Preparing for the EU Pay Transparency Directive - A Comprehensive Checklist

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We’ve talked about the who, what, why of the EU Pay Transparency Directive,  we’ve shared why UK companies should care about the directive and what lessons we can learn from the US transparency movement.

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So now what’s left? Giving you the best advice for how your company can begin to prepare for the EU Pay Transparency Directive today!

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In this article we will help you to understand the following

• The requirements of the EU Pay Transparency Directive
• Comprehensive checklist to ensure compliance to the EU Directive
• Cost of not preparing for the EU Pay Transparency Directive

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Understanding the EU Pay Transparency Directive

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What is the EU transparency directive?

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The EU Pay Transparency Directive is a new piece of legislation aimed at promoting wage transparency and reducing the gender pay gap across the European Union.

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The directive requires employers with 250 or more employees to publish information about the salaries of their employees, broken down by gender, job category, and possibly other factors.

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The directive also includes a range of measures aimed at improving wage transparency, such as requiring job ads to include salary ranges and prohibiting employers from asking job candidates about their previous salaries.

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Why transparency now?

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What is transparency really? Giving people idea of why they make what they make

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The global trend towards transparency for candidates is driven by a desire to promote fairness and equity in the hiring process, as well as to attract and retain top talent. Candidates are increasingly demanding transparency from employers, particularly with regard to salary information and the hiring process itself.

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Employers that are able to provide this transparency are likely to be viewed more favorably by candidates and may have a competitive advantage in the talent marketplace. Additionally, there is growing recognition that greater salary transparency can help to address issues such as pay equity and diversity in the workplace.

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Comprehensive checklist to ensure compliance to the EU Directive

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Breaking it down into sections our expert compensation experts have put together the ultimate preparation list to ensure that your company is ready to comply!

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How to prepare for pay transparency measures for candidates & employees?

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Reminder: the directive includes measures like transparency for job-seekers, right to information for workers, reporting on the gender pay gap

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Say goodbye to the days of compensation being hidden in a black box. Although it can feel like a mountain of tasks, we’re breaking it down for you to get ready for 2024.

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#1 The preparation stage

Before you even begin to think about diving into your transparency journey, there are a few steps that we recommend to make this process as smooth as possible.

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These "behind the scenes" tasks are critical to the efficiency of your preparation:

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[ ]  Do you have the support of your leadership and/or main stakeholders in undertaking this transparency project?

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[ ]  Have you identified the main people involved in the evaluation & implementation and gotten them onboarded?

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[ ]  What is your timeline to dedicate to preparing for transparency?

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[ ]  Have you educated yourself on the EU Pay Transparency Directive?

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Now that you have this part under control, it’s time to start digging into your current compensation approach.

‍If you haven't had structure from day one and stuck with it, the checklist above can feel overwhelming. However, don't let that discourage you. Transparency is a journey.

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Your compensation approach checklist - answer the following questions with your team:

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[ ]  What is your current compensation philosophy? If you don’t have one yet, add it to the list of to-do.

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[ ]  What is your attitude towards transparency? Basic compliance?

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[ ]  Do you have a way to track and monitor pay gaps and pay inequity?

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[ ]  Have you evaluated internally the fairness of your compensation decisions?

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[ ]  Where do you get your data for your salaries? Internal? External using a salary benchmarking tool? External using a free tool?

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[ ]  What is your current approach to compensation communication? What is done well and what is done poorly?

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[ ]  Does your team feel comfortable and confident explaining compensation decisions to candidates/employees? Where do they need more support?

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Managing and tracking pay gaps and pay inequity is such a pain right? Luckily, we have just the tool for you…

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#2 The big work stage

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Now that you have answered the questions above with your team, it’s time to take some action.

‍Use the checklist and suggestions below to build out your transparency roadmap, take it step by step.

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The work in preparing for pay transparency:

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[ ]  Update and align your team on your Compensation Philosophy (Remember: it should align with your company values)

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[ ]  Determine how transparent you would like to be (Keeping in mind that the minimum is transparency for candidates & employees)

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[ ]  Use real-time quality data. What is good data? Learn here.

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[ ]  Create pay levels using Figures

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[ ]  Create salary bands using Figures

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[ ]  Have you created a transparency roadmap using the actions above?

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Don’t forget: all your hard work will pay off when your company doesn’t have sanctions, attracts top talent, and has increased employee retention!

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#3 The implementation & sharing stage

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Once you have your roadmap in place, it’s up to you to implement and share at your own pace. The benefit of starting your journey to transparency now, is that you can take the time to build the best strategy that works for your company given your resources.

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Behind the scenes: Implementation of your new transparent compensation strategy

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[ ]  Complete your roadmap listed above.

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[ ]  Onboard your managers (in touch with candidates and employees) with compensation communication elements

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Out on stage: Sharing of your new transparent compensation strategy

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[ ]  Have you communicated internally to your team the new updates in the compensation strategy?

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[ ]  Have you updated your job descriptions with salary ranges and data sources?

‍Go a step further & increase your employer brand: launch an external communications plan to share your commitment to fair & transparent compensation decisions!

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Cost of not preparing for the EU Pay Transparency Directive

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#1 Time is ticking away, rushing leads to mistakes

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The deadline for companies to comply with the EU Pay Transparency Directive is fast approaching.

If companies do not start preparing now, they run the risk of falling behind and making costly mistakes. Rushing to meet the deadline can also lead to errors and omissions that could put companies in legal jeopardy.

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It is important for companies to take the time to thoroughly understand the requirements of the directive and develop a comprehensive plan for compliance.

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#2 Potential risks and consequences for non-compliance

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Non-compliance with the EU Pay Transparency Directive can result in fines and reputation damage for companies.

If a company fails to publish the required information or provides false or misleading information, they may be subject to fines and other penalties.

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What happens if your company has a pay gap?

Companies that are found to have an unjustified 5% pay gaps between employees may face sanctions and damage to their reputation. As of April 2023, there is no further official information on the potential sanctions or actions.

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Conclusion

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Well folks, there you have it - our comprehensive checklist for preparing for the EU Pay  Directive! It's time to kick those pay gaps to the curb and ensure everyone is getting the compensation they deserve.

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At Figures, we're all about fairness and transparency, and this new directive is a step in the right direction. So let's get to work and make sure we're all on the same page when it comes to pay.

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Happy pay transparency prepping, everyone!

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Note: The information provided in this article by Figures does not, and is not intended to, substitute or constitute legal advice.