Although the Directive provides a definition for categories of workers, many employers are unsure how to group their employees. WTW and Linklaters share guidance on how you should approach it.
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Pay Transparency Legislation
With less than 16 months to go until the EU Pay Transparency Directive (“the Directive”) comes into force, many organizations have started to assess how they will be impacted by the Directive and what they need to do to prepare.
At the core of the Directive is the concept of "categories of workers," which is defined as groups of workers doing the “same work” or “work of equal value”, classified in a non-arbitrary way using gender-neutral and objective criteria.
Although the Directive provides a definition for categories of workers, many employers are unsure how to group their employees. While some are still hopeful that greater guidance will be provided when member states transpose the Directive into national law, based on information shared by member states to date we believe it is reasonable to expect that no further guidance will be provided in the short term.
In the interim, employers must decide how to categorize workers to prepare for the Directive's implementation, which includes identifying and addressing unjustified pay gaps. As they do this, employers should:
Consider that worker representatives will need to agree on the criteria to classify employees into categories of workers. Any decision will therefore also need to be informed by employee representatives’ expectations; and
Not look at the concept too narrowly and only compare employees doing the same work. The ‘equal value’ concept is indeed key. Work of equal value includes work with the same level of skills, effort, responsibility and working conditions (as relevant to the position) and, in line with existing EU guidelines, should be assessed using an objective, gender-neutral and analytical job evaluation system. As such, for defining categories of workers an organization’s job levels (provided job levels are derived at using the criteria outlined above) should form the first basis for grouping workers.
Frequently asked questions against this legal framework are:
Can companies use existing collective labour agreements (“CLAs”) classifications? This may be appropriate in some instances, and will sometimes also be the only practical way of grouping employees with worker representatives’ agreement. However, from the Directive and case law’s perspective, this is only acceptable provided the relevant CLA classification is underpinned by gender-neutral criteria. The Court of Justice of the EU and national courts have indeed repeatedly held that courts are not bound by CLA classifications or unions’ agreements when assessing equal value work.
Can job architecture (e.g. job family groups) be considered? This should be assessed on a case-by-case basis and may entail legal risk if not sufficiently calibrated. It might be acceptable to further break down the grouping using a combination of job levelling and job architecture (e.g. job family groups) but only provided the architecture group roles are based on different skill, efforts, responsibility requirements. For example: roles in the job family group Sales might require different knowledge and skillsets than roles in the job family group IT, but companies should be able to demonstrate that against the equal value concept.
To come to a sound proposal (and agreement) for your organization, it will be important to consider the following factors:
The current approach to classifying jobs into levels and design of your salary structures, and whether that approach is underpinned by gender-neutral criteria
Any existing classification systems for workers covered under CLAs, and whether those classification systems are underpinned by gender-neutral criteria
Legal advice
Expectations and/or input of workers’ representatives
Employee expectations
Sample sizes - companies are also testing different categories based on sample sizes as small sample sizes may impact the ability for statistical models to uncover discriminatory patterns
Testing different approaches and leveraging data-driven insights are recommended for making informed decisions and enhancing your confidence when preparing for the Directive. At WTW and Linklaters, we are collaborating closely with organizations to achieve this goal.
For more information about the Directive and how to prepare, please visit Linklaters’ dedicated resources hub. Our clients can also access this transposition tracker, specifically designed to monitor national transposition across Member States.
If you are interested in learning how WTW and Linklaters can support your organization, please contact the authors directly.
