EU pay transperancy

How the EU’s ‘Pay Transparency Directive’ Will Help Close the Wage Gap 

In Europe today, women are paid 13% less than men for the same work. Besides being utterly unfair, the situation hurts just about everyone involved. Women lose out on compensation they’ve rightfully earned, making it harder for them to advance. They also suffer the effects of discrimination. They feel undervalued and unappreciated, which could create increased vulnerability to depression and anxiety.

The workplace also suffers. Any employee who feels undervalued is apt to underperform. They also switch jobs more often. Ultimately, employee morale drops and company culture suffers across the board. Hiring becomes more difficult and the company’s brand loses some of its luster.

Fortunately, the European Parliament isn’t waiting for European businesses to fix the problem on their own. It passed the Pay Transparency Directive to force companies to end the culture of pay secrecy – one of the factors responsible for the pay gap in the first place. Not knowing the prevailing pay rate at one’s level makes it harder to demand fair pay.

Each EU member state will be required to implement the directive in its own way and set its own penalties for businesses that are not compliant. Under the directive:

  • Employees will be able to receive information on average pay levels at their company, organized by gender.
  • Ads for jobs must be gender neutral and pay levels set without regard for gender.
  • Contract clauses that bar disclosing pay levels will be banned.
  • Companies with pay gaps of 5% or more will carry out joint assessments to ensure compensation is fair.
  • The burden of proof in a fair pay dispute shifts to the employer.

The new measure should help cut the wage gap, increase fairness, and improve workplace culture. It won’t eliminate the wage gap overnight, but it’s a big and commendable step in the right direction.

Fighting Wage Discrimination

Wage disparity between men and women remains one of the great paradoxes of today’s business culture. On one hand, there is clear evidence that gender balance and pay equity are good for business. Data shows that companies with women in leadership roles are more profitable overall than those led by males.

On the other hand, the data also shows low numbers of women in senior positions and a wide disparity in pay for the same work across all levels.

Fixing the problem should be a high priority for businesses, and with the new EU directives, companies will have even more incentive to create a gender-neutral culture.

Here are some ways companies can reduce the gender pay gap:

  • Bring more women into senior level positions – Too often, women are overlooked for senior appointments simply because men are still perceived as being more available for working long hours.
  • Improve the status of women in traditionally female occupations – Improving gender balance in all departments goes a long way toward showing that the work of both men and women is essential to the success of the company.
  • Use AI to write job adverts that are free from gender bias language – AI can eliminate the unconscious bias that often makes its way into job ads.
  • Track hiring and wage equity through DEI stats – Make sure the hiring throughout your company matches your organizational values.
  • Maintain a central pay control on starting salary across all levels/roles – When salaries are fair from the very beginning and gender-neutral criteria are set for promotions and raises, there is less room for gender bias to creep into the system.

It’s no secret that all employees, male and female, want to work for companies that are known for fair policies. Fighting the wage gap will help businesses attract more employees, raise the caliber of candidates for positions, and improve retention rates.

With the era of pay transparency coming to Europe, an immediate improvement should follow – to the benefit of employees and organizations alike.