The Recruitment Process

Eliminating Pay Discrimination in the Recruitment Process

The EU Pay Transparency Directive also applies to applicants ahead of the interview process, changing the way wage setting is traditionally done. 

Conventionally many companies have been used to poll an applicant's salary expectations during screening or interview by asking for their pay history, current pay or expectations. This type of information asymmetry makes it harder for the applicant to negotiate their compensation package with their future employer. And it is this disadvantage that the directive aims at eliminating.

Asking questions about an applicant's pay history will no longer be allowed, as such questions will be legally equated with asking about a pregnancy. This fundamentally changes the power balance between employers and employees.

This part of the directive is designed to ensure that previous pay discrimination an applicant may have faced, isn't simply copied into the remuneration package at the new employer. Eurostat reports a significantly larger Gender Pay Gap among senior workers than among the young generation, indicating that the existing approach based on the applicant's personal pay history exacerbates existing pay gaps that may have arisen as a result of work breaks, e.g. maternity leaves, or discriminatory actions of former employers. Hence, going forward, the hiring company must inform applicants ahead of an interview what the expected pay range for the position is and can no longer ask the candidate.

In short, you could says that it's the chair that determines the salary and not the individual sitting in it. 

How companies choose to tackle this change will vary, and especially the breadth of the ranges announced will be one of the key things to monitor. Companies which indicate narrow pay ranges, will have limited possibility to differentiate based on the applicants' experience and credentials - and they will need to ensure that existing employees in positions of equal value are also within the same given range, so they will not feel unfairly treated. This requires a detailed job structure, but it also raises your company's credibility among existing and prospective employees,ad makes you an attractive workplace, which in turn makes it easier to recruit and retain talent. At the other end of the scale, we have the companies that apply very broad pay ranges. They will likely bee seen as trying to cheat the system to maintain discriminatory pay schemes, and thus seem like a less attractive employer.