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Focus on 2023 – Pay transparency strategies

February 10, 2023

Tamsin Sridhara and Eva Jesmiatka discuss the upcoming pay transparency legislation across Europe with senior HR leaders at Focus on 2023.
Compensation Strategy & Design|Ukupne nagrade |Executive Compensation
Focus on 2023 – Pay transparency strategies

Tamsin Sridhara and Eva Jesmiatka discuss the upcoming pay transparency legislation across Europe with senior HR leaders at Focus on 2023.

The video covers the following topics and insights:

  • The EU Pay Transparency Directive
  • What we mean by pay equity
  • Structures and process for pay transparency
  • Pay transparency helps ensure fair pay
  • The need for manager education on pay equity
Video transcript

Focus on 2023 – Pay Transparency strategies


EVA JESMIATKA: Good afternoon, everyone. And good afternoon, Tamsin. Great to be here today. So Tamsin, you and I, we're going to talk about pay equity and transparency. And I think it's fair to say that for you and I, it's a topic that at the moment and actually for the last year or so, it's a topic that we talk about actually on a daily basis, either with each other or with our clients.

But before we dive into the discussion, I'm sure that a lot of people in the audience are now wondering, what do these products in front of us have to do with pay equity and transparency?

TAMSIN SHRIDHARA: I mean, Robert Peston mentioned that the younger generation we have to bear in mind. And my niece is applying for a job. She said to me, why is it if I go into a supermarket, everything I buy in there has a price on it? And yet when I go to get a job, there is no price on the job.

And it made me stop back and think, so we as reward practitioners, why is that the case? Those big decisions in life, I go and buy a house, it's got a price on it. I can even go and buy my funeral and it's got a price on it. But if I go and look at a job, there is not a price on that. And you look at Al the data that Al and Lisa was saying, and this has consequences to it because pay and bonus matters to people when they join an organization.

But there can be that perception of unfairness because they don't know what they're meant to be getting. And the reality is there can be actual unfairness that perpetuates itself. So what we're seeing now is that situation where governments are stepping in and telling us as employers that we need to put a price on a job.

So that's what we're seeing in the States at the moment, that's what the EU is discussing, and that's what sort of Israel has already put in place. And that is meant to address greater transparency to address, in part, sort of pay equity. So that's where we wanted to start, wasn't it, Eva? Is just saying, we know pay transparency is coming, and we want you to be prepared for it. So maybe it's worth just recapping what we mean by pay equity. And I think we might need the--

EVA JESMIATKA: I realize I forgot ticker. I'm going pick that up while I'm talking through it. Yeah. So what do we actually mean with pay equity? Pay equity in essence works on the principle that as a company, you need to make sure that you offer equal pay for work of equal value. What is really important to bear in mind with that is that it doesn't mean that you need to pay exactly the same for people who are doing the same job.

But what it does mean-- I think I need to click through a bit, I realize. This is a little bit of a spoiler alert. But what it does mean is that any differences in pay can only be for objective reasons. And they can't be down to any protected characteristics such as gender, such as ethnicity, such as age, sexual orientation, et cetera.

And the concept of pay equity and equal pay in itself is not new because equal pay laws have actually been around for decades. This here is actually 65 years since the Treaty of Rome. Next year is going to be 60 years since John F Kennedy signed to Equal Pay Act. But the big difference that we're seeing at the moment is that concept of transparency.

And what we are seeing is that the pressure on companies to become more transparent around pay equity and pay in general is very rapidly increasing. And we actually see that this pressure is coming from multiple different angles. So starting off with employees, we actually see that employees, their expectations around this have massively increased.

Reality as well is that actually, they have a lot more access to information around pay from external data. So they are able more and more to find out what is a typical pay rate for a job that I'm doing. But they don't want to find that out from external data. They want to hear it from you as their employer.

And another reality is with the EU fair pay directive that's coming, within four to five years from now, all employees in EU member states will have the right to ask you, how does my pay compare to the average male and female pay of peers in this organization?

And on the other end-- so we have, of course, on the employee perspective. But then there is another group of stakeholders that are also putting pressure on organizations. So Tamsin, maybe you want to say a bit more of what we're seeing from investors and governments.

TAMSIN SHRIDHARA: Yeah, you're right about the investors. So when Robert was talking, he really highlighted the issue we've got in the UK about talent shortages. So businesses, investors, what they're looking to do to businesses now is say, we want evidence you've got a sustainable business.

When that comes to people, it means you've got a talent supply, but critically is also that you're paying them fairly because paying people fairly is fundamental to retaining your talent. And so at the moment, investors are looking to you to explain broadly what you're doing on pay equity.

So we've got 95% of European companies saying we're going to say more about what they're doing generally on pay equity. But at any moment in time, these investors, the rating agencies could ask you to put some numbers out there to demonstrate that you are paying and you can explain all the objective reasons for difference. So there could be that other pressure coming from investors as well.

EVA JESMIATKA: Yeah, exactly. So as I mentioned at the beginning, Tamsin you and I were literally having on a daily basis conversation with companies around how do we prepare for this? And what do we need to do to build that confidence, but also to prepare for that increased transparency?

And having worked with a lot of companies on this but also just actually thinking from us as fair pay practitioners, what do we really believe the levers are for delivering pay equity and preparing for transparency? And in our point of view, there are four core pay equity levers that are really underpinning this. So that's structures, processes, education, analytics and reporting.

And it's probably worth to maybe talk about those in a bit more detail and bring out as well what are the things that we have seen that some of our clients and companies are doing around this that can really support a pay equity agenda. So Tamsin, maybe you want to start with taking structures and processes combined because I think they go quite sort of hand in hand anyway.

TAMSIN SHRIDHARA: Yeah. So if we just imagine, you're a manager making a pay decision and you're a manager making a pay decision. And if you've got no parameters, you could be making a pay decision on the same job and you can get very different outcomes. So the two employees then a couple of years can say to you, well, can you explain the reason for difference? And you can't. You just can't explain the difference.

And this is where structure gets you. So some of the fundamentals. You've got a job architecture, so you know people are-- where people are doing similar types of work, job leveling, so similar levels of work. And then you put a pay range in there, so that adds some extra parameters. And then you say within that pay range, you can have differences based on performance or location and that sort of thing.

So that gives you some parameters. And that immediately then supports that pay equity situation. And it was very vividly brought home to me with a client recently relooking at all of this. They have professional staff, and then they decided for their professional staff, they were going to recognize career steps. So step progression depending on experience and base salary. And they had support staff, and they wanted to keep salary ranges for support staff.

So they kept salary ranges a bit close but very clear guidance. And then after doing that, they removed all the unexplained differences in pay. And then they were just left with a much easier system to work with and much more ready for transparency. But a big part of that was making sure the business and the managers also bought into that. I know that's something you've been looking at, Eva.

EVA JESMIATKA: Yeah. So I think that brings us to that third lever, which is education. And maybe to share a bit of insights from a study that I did earlier in the year with one of my clients. So they wanted to understand what are other companies really doing about this, and where is their thinking to focus on pay equity and support that transparency?

And as part of that study, we spoke to a number of different companies who are quite well progressed when it comes to pay equity agenda. And what was really interesting to find is that literally in every conversation that we had with those different companies, education came out as 'that is going to be an absolute priority for us'.

Because there was broad recognition that first of all as a large company, it can't be just on HR and reward to make this happen because at the end of the day, it's typically your managers who are actually involved in making pay decision. But we're also the ones who are having conversations with people around pay. So when somebody has a question around their pay, they will go to their manager.

And what all of them said is in order to become more transparent, we can't do that overnight. But what we need to make sure that we do is that our managers really understand how do we actually approach pay in this organization? What are the things that we reward for? And how do we make those decisions? But also to your point around structures and processes, what are the structures and processes that we have here?

And how do I really use them in a consistent way to make sure that for every single employee, we follow the same consistent and fair process. And by educating managers on that, they said that is going to be the absolute sort of short term priority. Longer term, yes, we recognize we also need to focus on the broader employee population. But we really need to start with that manager group because they are so key in this whole process.

So I think if you think about it structures, processes, education, those are almost three elements that really serve as sort of your input levers to really support pay equity, achieving that, supporting the road to transparency. Then analytics and reporting is maybe a bit more of an output sort of lever. And maybe Tamsin, I know that you've been doing some really big projects over the last few months. So maybe you want to talk about that a bit more.

TAMSIN SHRIDHARA: I think there are just three tips I give for analytics. For the analytics is knowing what questions you want to answer. So typically in this space, you're looking to say questions you're looking to answer is, do we have any differences in pay we can't explain? First question. Second question, any of there's differences in pay related to gender or ethnicity, anything that is sensitive.

And the next thing is about so what are we going to do about it. So then the tip is whenever you're doing analytics, you need to make sure that it's proximate to making change happen because there's no point doing analytics unless you're going to have the action. So at the moment, all the analytics we're doing is to inform action and make sure that you're making those incremental improvements to be ready for greater transparency.

EVA JESMIATKA: So to quickly summarize then, pay equity and transparency is really coming. And I think we can all agree on that. And the key for organizations is going to be ready for that and to build confidence that you are delivering pay equity. You do that by really focusing on having the right fundamentals in place, so your structures and your. processes.

Really think about that education piece because I think that's such a valid point. Educate your managers, and do your checks to make sure that everything is running as intended. And then no matter who is going to ask you questions around pay, whether it's employees, whether that's investors, whether that's governments, you should be in a far better position to answer questions with confidence. Tamsin, thank you very much.

TAMSIN SHRIDHARA: Put a price on your job.


Europe Pay Equity Lead

Global Pay Equity Lead
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