The importance of salary bands in preparing for the EU Pay Transparency Directive

December 13, 2023
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The importance of salary bands in preparing for the EU Pay Transparency Directive

The EU Pay transparency directive is coming... are you feeling ready? Don’t worry, our expert team at Figures is here to help you attract and retain talent through the most efficient and compliant way!

Up first, how to prepare for pay transparency for job-seekers using salary bands. 

In this article we will go over:

  • The EU Pay Transparency Directive & it’s implications
  • Pay transparency for job-seekers and workers
  • Why salary bands are key to being ready

The EU Pay Transparency Directive & Its Implications

The EU Pay Transparency Directive is a new regulation that will require companies operating within the EU to provide detailed information on pay scales for all employees. This means that companies will need to have a clear understanding of their salary structures and how they relate to different job titles and levels within the organization.

Check out our full breakdown on the who, what, where, when, why, and how of ​​the incoming EU pay transparency regulations.

The new regulations are aimed at promoting greater transparency and fairness in compensation practices, and reducing the risk of pay discrimination. Companies that are found to be in violation of the regulations could face significant fines and legal action.

Pay Transparency

One of the key elements of the EU pay transparency directive is "pay transparency measures for BOTH workers & employees". This includes:

  • Pay transparency for job-seekers: employers must provide information about pay level or range in the job description or before the interview. Employers will NOT be allowed to ask candidates about pay history.
  • Right to information for workers: irrespective of the size of the company, workers will have the right to request specific information on their pay and average pay levels (or workers doing the same work of equal value).

What does this mean for you? With transparency soon becoming mandatory, you better make sure that your compensation decisions are ready to be shared to candidates and workers. 

Learn more about pay transparency & best practices here.

What happened in the US? 

Lucky for us in Europe, we can look across the ocean to the implementation of pay transparency laws in the United States and learn. We wrote an entire article on it but let's just look into one major problem we saw happening:

Companies who shared unrealistic salary ranges on job postings were being named and shamed.

So what does this mean for you? 

Even if the regulation seems lax, by not putting out your very best transparent ranges or salaries, you can hurt your employer brand in the long run.

Salary bands: the best way to prepare for the EU Pay transparency directive 

What are salary bands? 

Salary bands define how much a company is willing to pay for each job at a given level of execution. They can be based on factors such as:

  • Compensation strategy
  • Internal fairness
  • Company positioning compared to the external market
  • Budgets

Why use salary bands for the EU pay transparency directive?

TLDR: Creating salary bands are the best way to be the most efficient & compliant to the new directive.

#1 Transparency & fairness

With the new legislation coming out requiring European companies (like yours) to share salary information, you should begin preparing now. One of the key advantages of using salary bands is that they promote transparency and fairness in compensation practices.

By assigning specific pay ranges to different levels and job titles, companies can ensure that they are providing fair and consistent compensation to all employees, regardless of their gender, race, or other personal characteristics.

This can help to avoid biases and discrimination in compensation decisions and promote a culture of fairness and equality within the organization and externally to candidates.

#2 Make pay management more effective

In addition to promoting transparency and fairness, using salary bands can also make pay management more effective.

By dividing employees into different levels and job titles and assigning them specific pay ranges, companies can streamline the compensation process and ensure that they are making constructive and consistent compensation decisions.

This can help to reduce the risk of errors and inconsistencies in pay management and ensure that employees are being compensated appropriately for their skills and experience.

How to build your own salary bands? 

Stay tuned for our in-depth article with best practices on how to build your own salary bands...

In conclusion

So, to wrap things up, salary bands are a key important strategy that companies can use to get ready for the new EU pay transparency regulations.

They help promote transparency, fairness, and effective pay management, which can reduce the risk of pay discrimination and make your company more trustworthy and accountable.

That's why salary bands are an absolute must-have for any company that wants to follow the new rules and make sure their compensation practices are fair and equal for everyone.

The best time to start preparing is now! Get in touch with our team to learn how

Further reading on the EU Pay Transparency Series:

Looking for more resources, tools and content?

That's why we created Figures, you don't need to be a compensation expert, we are. With our an all-in-one compensation platform updated in real-time, expert HR and People insights, we want to make your job more efficient and power more fair decisions.

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