TAMSIN SRIDHARA: Welcome to the second in our series on pay clarity and visibility. In this video, we'll be focusing on the EU pay transparency directive and the implications for applicants and for employees. I'm Tamsin Sridhara. And I'm delighted to be joined by my colleague Eva Jesmiatka,
Eva, in the first video, we talked at a high level about pay transparency and the information that employers will be putting into the hands of employees. Let's take a deeper dive and let us start first of all with applicants. So what additional information will applicants have the right to?
EVA JESMIATKA: Yeah. So under the EU pay transparency directive, applicants will need to be provided with the initial pay level of the job that they're applying to. And that information needs to be provided ahead of the first job interview taking place. So employers can think about doing that maybe through the job advertisement or communicated information verbally, but it needs to take place ahead of the job interview.
TAMSIN SRIDHARA: So now that's quite similar from what we've been seeing across various US states. What are we learning from our colleagues in the US that can be relevant and helpful for our clients based in Europe?
EVA JESMIATKA: Yeah. So what we've seen in the US, some of the key learnings from that is that companies need to be really mindful about the type of information that they're communicating and how that information might be perceived. So really think about what is the pay range that we communicate and how wide is that pay range.
But also think about how basically the moment that you start communicating this and putting this out, this is not only impacting the applicants themselves but in essence it impacts everyone involved in making pay decisions or involved in the recruitment process.
So think about as well that you need to make sure that, for example, your hiring managers are aware of the information that you're putting out. But also think about that any information that you might decide to share through a job advertisement will, in essence, be visible as well to your current employees. And that was another big learning from the US. Don't forget about your own employees where you're focused on job applicants.
TAMSIN SRIDHARA: Thanks a lot Eva. And we've had a-- there's a question that comes up is about was that removed the right to negotiate. So can you just talk a little bit about that and what the employer can ask and can't ask.
EVA JESMIATKA: Yeah. So great question. So it doesn't remove the right to negotiate. What it in essence comes down to is that applicants will go into the negotiation process more informed than they will currently be.
And in addition, what is really important for employers to be mindful of is that they will no longer be allowed to ask applicants for either current pay levels or historic pay levels. And I think that is something to be really mindful of as you're about to enter a pay negotiation. But pay negotiation will continue to take place.
TAMSIN SRIDHARA: And certainly I know you and I when we do our pay equity analysis for clients, we can often see that inequity most commonly comes on higher and it'll mitigate that. But you will probably still get some outliers and you just need to be able to justify why somebody pays different from that pay range. So that's applicant. So then moving on to employees, what additional information will employees have the right to?
EVA JESMIATKA: Yeah. So also for employees the EU pay transparency directive is really going to provide a wider right to a lot more information. So first of all, employers need to make sure that they make it easily accessible for employees to understand how pay levels within the organization are being determined, but also what factors are taking into account when making pay decision, and how you in essence make pay progression in the organization.
Then in addition, and this is I think that is really important and which is going to create a significant step change, is that employees will have the right to request on an annual basis how their own pay compares to the average male and average female pay of employees who are in the same category of work and employers who actually need to make sure that they remind employees of this right on an annual basis as well.
TAMSIN SRIDHARA: So that concept of category of workers it occurs in different parts in EU directives, but it's got a very specific meaning here. Can you then just run through what categories of workers means?
EVA JESMIATKA: Yeah. So based on our understanding, for categories of work is in essence that's where you'll see your job leveling construct coming in. So organizations need to make sure that they have sound job leveling methodologies that allows them in an objective way to define what are the biggest roles in our organization. What are the smallest role in our organization. And where does every role fit in into our internal hierarchy.
So in essence roles that are operating at the same job level. And then depending on the size of the organization that you're looking at, that might actually be combined as well with what we refer to as a job architecture construct. So that's more looking at in what area of specialty do you operate. And if you have the sufficient headcount, you might be looking at a combination of job leveling and job architecture that classifies a category of work.
TAMSIN SRIDHARA: So categories of workers, your default is you're looking across the organization because then you're looking at employees doing same similar work and work of equal value, and you may also then be taking the vertical into account in terms of job families.
EVA JESMIATKA: Yes, exactly.
TAMSIN SRIDHARA: OK thanks. And then there's right to information. We've got one market, Germany, where they've had this-- employees have had this right to information for a number of years. Can you just comment on what we've seen in Germany and what we think will probably be different in terms of the directive?
EVA JESMIATKA: Yeah. Yeah, you're absolutely right. So what we're seeing is that in Germany, in essence, employees already have the right to request how their own pay compares to others in the organization. What we're seeing and what we're hearing from our colleagues in Germany as well is that actually this right is not exercised to an extent that one might expect. The key difference is going to be that under the EU pay transparency directive, first of all this right is being-- employees are being reminded of this right on an annual basis by their employers.
But also be mindful that they will be reminded at the same time of year when companies actually need to publish pay gaps both at an entity level, but they also need to calculate the pay gaps at a category of workers level. And we'll cover more of that in our next video. But I think going back to your question Tamsin, that is really going to mark a key differentiator in terms of what we currently see is already in place in Germany.
TAMSIN SRIDHARA: So all those different data points facilitating more discussion as well. So when you look at then the information that's going to be made available to employees, employees have to understand it. Don't they? And I know you've just done a custom survey across various clients about their views on education and communication. Can you just comment about the importance of education.
EVA JESMIATKA: Yeah, absolutely. And I'll only comment on that from a high level perspective because we are going to do a further video on employee communication, but it's absolutely crucial. And what we're seeing is that companies are recognizing that in all of this-- the journey to educate both managers but also employees around pay management. How pay decisions are being made in the organization is going to be absolutely crucial.
And before you can go out and communicate someone's pay level and how it compares to their peers, you really want to make sure that you're ahead of that, have communicated to them. This is in our organization how we make pay decisions. And this is how your pay has been determined.
TAMSIN SRIDHARA: So information has to go with education?
EVA JESMIATKA: Yes, absolutely.
TAMSIN SRIDHARA: And you flagged that we were going to do a deeper dive into education and communication in the fifth of the series.
EVA JESMIATKA: Yes.
TAMSIN SRIDHARA: But that-- thank you, Eva. That brings to a close the second video. And in the third video, we'll be moving to look into pay gaps. How to calculate and how to report. Thank you.
