In the first of a two-part series on global pay transparency, Center On Executive Compensation and HR Policy Global members heard how companies are tackling compliance with the EU directive on pay transparency and the broader implications of pay transparency in the U.S. and beyond.
Roll up your sleeves: Elaine Beddome of HP discussed the importance of “taking inventory” of the different requirements in each country and understanding where employees are located. She also urged that CHROs consider the nuances of the various laws, such as how “workers” and “pay” are defined, to prepare for pay equity analyses.
Key questions to ask:
- Do we have the data we need? Many organizations do not have globally centralized HR and payroll systems and will have data access challenges.
- Do we have the partners we need? Assess internal and external resources to collect data and perform the necessary analyses.
- What does the job architecture look like in that region? Some regions have more sophisticated pay structures than others.
Find your north star: Thad Shepherd of Marriott International suggested two guiding principles for transparency amid business complexity and differing generational and cultural viewpoints:
- Ensure adherence to legal obligations; and
- Invest wisely in balancing financial and reputational risks while remaining accountable for the investments put into compliance efforts.
Understanding equal work of equal value: Employers must use defensible objective criteria for pay decisions such as education, professional and training requirements, skills, effort, responsibilities, and the nature of work. Christine Hendrickson of Syndio pointed out that employers should evaluate jobs across the organization – not solely from a functional perspective. While the law itself could be interpreted to undermine the concept of “market-based pay,” she suspects companies will likely continue their practice of external market-pricing as a part of their objective criteria but not rely on it fully.
Find the root cause of pay gaps: Ms. Hendrickson stated that “the biggest pay gaps are driven by pay decisions at the time of hire and at promotions.” She advised that:
- Companies begin conversations with works councils right away to discuss potential concerns. Determine what pay adjustments to make during the 2025 salary increase cycle before the 2026 data disclosure takes effect.
- Employers who are new to doing pay studies should be aware that unadjusted pay gaps are driven primarily by disparities in “pay opportunities” and the emphasis should be on how to address this on a larger scale.
Center’s take on U.S. implications: Ani Huang shared how the EU directive could increase pressure on U.S. companies that are already facing shareholder proposals on pay gap disclosure and potential U.S. regulatory requirements like EEOC Component 2 data collection and federal contractor pay transparency requirements.
What’s next? Join us for Part 2 of the Global Pay Transparency Series: UK vs Brazil, the Past and Present of Global Pay Transparency Reporting Obligations, on July 10.
