Center Webinar Explores the Far-Reaching Impact of EU Pay Transparency Rules

Center and HR Policy Global members heard how companies are tackling compliance with the EU Directive as well as the broader implications of pay transparency in the U.S. and beyond, In the first of a two-part series on global pay transparency. 

Roll up your sleeves. Ms. Beddome discussed the importance of “taking inventory” of all the different requirements in each country and understanding where your employees are located. Consider the nuances of the various laws, such as how workers and pay are defined, so you can prepare for your pay equity analyses. Key questions to ask: 

• Do we have the data we need? Many organizations do not have globally centralized HR and payroll systems and will have data access challenges. 

• Do we have the partners we need? Assess internal and external resources to collect data and perform the necessary analyses. 

• What does the job architecture look like in that region? Some regions have more sophisticated pay structures than others. 

Find your north star. Mr. Shepherd suggested two guiding principles for transparency amid business complexity and differing generational and cultural viewpoints:  

• Ensure adherence to legal obligations.  

• Invest wisely in balancing financial and reputational risks while remaining accountable for the investments put into compliance efforts. 

Understanding Equal Work of Equal Value. Employers must use defensible objective criteria for pay decisions such as education, professional and training requirements skills, effort, responsibilities and the nature of work.  Ms. Hendrickson pointed out that employers should evaluate jobs across the organization – not solely from a functional perspective. While the law itself could be interpreted to undermine the concept of market-based pay, she suspects companies will likely continue their practice of external market- pricing as a part of their objective criteria but not rely on it fully.  

Find the root cause of pay gaps. Ms. Henrickson stated that “the biggest pay gaps are driven by pay decisions at the time of hire and at promotions.”  

• She advised that companies begin conversations with works councils right away to discuss potential concerns. Determine what pay adjustments should be made during the 2025 salary increase cycle before the 2026 data disclosure takes effect. 

• Employers who are new to doing pay studies should be aware that unadjusted pay gaps are driven primarily by disparities in “pay opportunities” and the emphasis should be on how to address this on a larger scale. 

Center Take on U.S. Implications. Ani Huang shared how the EU Directive could put pressure on U.S. companies to increase pay gap disclosure through shareholder proposals, U.S. regulatory requirements like the potential re-emergence of EEOC Component 2 data collection and expanding the proposed federal contractor pay transparency requirement to all workers. 

Join us for Part 2 of the Global Pay Transparency Series: UK vs Brazil, the Past and Present of Global Pay Transparency Reporting Obligations.