The purpose of the new EU Pay Transparency Directive is to advance workplace equity across all member states. It was officially adopted by the European Parliament on March 30, 2023, which means member states now have up to three years to transpose the requirements into local pay transparency legislation.
It is not yet known how the directive will manifest itself once transposed into local legislation; however, we know that overall, there is one requirement that applies to all companies operating within European member states and several requirements that applies to companies with more than 100 employees.
All companies, regardless of size, must be able to provide overview of how the individual employee's pay compares to colleagues in similar positions.
Employers with at least 100 workers, or fewer if defined at a national level, must also be able to disclose a salary scale for new hires, describe in gender neutral criteria what defines salary and career paths and publish information about the company's gender pay gap.
.. are you ready to be transparent about your pay policy?
Being prepared for the EU Pay Transparency Directive is a good idea from more than one perspective.
Bottom line is that it's actually good business.
Pay Transparency enables you to take better and more disciplined salary decisions on all levels, which is good for the bottom line.
Remuneration is one of the biggest - if not the biggest - factor in the finances of your company; yet many companies still do not have a structure in place that ensures informed decision-making.
Providing your employees with a career road map increases fairness, motivation and satisfaction. This leads to higher retention rates, thus reducing your recruitment and training costs, which preserving valuable knowledge inhouse.
Being fair is attractive, and for many - especially in the younger generations - it's also a prerequisite. Having a comprehensive Job Architecture enables your hiring managers to better define the role and responsibilities, and clearly state your company's expectations to new-hires. It also makes is easy to be upfront about the expected pay range, as will be a requirement when the pay transparency directive enters into force in local legislation
Embracing the new requirements early on provides ample opportunity to brand your company as a fair employer, who's actively working to advance diversity. In a competitive market that in many industries belongs to the jobseekers it provides an opportunity to stand out as the more attractive employer, thus attracting the better talent and making it easy for experienced workers to make the decision to change company.
Directive (EU)2023/970, also known as the Pay Transparency Directive, was published in the Official Journal of the European Union, on May 10, 2023. The text stipulates in Article 34 that member states must be set to comply with the directive by June 7, 2026.
However, some countries are ready to implement their legislation before others, which means companies may have to be compliant before the end of the three-year grace period.