process when the department heads are not prepared properly to meet the challenges to the pay structure.
Prepare for documentation. The formal requirements in the directive alone puts several levels of mandated reporting into law. Beyond the mandatory reporting, you will also need to document the rationale for your decisions, and how your pay levels will be affected.