Mandated changes in EU pay transparency reporting could have “significant ripple effects” for global compensation, according to Vijay Gandhi, regional director EMEA at consulting firm Korn Ferry.
Recent research from the firm revealed that 51.9 percent of EU businesses plan to extend the changes required by the EU pay transparency directive beyond EU borders.
Asked how many employees could be affected by the EU rule changes, Gandhi told Benefits Expert: “While it is difficult to provide precise figures at this time, employees in non-EU countries could be increasingly affected, as companies move toward aligning their pay standards more closely with EU benchmarks.”
He said that the shift towards greater transparency shows a wider commitment to pay equity and fairness among employers. Embracing the changes also helps businesses differentiate their employee value proportion today and in the future.
“In the UK specifically, it is likely that a large proportion of the workforce will experience some impact as compensation practices in the EU begin to set global standards. Over time, this could mean that pay structures aligned with EU standards will increasingly become the norm, raising expectations across regions and fostering a more unified approach to global talent management.”
EU ripple effects
With the UK in line to feel the ripple effects of changes in the EU, Gandhi outlined several proactive steps UK employers could take to align with emerging expectations.
“One of the most important is ensuring fair pay practices, which extend beyond equal pay to include fairness in terms of opportunity and advancement for all employees. The UK’s existing reporting requirements on gender, race, and disability already position employers to address these key aspects, but the EU directive may increase the pressure to further enhance transparency and accountability in pay practices.”
Another crucial element, highlighted by Gandhi, is the growing prominence and role of unions, which are expected to continue to influence how pay structures are negotiated and communicated.
“UK employers should be prepared for increased union engagement around pay transparency and fairness, as well as the potential for stronger demands for greater equity.
“There is also a broader desire within the UK to align more closely with EU standards, particularly around fairness in compensation. By adopting best practices and preparing for future regulatory changes, UK employers can not only mitigate the risk of non-compliance but also strengthen their employer brand, attract diverse talent, and ensure they are prepared for a more transparent and equitable future.”
Adoption challenges
Adopting greater pay transparency is not without its challenges, which include GDPR compliance, leadership resistance to change, and ensuring good quality data.
To overcome these potential barriers, Gandhi outlined several strategies for employers. These include making sure that they understand the legal frameworks around pay transparency and then put in place data protection protocols to safeguard employee information.
He said conducting regular pay equity analysis would help employers identify disparities as well as provide a baseline for fair pay practices.
“Refining job architecture also ensures consistent and accurate compensation data, aligning job roles and descriptions with specific responsibilities. Reviewing and adjusting the reward strategy and design will also help promote fairness in compensation and ensure competitiveness,” he said.
Communicating and enabling change is key for employers that face resistance to transparency inside their organisation. “By fostering a culture of openness and trust, employers can clearly explain the benefits of pay transparency and support employees and managers in adapting to these changes.”
Gandhi was clear that HR has a pivotal role in addressing the pay transparency challenges.
“First, HR should take the lead in driving the change, ensuring alignment with the organisation’s broader governance structures. This includes keeping the remuneration committee well-informed on pay transparency developments, as these issues significantly impact governance and decision-making.
“Additionally, HR can facilitate data diagnosis, conducting regular audits to assess pay equity and identify any gaps. With this data, HR can then design and implement a comprehensive strategy for addressing these disparities and improving transparency, ensuring the approach is both fair and aligned with best practices.
“By positioning itself as the central function for change, HR can help the organisation navigate the complexities of pay transparency while fostering a more equitable and transparent workplace.”
