Governments across the world are asking companies to be more transparent about pay. Organizations need to prepare for a new wave of pay transparency legislation which is sweeping the globe.
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Pay transparency legislation is an important tool in ensuring equality in the workplace. Placing more information in the hands of employees allows employees to better understand how they are paid, to be assured they are being paid fairly and to make informed decisions about their careers.
In Europe, employers are focused on preparing for the European Union (EU) Pay Transparency Directive, while in the U.S. legislative momentum across the states has been building in recent years.
Pay transparency is growing in momentum across the U.S., with requirements recently coming into force in areas with significant economies, like New York, California and Washington. While the specific details of the legislation vary from jurisdiction to jurisdiction, the intention is the same: to level the playing field when it comes to pay, promoting transparency and equality.
The EU Pay Transparency Directive is a big step forward for Europe. The Directive requires each Member State to introduce legislation by 2026 requiring all employers in the Member State to explain their approach to pay. Employers must disclose salary ranges to new hires and average pay levels to current employees. Organisations with over 100 employees will also be required to disclose pay gaps for each category of worker. Employers should prepare to comply with the directive.
The directive means employees will have a much clearer understanding of where they stand on pay — and be in a stronger position to question any discrepancies. Preparing employees and managers and leaders for this level of transparency is a critical part of preparation activity. Meanwhile, conducting regular pay equity analytics will put employers in a stronger position to correct any pay inequalities and steadily create a fair and inclusive environment.
Pay transparency legislation is not limited to Europe and the U.S., Ecuador, Brazil and Canada have all recently introduced equal pay laws. Employers must be confident that they are compliant wherever they operate.
It’s important to bring your whole organization along on your pay transparency journey. Gather different perspectives on how your pay story is currently told, from employees to HR, leaders and managers. By working out where you currently are, you can establish where you need to get to.
As you move forward, technology will be an important tool in streamlining and automating the process. Most employers will already use the systems they already have in place to gather and organize pay-related information.
