A new EU law has landed — and it’s quickly become the topic du jour for businesses in Europe. Executive teams are on high alert, and preparation is the name of the game. Or… is it?
While some companies are already reviewing their processes and working to push through changes with minimum disruption, others are burying their heads in the sand, hoping legal grey areas will buy them time.
Let’s cut to the chase: we’re talking about Directive 2023/970 of 10 May 2023, designed to strengthen gender equality through pay transparency.
But if you’re feeling a strong sense of déjà-vu, you’re not imagining things.
Back in 2016, the introduction of the General Data Protection Regulation (GDPR) caused a similar flurry of activity — this time in legal and data protection departments. It lasted right up until its enforcement in 2018.
So, what can HR and compensation leaders learn from that period?
To answer this question, I spoke with Julie Schwartz, a specialist in privacy and cybersecurity. Together, we looked back on the ways that companies prepared (or didn’t) for the GDPR — and how we can apply the lessons they learned today.
The result? A fascinating and informative discussion that I hope will guide you through this transitional period.
The grasshopper and the ant
Have you heard the story of the grasshopper and the ant? While the ant diligently prepares for winter, the grasshopper sings the summer away, only to find itself caught short with no supplies when the cold sets in.
And, much like with the GDPR, companies preparing for the EU Pay Transparency Directive tend to find themselves in one camp or another. Some, like our friend the ant, are planning ahead, updating their processes, and working to avoid a last-minute scramble.
‘Some companies immediately took action, taking the necessary steps to comply,’ explains Julie Schwartz, reflecting on the GDPR rollout. These are also the companies that quickly understood data security was a solid marketing opportunity.
They realised that protecting consumer data, and especially communicating about data security, had become a winning strategy. This observation helped those early adopters to secure buy-in and budget very quickly.
Today, we’re seeing a similar pattern with pay transparency. The companies that are already tackling the issue head-on are well aware of the positive impact it will have on their employer brand. If you’re an HR or compensation leader looking to secure resources, that’s the message to take to leadership.
And then there are the grasshoppers…
‘Others simply ignored the issue and hoped for the best, especially when they didn’t have the budget to properly manage the transition. They opted for inaction while waiting for the first sanctions,’ Julie says.
Just like in the fable, waiting too long to act came with real consequences.
‘When those latecomers finally decided to act on the GDPR, they found the project was simply too big to manage in six months,’ Julie says.
‘They suddenly realised the scope of the work that needed to be done, the budget it would take, and the new tasks they’d have to add as implementation progressed.
It’s very difficult to do things well in a hurry.’
I could say the same thing, word for word, about the transition towards pay transparency.
Designing fair compensation policies, correcting historical inequities and training both HR teams and managers on compensation doesn’t happen overnight. It’s a long-term project, which requires time, planning and commitment.
Directive or regulation?
So far, the comparison holds up. But as I talked with Julie, I had to admit: when it comes to pay transparency, there are far fewer companies playing the role of the ‘model student’.
To be honest, very few organisations are truly tackling the issue head-on.
And there’s another key difference, too: to comply with the GDPR, companies were required to overhaul their internal structures. For starters, they had to appoint a Data Protection Officer — a mandatory role under the new rules.
In many cases, companies also set up dedicated task forces to ensure proper implementation. Granted, these systems weren’t always perfect, and already overloaded teams often saw their workloads increase. But the effort was there.
In contrast, I’ve rarely seen companies create a dedicated task force for pay transparency.
Why is this?
Part of the answer may lie in a subtle legal nuance. The GDPR is a regulation — a law that applies directly in all EU member states from the implementation date (in this case, 25 May 2018).
The law also clearly outlines the sanctions for non-compliance, leaving little room for doubt.
The law on pay transparency, on the other hand, is a directive.
As Julie Schwartz points out, that means it needs to be transposed into national law in each member state before it's fully enforceable (member states have until June 2026 to do this).
Until then, we can only speculate about exactly what the directive will look like in each country and what the consequences for non-compliance will be.
That uncertainty has had a diluting effect: without a clear legal deadline or defined penalties, there isn’t the same sense of urgency.
The winds of change
Is this why the GDPR had such a big impact on businesses?
After all, all EU member states already had at least some form of data protection regulations in place before the GDPR came into force. According to Julie Schwartz, 75% of the provisions of the GDPR already existed in French law prior to 2018.
But when the GDPR was implemented, complaints and penalties surged.
‘In France, we saw an explosion in complaints to the CNIL* and data-access requests directed at companies, ’ Julie says.
Why did this happen? Most likely, it was due to the extra media attention the issue was getting.
‘We talked so much about the GDPR that consumers realised they had rights and decided to exert them… even though those rights already existed before the GDPR.’
In the same way, it’s highly likely that legal action over salary inequities — which are already illegal in nearly all of Europe — will increase sharply in the coming years. And that shift won’t solely be down to the new law or the sanctions it imposes. The extra media attention on pay transparency will also have an impact.
Put simply, the more people talk about pay transparency, the better employees will understand their existing rights — and feel empowered to bring cases of pay discrimination. This may well be the clearest lesson we can take from the rollout of the GDPR.
After all, the world didn’t change overnight on 25 May 2018 — there was no sudden tidal wave. But, between 2016 and 2018, data privacy became increasingly front and centre for employees and employers. These days, consumers expect their data to be protected — and are willing to take legal action if it isn't.
*CNIL = ‘Commission nationale de l’informatique et des libertés’, France’s independent data protection authority.
On the lookout for unintended consequences
Between 2016 and 2018, most companies realised they needed to move with the times when it comes to data privacy. But Julie also points out an unintended consequence of the GDPR:
‘Sometimes the law is used in ways that weren’t really anticipated. For example, in HR disputes before they even reach court, an employee might invoke GDPR to request access to all their data held by the company — using it to build their case. That’s not really the spirit of the law.’
In the same way, the EU Pay Transparency Directive may bring indirect consequences that we’re not yet able to foresee. And, just like the final rules, which may be subtly different in each country, the sanctions for non-compliance remain largely unclear.
What is clear, however, is this: companies that commit to transparency early will be in a far stronger position than those who hang back. They’ll avoid the need to overhaul processes at the last minute, stay ahead of compliance, and most importantly, gain a competitive advantage in the employer branding game.
My advice? Don’t be afraid to be an ant in a world of grasshoppers. After all, the future is much less certain for those who spent their summer singing instead of getting ahead of the curve.
To continue the conversation
Here’s some reading to keep the conversation ongoing on this topic. If you’ve come across any interesting reads, feel free to send them my way!
The gender pay gap isn’t budging enough, but the best companies close it — Josh Bersin, HR Executive
Josh Bersin is one of the voices in HR that I follow most carefully. In this article, he takes stock of the gender pay gap, which isn’t closing fast enough despite the work of the best businesses.
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