The Directive will potentially lead to significant transformation of critical people policies and approaches including pay frameworks, job architecture, worker and union engagement, and HR systems. While many organisations will already be monitoring pay equity, the Directive brings in a host of additional transparency requirements including:
- Pay information: Workers can request information on their individual pay level and the average pay level for other workers doing the same type of work broken down by sex. This information must be provided within two months of a request being made;
- Pay philosophy: Employers with more than 50 workers will be required to provide information on the criteria used to determine pay, pay levels and pay progression for workers;
- Recruitment: All employers will be required to provide information on initial pay or pay ranges for vacancies and ensure job advertisements are gender neutral. Employers will also be prohibited from requesting current or historic pay from prospective employees; and
- Gender pay reporting and equal pay assessment: Mandatory annual Gender Pay Gap reporting for employers with at least 250 workers in a member state (with less frequent reporting required at a later date for those with at least 100 workers). For those reporting, if a pay gap of 5% is found within a worker category and other criteria are not met then a joint pay assessment must be carried out.
For large employers, particularly those in multiple EU territories, the implications of these requirements are significant. As a result, many are already starting planning to ensure that required systems and process changes can be made in good time to ensure a smooth transition from a legal, operational and strategic perspective. For all those impacted, preparing will require a dynamic approach, aligning operational and system requirements with broader HR and DEI strategies to ensure effective compliance. Those who proactively embrace the Directive and its impacts will be best placed not just to ensure compliance, but enhance transparency, demonstrate a commitment to organisational fairness and ultimately attract and retain the best talent.
Where to start? Key questions to consider
- Job architecture: Do you have a robust methodology to identify and determine similar work (e.g. through gender neutral job architecture)?
- Pay structures and policies: Do you have an existing pay philosophy and banding that you are comfortable sharing with employees and recruitment candidates?
- Recruitment: How can your processes be adapted to ensure appropriate pay offers are made without reference to a candidate’s current pay level?
- HR technology and systems: Are your systems equipped to gather and process the data required for internal and external reporting?
- Operations: Do your operation have the capability to process employee requests for pay information in a two month window?
- Equal pay: Is pay equity currently monitored?
- Scope: Are you prepared if the requirements extend to contractors and other types of workers?
If you would like to discuss how this may impact your business in more detail, please get in touch.
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