EU Pay Transparency: A New Responsibility For HR And A New Chance For Fairness
Why The EU Pay Transparency Directive Is Coming Now
The EU has worked for equal pay for decades. The gender pay gap still exists. Progress is slow. Unexplained pay differences between women and men remain in many countries.
A lack of transparency is one of the biggest barriers. That is why the EU now introduces stricter requirements. The Pay Transparency Directive has three main aims.
• Ensure a fair and consistent pay structure
• Strengthen employees’ access to pay information
• Create real consequences when pay gaps cannot be explained with objective criteria
How To Analyse Gender Pay Gaps In A Compliant Way
The webinar introduced a method that will likely become central for many organisations. Oaxaca Blinder decomposition. The name is technical. The logic is simple.
The method splits the gender pay difference into two parts.
The explained part shows how much of the gap is due to legitimate differences in criteria. For example longer tenure or higher responsibility.
The unexplained part shows how much of the gap cannot be explained by those criteria and is tied only to gender.
If the unexplained gap for comparable women and men is above 5 percent, the company must perform a joint pay assessment and act on the findings.
This structured approach helps you move from vague discussions to clear evidence.
The main requirements that HR needs to prepare for now.
- A transparent pay structure
Your organisation must be able to explain why pay is set as it is. The explanation must rest on gender neutral and objective criteria. Examples are education, experience, job function, responsibilities and working time. - Pay information before employment
Job postings must include the pay range for the role. You are not allowed to ask about previous salary during recruitment. - Employee right to information
Employees gain the right to know which criteria are used to set pay. They also gain the right to see pay information for comparable roles. HR must communicate this right at least once per year. - Reporting obligations
Companies with 100 employees or more must report on pay differences between men and women. Reporting must use medians, quartiles and relevant job categories. - Joint pay assessment If there is an unexplained pay gap of more than 5 percent between women and men in comparable roles, the company must carry out a joint pay assessment. The purpose is to identify why the gap exists and ensure corrective action.
You must be able to document why some employees earn more than others. That requires structured data and clear, gender neutral criteria. Typical criteria include:
• Length of service
• Educational level and field
• Job category
• Job function and responsibility
• Working time
• Job relevant qualifications and training
These criteria must be objective and logical. Missing or low quality data create risk. Poor structure in your HR and payroll data leads to pay decisions that are hard to explain. This was a central theme in the webinar.
