Pay transparency rules are set to change across the EU, and with a new government in Westminster, changes could be in the pipeline for the UK too. It makes sense to get on the front foot, says Sally Purbrick, senior reward and HR specialist and former Anglian Water Services head of reward.
Back in March 2022, the UK government announced it would conduct a pilot project on pay transparency to “break down barriers for women”.
No pilots materialised and the plans were abandoned in May 2024.
Fast forward to 5 July, 2024, and the new Labour government has taken office. Many are waiting to see how pre-election pledges to “close the gender pay gap once and for all” will pan out.
With the UK gender pay gap among all employees at 14.3 percent in November 2023, and 7.7 percent for full time employees only, there is certainly more work to be done.
But while employers watch and wait to see what the UK government will do next, they need to keep an eye on changes happening around EU pay transparency requirements.
New EU rules
On 24 April 2023, the EU pay transparency directive was adopted by the EU Council. It came into force in June 2023.
The directive aims to combat pay discrimination and help close the gender pay gap in the EU, which stood at 12.7 percent across the group in 2022.
EU member states have until June 2026 to transpose the directive into national legislation. But countries don’t have to wait until the deadline to take action.
Sweden became the first member state to release its draft local legislation in mid July 2024.
Given that the UK officially left the EU on 31 January 2020, some might wonder why the UK should worry about EU rules.
“Employers with teams solely in the UK won’t be affected,” says Purbrick. “But if you’re in the UK and have employees in other member states, even a small number, then you do need to keep abreast of the changes.”
She warns that while the deadline for EU countries to transpose the directive might be July 2026, countries could act before that.
Commenting on Sweden’s draft legislation, Purbrick says: “The [directive’s] headline number was 100, but Sweden is interpreting that as 10. So [you need to be aware] even if you have just 10 employees.
“We don’t know about all the other countries so far, so what I’d say is until everything is totally agreed, keep watching, keep learning. But if you have any employees in any member state you may well have to comply.”
Recruitment competition
Purbrick says that while UK employers may not be directly affected, it makes sense to keep abreast of EU changes because they may well be competing for talent with organisations that are complying.
“If you’re working for an employer that is UK only, they might not keep abreast of what’s happening. You might be attracted to a job in another organisation that is complying [either] because it’s best practice [and/or] because it has to as they’ve got some international or European businesses. So, you’re going to have a better experience being part of that organisation.
“Parity with other organisations is one point. But my bigger point is, it really is best practice. Why would we not want to make things better than what we have today?”
Know your EU directive
The EU directive makes it compulsory for employers to tell job seekers the starting salary or pay range of advertised posts, and recruiters will no longer be allowed to ask candidates about their pay history. One reason for the latter requirement is that asking about pay history during the hiring process contributes to the gender pay gap and keeps women on lower wages, according to the Fawcett Society.
Once in post, workers will be entitled to ask their employers for information about average pay levels, broken down by sex, for categories of employees doing the same work or work of equal value. They will also be able to ask about the criteria employers have used to determine pay and career progression.
Reporting obligations
Large companies, with more than 250 employees, will be required to report annually on the gender pay gap in their organisation to the relevant national authority.
Smaller organisations will be required to report their gap every three years, while employers with less than 100 employees won’t be required to report.
Under the rules, if the report reveals a pay gap of more than 5 percent that cannot be justified by objective, gender-neutral criteria, companies will be required to take action in the form of a joint pay assessment carried out in cooperation with workers’ representatives.
Access to justice will also be enhanced. Workers who have suffered gender pay discrimination can receive compensation, including full recovery of back pay and related bonuses or payments in kind.
The burden of proof in pay discrimination cases has traditionally fallen on the employee, but with these new rules the responsibility lies with the employer to prove that they have not violated EU rules on equal pay and pay transparency.
The directive also makes it clear that EU member countries will need to ensure that penalties for violations are effective, proportionate and dissuasive and will include fines.
Intersectional discrimination, where multiple forms of inequality or disadvantage are combined (for example, gender and ethnicity or sexuality), has been included in the new rules.
The directive also contains provisions ensuring that the needs of workers with disabilities are taken into account. For countries that already have pay transparency rules, these are areas where they may need to broaden their legislation.
Where to start
UK employers that want to be prepared for the arrival of pay transparency, be it in the EU or elsewhere, need to ensure they have a good foundation of data to build on, says Purbrick.
She say it’s important to have a good way of evaluating all jobs because without that bedrock ”you’ll crumble at the top”.
To do that employers need to ensure they have a job evaluation system because many organisations don’t actually have that, she adds.
“Evaluate each job, understand the size, scope, scale of each job, and then have a good pay structure that would sit around it. That would be a really good starting place. Don’t make the assumption just because you’re a big organisation you’ve got that cracked because many don’t.”
Purbrick says that these are two big pieces of work “that won’t happen overnight”.
Once this foundation work is in place you can start communicating about the changes with your employees.
“[You need] a good communication plan around what you’re sharing, when you’re sharing it, and why you’re sharing it with employees.
“I’d described those first two – evaluation and pay structure – as big pieces or mid term pieces of work.
“Probably a quicker win would be around [including pay and salary ranges in] job advertisements as it’s the most simple one to do.
“But you need to be prepared for responses about what you are prepared to pay people,” she cautions.
As any job hunter will tell you, there are not loads of job adverts with salary information.
However, there’s a sting in the tail for employers that decide to ignore job advert transparency.
Purbrick explains: “People don’t trust an organisation if it doesn’t say what you’re going to pay people. Therefore, you’re not going to attract the best people.”
For employers who are solely in the UK, she says that while they don’t technically have to comply, if you’re recruiting you could be up against recruiters advertising European roles that have a job salary on there.
“If you’re in the UK, and you’re blind to it, are you going to be attracting the best kind of talent to your organisation?”
Proof is in the prodding
Data is the keystone for employers that want to get on the front foot with pay transparency. But you need to understand that your data is never going to be perfect, says Purbrick.
“But keep poking and prodding, and understanding where your gaps are because you’re going to need comparative data, similar to what we have to do for gender pay reporting. If you don’t know enough about your people that’s going to be very, very hard if you have gaps there.”
Asked about the chancellor’s pre-election pledge to close the gender pay gap, Purbrick says it is a statement that no one would disagree with. “Should employers get on the front foot with it? Absolutely.”
- You can hear more from Sally Purbrick on the topic of evolving pay transparency as she is speaking at the Benefits Expert Summit 26-27 November.
- To attend the event, visit the Benefits Expert Summit website to register.
