The incoming EU Pay Transparency Directive requires member states to implement provisions into their national laws by June 7, 2026. So, is the fact that UK companies aren’t directly impacted a Brexit-created stroke of luck, or a missed opportunity?
Refresher – key impact areas
For businesses and employees, the headlines from the EU PT Directive are as follows:
- Recruitment - Employers to provide information on each role’s pay level or range and can no longer ask for an applicant’s pay history.
- Employee rights to data - Employees will be able to request information on average pay levels, broken down by gender for comparable work. Employers will need to make this information accessible and easy to understand, alongside the criteria used to determine pay, pay levels and pay progression.
- Regular assessment – a new onus on employers to assess pay structures and policies for gender bias, and any discrepancies or inequalities to be identified and corrected.
- Gender Pay Gap reporting – Every three years, employers with 100-249 workers will need to publicise information on their gender pay gap. Annually for employers with 250+ workers.
- Remedying gaps - Where a gender pay gap of 5% or more is unjustifiable on objective gender-neutral factors, employers will need to assess and address.
Lucky escape for UK employers?
While the labour government has proposed some increased requirements around gender pay reporting - narratives and action plans for closing gaps and new reporting around ethnicity and disability - we are yet to see any real detail and requirements are likely to lag behind the EU.
Likewise, whilst many organisations in the UK might reflect favourably on Brexit in terms of dodging many of those direct impacts, those who do need to comply (ie those with operations based in the EU) are still grappling with the requirements of the proposed directive, many of which still need more clarity. Most EU countries are yet to transpose the legislation into local law, leaving big questions, including:
- Where the law now requires comparisons of average pay by category of worker, how will those categories be defined?
- Will summary definitions of groups suffice, or will a more analytical job evaluation framework be needed?
- With pay and benefits both included in reporting, how will the data need to be collated and treated?
- How will the requirement to publish pay ranges for advertised roles affect current workers in those companies?
Facing up to a new dawn
For many, it will come as a relief not having to answer some of these questions, but I would argue that kind of thinking only delays the inevitable. Transparency around pay is only moving in one direction.
The talent marketplace is now global, and momentum elsewhere is turning the dial. In the US, for example (where EDI measures are admittedly under obvious pressure) currently more than 26% of the workforce is covered by Pay Transparency laws that include the disclosure of pay ranges or even total compensation in adverts, and the banning of salary history. If UK businesses bury their heads in the sand over pay transparency, there is an overwhelming sense that it could affect their ability to attract and retain talent in the long term.
And the key reason for that is a younger generation of workers leading a societal momentum shift in expectation. As a cohort, they are far more open to the idea of sharing information than their older colleagues, meaning they have higher expectations around reward openness and will vote with their feet if they feel they are left in the dark around pay.
The path to sustainable equity
It is not always easy to be open when you are managing legacy structures or dealing with pay anomalies that are difficult to explain. But fundamentally I believe that we can all do the right thing by being more open about how reward works in our organisations, by lifting the lid on this instead of shutting it and walking away.
We must recognise that rectifying legacy pay arrangements can cost, but historical inequities don’t go away, they only cause more issues until they are confronted, as we have seen in recent cases with local government and retailers who are now having to remedy past discriminatory practices.
The EU Pay Transparency Directive may not apply directly in the UK, but the principle of eliminating pay discrimination is morally the right thing to do and will eventually catch up with us all.
For guidance and support, please contact Justine Woolf, or to find out more about our pay and reward consultancy, contact the Innecto team.
