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?
Key impact areas of the EU Pay Transparency Directive
For businesses and employees, the headlines from the EU Pay Transparency Directive (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 year, employers with 250+ workers will need to publicise information on their gender pay gap. Employers with 100-249 workers will need to report information every three years.
- 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.
Transparency around pay is only moving in one direction.
Lucky escape for UK employers?
The Labour government has proposed some increased requirements around gender pay reporting. These include narratives and action plans for closing gaps and new reporting around ethnicity and disability. But we are yet to see any real detail, and requirements are likely to lag behind the EU.
Some UK organisations might reflect favourably on Brexit in terms of dodging many of those direct impacts. However, those who do need to comply (i.e. those with EU-based operations) 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, not having to answer these questions will come as a relief. But 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) more than 26% of the workforce is covered by Pay Transparency laws. These laws include 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 left in the dark around pay.
The path to sustainable pay equity
It is not always easy to be open about pay when managing legacy structures or dealing with anomalies that are difficult to explain. But we can all do the right thing by being more open about how reward works in our organisations.
We must recognise that rectifying legacy pay arrangements can cost, but historical inequities don’t go away. If they are not confronted they will likely cause further issues, 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 if organisations don’t tackle pay transparency, repercussions will eventually catch up with them.
