Pay attention episode 14: Five big problems, one Pay Transparency Directive

Recorded live at our Managing an International Workforce event, our next episode of Pay Attention focusses on the five biggest challenges facing employers in relation to the new obligations of the Pay Transparency Directive. Expect practical insight, lively debate and a few things you’ll wish someone had told you sooner. 

Transcript

The Agenda podcast by Lewis Silkin

Episode 14 – Pay Attention: Five big problems, one Pay Transparency Directive
 
 

Tom Heys: Hello and welcome to Pay Attention, a regular podcast coming to you not from the Lewis Silkin offices, but from the Lewis Silkin Managing an International Workforce event. Yes, it's Pay Attention Live, the live podcast recording that literally nobody asked for. Well, here we are anyway. Now I asked ChatGPT to write this intro for me, but it refused, unionised, and is now seeking equal pay with our comms team.

David Lorimer: We're going to have a look at five of the bigger practical and legal challenges that the Directive presents. And of course, we're going to try and suggest some ways to solve them, so, by the end, you'll all be off running your own PTD projects, we hope.

We'll ask a couple of specific polling questions if you don't mind participating in that, but of course the Q&A function is available to you as well so that you can interrogate our wonderful panel, and on the subject of which I'm delighted to be joined by four PTD aficionados, or at least that's what I've said they are. And I'm really looking forward to our chat today. So, we've got Síobhra Rush, who's Partner and Head of our Dublin office. Bernadette Daley, who's the associate GC at Cummins. Tom Heys, Lewis Silkin’s Head of Pay Reporting, and Sally Hart, who's a Senior Award Consultant and a key cog in our pay transparency team. So that's enough from me, Tom, over to you to kick things off in normal ‘Pay Attention’ style.

Síobhra Rush: So, we're going to cover five topics, main topics between us, and I suppose we'd just like to find out which of these your organisation or you’re most focused on. So, Sally will be covering communications and engagement. Tom will be talking about collecting and analysing the data. Bernadette will be covering owning, starting and managing the project. David's going to cover the lovely issue of categorisation and I'll be talking about local implementation. 

David Lorimer: We're going to go on to our first topic proper. So, cons and engagement not top of the worry list for the people in the room, but we think it probably should be, which is why we put it front and centre. So, Sally over to you.

Sally Hart: Thank you. Even if no one cares, I'm delighted that we're beginning this session talking about communication as arguably it's the key to a successful implementation of the EU Pay Transparency Directive. Within communication, it's good to start by identifying the key messages, and here we need to take account of the current level of pay transparency and where you need to get to.

And employers will need to develop a narrative around their approach to categorisation, top of everyone's mind, pay setting and progression, and finally on the reported pay gap results as they come out. The next step when you've thought about what you want to say is to tailor those messages to each audience, ideally keeping it simple, consistent and focused on what's relevant to each group.

Looking at audiences, it's always advisable to start engaging the leadership team. So, socialising the requirements of the Pay Transparency Directive and getting buy-in on the approach; and we've seen this as a particular challenge with our clients for those organisations who have parent companies outside of the EU, such as US multinationals. And there it may be necessary to educate on the difference between US pay equity, which is largely around the same jobs, versus the EU concept of equal pay for work of equal value. So, there we need to explain that the EU pay transparency equal value is not based on external market value, as sometimes people think it is, but internal value, on assessment of skills, responsibilities and other factors. And then another key audience is of course the workers representatives as they have several key roles stipulated by the directive including input on the categorisation that everybody's worried about, individual right to information, explanation of pay gaps and on joint pay assessments should you need one.

David Lorimer: Yes, for those of you playing pay transparency bingo, we've touched on categorization, now worker reps and objective reasons. So, we're getting through these aren't we? Yeah. And on the subject of representation and works councils, I mean, it's something we can't ignore. Absolutely goes right to the core of comms and engagement. That's an audience we're going to have to engage with. But the starting point that we're finding is identifying who they are. And so, a lot of the clients that we're working with have either done or on the midst of a bit of an audit of the European population, working out who's covered by existing kind of formalised collective arrangements, works councils, CSEs, trade union recognitions, etc, because those will almost certainly be by default your worker reps for PTD purposes. And perhaps more importantly, working out where you have gaps, whether that's entire countries or bits of populations in countries. And of course, one of those gaps is likely to be Ireland, isn't it, Síobhra?

Síobhra Rush: I think I may have mentioned this when I spoke about pay transparency before at this particular conference where you don't have worker representation. You know, we don't have works councils in Ireland. Trade union recognition isn't obligatory. So very low representation in and I'm sure there's other jurisdictions that are the same. Employee reps are really only elected in TUPE or for collective redundancies. They have a very limited time frame. They are done by the time the 30-day consultation is finished and then they go off and back to their day jobs. We probably have some of our larger clients who would have kind of an employee consultation forum that they would use and you know I'd suggest that maybe they need to resurrect them because the knowledge that's going to be required by employee reps as Sally has said they play a huge part in getting the information and they're going to want to understand the information. It will make for better consultation with them where they know what you're speaking about. So, you know, the education system and how they are trained to exercise their rights under the transposing legislation will be really important as well. So, yeah, I think we'll probably see a much bigger role for employee representation in countries that don't already have works councils or, you know, the kind of collective bargaining agreements and things like that, which we don't.

David Lorimer: Yeah, so we've got them spun up. We know who they are. And, Bernadette, how are we going to talk to them? How are we going to get them up to speed, I guess?

Bernadette Daley: Yeah, thanks. And we do have an existing labour relations framework. So, one of the things is we do need to check that that does cover all the employees that are going to be in scope. I think it probably will, but it then means we need to look at our European Works Councils, our Works Councils, and decide whether they already know enough around the Pay Transparency Directive. I think the answer is going to be no. So we're going to have to engage in some pre-training, to make sure that they're equipped to do their jobs, that they understand concepts around our compensation philosophy, some of the key terminology that we use, because actually, if you get into joint pay assessments, which I know we'll talk about later, that does require actually quite a detailed knowledge of the data that's being analysed and the reports that are coming out. So, for us, we are going to have to do some work during quite a lot of next year and getting ready for that this year to be able to make sure our reps are properly equipped.

Sally Hart: Yeah, you're right, Bernadette. There's a lot that can be done in advance to take the workers' representatives along the journey to compliance with you. And you may want to start by getting their agreement, getting their understanding on your approach to categorisation and providing, as you've said, understanding of the pay structures and any reasons for any big differences. You may have groups such as sales who are compensated very differently from other groups. But as well as Workers' Council, there are other groups you're going to have to bring along with you. So talent management in terms of candidate information, your employee relations are obviously going to be working on workers representation, generalist HR, line management, and obviously in the end, employees. Line managers are absolutely key in this because we need them, to be making good decisions on hiring and on promotion, and to be saying the right thing, really important. So one idea might be to develop a training of Reward 101 that can be rolled out to whoever needs to know about reward, and to develop some specific training just for managers on how to deliver that message around pay transparency in a positive way.

David Lorimer: Yeah, I mean, it's going to change the whole manager-report relationship, isn't it? Because around key dates, around reward raises and bonus season, there are going to be inevitably more questions. You can easily imagine a scenario where an employee is feeling a bit disillusioned about their pay. They bung in a right for request for pay information, which is new in most territories under the Directive, and they get back a set of data that they probably don't entirely understand, but which sets out their pay level and the average pay of men and women in their category. So, they're kind of comparators and they may very well be at the low end of the scale as against both of them. And they of course want to understand why they are where they are. Now there might be really good organisational reasons for that and all of the people in this room might know them, but how are you going to equip your managers to do that if they're not understanding the kind of basic drivers for comp and rewards in your organization. So, I think, Sally, your suggestion of developing and spinning up a kind of 101 session where somehow we get all of our managers to listen, that's the magic dust, isn't it? It’s going to be a good one. 

Okay, so comms and engagement ticked for now. Let's move on to collecting and analysing the data, a bit of a gear change and who better to contextualise that than Tom.

Tom Heys: Yeah, so my favourite subject. Collecting and analysing the data. So, two crucial things to get right. Obviously, a big part of the Pay Transparency Directive is about reporting of the data, but also there's the individual rights and in order to be able to comply properly with those, you'll need to be using the right data to be able to give people the average pay of people within their category.

So, two crucial things to get right. First, the collecting of the data, and so that presents a practical challenge because you've got lots of different countries that may be storing data in lots of different places and in lots of different ways. You've also got the fact that each different country will be implementing the directive in slightly different ways. So that makes it very hard to be able to say, you know, give a command across all countries collect this data and do it in this way because that might not be quite right. You might need to take decisions about, well, maybe let's do it in this way or do it in this way. I think a really crucial unresolved thing from the directive is the treatment of benefits. The directive is very clear that benefits and the value of them should be included within pay and bonus and everything when you're working out the gaps and the gaps by category and when you're doing all of that.

But the directive does not say how you value those benefits. It also doesn't say the scope of where you draw the line from the benefits. And that might be something that will be resolved when each country implements the legislation. But it might not. It's completely possible that countries will give not very useful definitions of what is a benefit. In practice, that means we're looking at things like life assurance. What's the value of that? Is it the value of it to the employee or if they die, is it the taxable value, if there is a taxable value, the cost of the policy, is that the value of it? But then even getting down into the nitty gritty of it all, does it include the free tea and coffee that's provided in your Slovakia office? How do you value a tea bag there? Should you value a tea bag there? But that's the scope of things that are potentially needed to be valued and included in your analysis. 

On top of that you've got other things as well like the total number of hours. Obviously a very crucial thing because you've got to work out hourly rates for everyone. You can't do that if you don't know how many hours people work. So, there's massive challenges here and I'm not, I don't think I have answers yet. We've got the legislation still to come in lots of places and hopefully some of those issues will be resolved.

Second part of my section is the analysis of the data. So, you’ll need to calculate and report gaps of the overall company, but you also need to calculate gaps by category, or gaps by grade or level - category is what the directive talks about it as. The directive doesn't explicitly say, but it requires that you explain any gaps by category. And it's incredibly unrealistic to think that there will be 0% gaps, so it's really crucial to have an understanding as to what's causing any gaps. The way you do that statistically is using regression, and that's if you're not familiar with that as a statistical technique already, I'm pretty sure within the next 12 months or so you will be. At its simplest, we're talking about drawing a straight line through a series of points. So, imagine you've got salary going up there and you've got length of service going down there, and trying to draw the line that fits best through those points. And you could say in that really simple situation, the length of service is explaining pay by this much. But in real life, there's more variables that you might want to include as potential objective reasons for your pay. There might be things like market forces that you'll need to feed in. It's still essentially about drawing the line through a series of points, but it gets harder to conceptualise because now you're thinking in multiple dimensions.

You've also got the problem that regression as a technique, only really works when there's enough data points. And so, it's quite realistic that at your more senior grade, you might only have say 12 people in those, maybe nine of them are men, three of them are women. Regression doesn't work with a data set that small. So how do you go about dealing with the key issue, which is explaining the reason for any gaps? And you'll need to take different approaches depending upon the circumstances. And finally, just another point about regression that I want to make is that it's not a completely objective technique. It's full of subjectivity because there's not one perfect way in any group of data to draw that straight perfect line through. You might include some variables, but not others. It's not the case that there's one perfect model to rule them all. It's that one model might be good and decent, another one might be as well. And ultimately, you'll need to be able to explain why you've chosen which statistical model you have compared to another, because the employee reps will get to ask you lots of hard questions about this. The analogy I've come up with to explain how it's different is that it's not like two plus two equals four. That's subjective, very clear. You know what's going on there. It's more like red plus green equals brown. How much red are you using? How much green are you using? How thick is the paint that you're slapping on. There's lots of subjectivity in that painting analogy in the same way, how much of this variable are you using, how much of that one are you using. So that's the problem. Sorry guys.

Síobhra Rush: Easily solved by Tom, of course. 

 David Lorimer: Yes!

Bernadette Daley: One thing that I wanted to ask you was obviously there's an issue around what pay elements are included and how to value them. To what extent do you think countries are going to take a consistent approach or are we going to get different approaches and methodologies by country?

Tom Heys: I think it will really differ. I can see some countries being quite specific, if in the legislation itself, or if not, at least in guidance that accompanies with it, the directive says all member states should be providing good guidance. In practice, though, I mean, there's 27 different countries. I think it's highly likely that there'll be lots of legislation which is vague, not helpful, and accompanied by guidance which is similarly vague and not helpful. So, the challenge for you guys is you will need to make a decision as to where you're drawing the line in the absence of any clear legislation and guidance.

David Lorimer: The good news of course is that the directive that's supposed to harmonise all of your different pay reporting obligations is potentially not going to harmonise all your different pay gaps. 

Tom Heys: Gives from one hand takes away with the other.

David Lorimer: I suppose in terms of talking about solutioning for that in particular, I think we think it's about making a decision, it's about being inspired by what already exists, making a decision based on that and then being prepared to de-scope certain pay elements down the line. So, for example, and to be a bit more hopeful, France published a kind of report that suggested we think that RSUs and equity would be descoped for reporting in France. Now that is fun, that is hopeful, but that is not going to be repeated everywhere, sorry. But what that does mean is if you can capture as much as you can, then it's going to be much easier later in time as you iterate to descope some elements or frankly to choose not to, because most of you in the room will want to take as consistent an approach as possible. And of course, what you'll then be worried about is, well, OK, is inconsistency all right as long as we don't get fined for it? But yes, a little bit hopeful. 

I think my two main takeaways, not understanding the analysis bit, were why is Tom painting his room brown? And I don't want to mention the B words at an international conference, but I do wonder if the UK had a seat when we were negotiating the Pay Transparency Directive, if the cost of tea bags would have been taken into account. 

Anyway, I'm scratching my head. So, let's move on and talk about a slightly different subject, owning, starting and managing the project. Bernadette, over to you.

Bernadette Daley: Okay, so this is where I told the panel when we were talking about this subject that I love project management. I'm rubbish at it, but I really like it, so I value it as a skill. It kind of leads us into this part of it, which is that the directive and the work that's involved involves coordinating across quite a large number of teams and disciplines and different work streams. So, one of the key things is having a really effective project manager because it's going to need somebody who has the influence, the network, the knowledge, the skill and the capacity, and that might be the biggest challenge, to be able to coordinate this work and to be able to drive it forward. I think the other thing the Project lead can do, which can be really valuable, particularly at this stage in the game, is to help engage with stakeholders about what needs to be done and when, and to think about what the compliance timeline is. So, what do we need to do and when do we need to do it to be able to hit the June 2026 deadline and then the June 2027 reporting. And we'll talk about that a little bit more in this session, but what we wanted to do first was to gauge where you are in thinking about your project lead.

David Lorimer: Is it HR? Is it reward or comp? Is it legal, finance, project management or other/don’t know. So, we can see the results coming in. Lots of reward and comp leads for this.

Bernadette Daley: Maybe we should have done a sub survey which is how many of you here are from reward and comp or are you all delegating this to somebody else?

David Lorimer: Yeah, that's a really good question.

Bernadette Daley: But yeah, looks like reward and compensation, I think probably predictably to the extent that you've got that speciality within your company is likely to be a front runner. Interestingly, legal at 14%; I'm very glad about that, I think that's sensible. In terms of, you know, lawyers in the room will clearly be kind of managing and scoping your own work, but in terms of the larger project, there's a much bigger piece there, fits more into HR reward and compensation piece.

David Lorimer: Yeah, I mean, I think anecdotally, my experience is that legal is maybe sounding the alarm bell on some of this and stepping in and saying, right, someone needs to take control of this. I mean, I think it's, again, anecdotally, reward and comp, obviously, the kind of deep subject matter experts on this. So that makes sense. But what we're seeing is that those senior reward skills actually in short supply, there's a scarcity of it on the market, understandably. And so, some of the organisations we're working with have gone a bit creative and have looked beyond that into different directives under HR. So, for example, we're working with some organisations who are using senior DE&I specialists who unfortunately might have been displaced, but who have kind of really good influencing skills and comms skills and experience of change management and also will have become involved in pay reporting projects before. So, there's a really good potential to tap that area for the right skills, I think.

Sally Hart: Sure, but I'd add to that, and maybe it's my reward background, but no one person in the organisation can take responsibility for PTD, nor can that responsibility be completely outsourced, although an advisor can help to signpost some of the actions and deadlines that you need to work to, and as Bernadette says, a project manager can help to chase up those actions. But it will need the collective work of HR data teams, HR generalists, talent management, employee relations, and as we said earlier, the line managers, to be successful. 

Bernadette Daley: Yeah I was talking before about kind of the project lead and their role in coordinating, driving it forward and also thinking about the path to compliance. I think one of the interesting things that has come up in the work that I'm doing at the moment on this is if you work backwards from your compliance deadlines, you can get surprisingly close to where we are now.

So, June 2026 is when you get the transparency regs coming in. So that applies to any employer in scope. That will need some work in certainly early 2026 to make sure you're ready, but it may be some kind of readiness assessments this year for the 2026 deadline. And even though June 2027 for the reporting, for those of you who are caught, I think seems like a deceptively long way off. 

Again, if you work backwards and think about the fact that that's going to report on data next year, so it's 2026 data that you're reporting out on, if you want to know what that data is going to say, and if you want to do anything about it before you get to that point, you may in fact find that you need to do some work in Q3, Q4 this year to really run some pilots, to do some readiness assessments, and then also to evaluate some of your results. So, when we worked backwards or when I was working backwards, in terms of if we wanted to impact and influence the 2026 data, we're going to have to do that in the pay cycle next year. And if we need to make decisions on that pay cycle, we have to do that by December. So suddenly I'm sitting here in June, I think it is. And then, and actually that's not that long away in terms of being able to work out where you are with your data and then running some preliminary assessments on it.

David Lorimer: Yeah, and there's some pretty tight timelines once the reporting kicks in, of course. So, the kind of idea that you've got six months to fix a 5% or greater gap or explain it before you go into a joint pay assessment. That's another push, isn't it? Because if you can use the time you've got now to lower the chances of having a 5 % gap by, yes, looking at your reasons, but also making the right decisions in the next reward cycle, then that's a very good spend of the time you have now, as you might have less later. 

Great, so, I guess one topic that we probably ought to cover in this session, he says reluctantly, is we're managing these projects. Are we able to claim privilege over some of the outputs over it? Are we able to keep some of its secrets squirrels? Síobhra, you've got some thoughts on where we might go?

Síobhra Rush: I suppose just some headline thoughts really around, you know, the fact that different jurisdictions will have different rules around privilege. So, in common law jurisdictions, it would be information or communications where the sole or dominant purpose is to give or receive legal advice. So, you need to establish who's going to be the client. You need to, I think in particular, you know, communications that are disseminated very widely might lose privilege even if you've tried to track privilege over it and just labelling a document confidential, legally privileged isn't necessarily bulletproof either.

And then bear in mind that there are methodologies and data, a lot of that won't constitute legal advice. You may take advice on risks associated with dry runs and iterations of your reporting, but you probably won't be able to assert privilege over all of the project. So really important to try and narrow down where legal advice is coming in, maybe set up a different platform for aspects of the project that probably could attract privilege or where you're getting the legal advice. Bear in mind that you won't want to include information on that platform that you have to share with the employee reps anyway. So again, important to keep the group as narrow as possible. Make sure they are all aware of what might attract privilege and that it shouldn't be disseminated any further. I don't know, David, any other tips?

David Lorimer: Yeah, I mean, I think having a lawyer in the loop, but also wanting them in the loop is important too. So, you need to be asking for or conveying advice as the lawyers in the room know. So it's not just about copying them in and slapping on an ACP, and actually one of my colleagues, and I promise that I'm interesting outside of work, but we were having a little poll over a US Circuit Court judgment yesterday around where I think most of us will know that the concepts of privilege are pretty broadly defined, and it's much easier to stay under that. But some of the pay equity analysis that have been carried out at quite a big organisation had been found to not be privileged because exactly as Síobhra said, that's really about running numbers. It's not necessarily legal advice. 

Síobhra Rush: Yeah, the legal element is kind of missing from it.

David Lorimer: And so, if it's under threat in the US, then yeah, we just need to be a bit careful, I think, in Europe is the truth. 

Síobhra Rush: Yeah 

David Lorimer: OK, well, that's enough of the headache on privilege, let's move to a different headache; and you asked for it, so here we go, you've got it. I don't know whether I wasn't in the first planning meeting. I think I was, but I got categorisation anyway. 

So, let's talk about how are you going to settle on the best option to categorise your workforce. I think most of us in the room will by now understand what the conundrum here is, but the PTD requires organisations to put workers in buckets, those who do the same work or work of an equal value, and then go on and report on the gap between average male and female pay within those categories, but also respond to requests for pay information by providing information about the requester's pay and the average pay for men and women in that category, so in that group. 

The implications we know are pretty significant. So, the methodologies, the way that you choose to put the people in the buckets, the categories, well those are to be consulted on, potentially consented to by worker reps in some of your EU territories. So that's going to be a bit of a lift and as why Sally mentioned at the outset, getting started on that conversation soon is a sensible thing. But it also involves, at a kind of more conceptual level, making a positive determination on who you think might be comparators for equal pay purposes, because the same work, work of equal value test, it's the same. It reflects the test, in terms of equal pay claims and having comparators for that.

So that's enough about the problem. The big question then becomes how do you do it? How do you settle on a methodology for categorising your workforce? I would say this, being a lawyer, and as mentioned, loving case law for some reason. The starting point, of course, is what's the legal test? What does the PTD say? And it says you need to rely on a system that identifies value based on skills, effort, responsibility, working conditions and unhelpfully any other factors relevant to the particular job. So not great guidance. I think the one thing that it's important to say and this is probably a negative to be a positive, the PTD doesn't say you must run off and do job evaluation, deep, points, factor based, job evaluation, which most of you will know in the room is hard and is time consuming. That's often been viewed in the UK at least as the kind of golden ticket, the best way to do evaluation of the value of roles, but the PTD does talk about classification methods as well. So subject to that stricter implementing law, it allows a level of employer discretion. 

But obviously we can't stop at the legal test. There's other factors that are going to influence the decisions that you make around this. So, where you've got those works councils or trade unions and you're talking to them about pay, you're bargaining with them about pay, you'll be talking already, in terms of how you categorise, how you segment your workforce. And you will have an understandable bias towards maintaining that because you've got to go back into the room and say to them, let's agree this method or let's talk about this method. But even where there aren’t those bodies, you're going to want to have something that broadly reflects how you reward people, how you give pay raises, how you determine equity. 

And then one other factor you're going to want to think about is, you will have established systems of categorisation in some of your in-scope countries, many of you. That might be because you've got local collective bargaining agreements that requires you to carve up the workforce. It might also be because you've got fairly extensive equality reporting obligations already, like those in Sweden or Portugal or Spain, for example, they've got flavours of categorisation. So, look, lots of factors to consider, but we want to talk about, and we want to hear from the room on what you're doing or what you're thinking. 

So, the question here is how have you or how do you intend to determine your categories for the directive? Are you going to use your existing job architecture? Are you going to combine that with some other organisational factor, job function, job family? Are you going to rule out full points-based job evaluation? Are you going to take some other fourth way that we haven't listed and potentially haven't thought very much about? 

Unsurprised to see full job evaluation hovering around three or four percent. Does that reflect what we're seeing in practice?

Sally Hart: Yeah, I think so. And I suppose the good news is, as David said earlier, that PTD does allow for job classification, which is pretty much what is a typical job architecture, job levelling that most companies are using. So, it does allow for that, although, as David said earlier, the points-based system would be more defendable. But it's also more costly, it's more difficult, especially if you're already working with something else. So hence, people are going to work with what they've got already. And I think another point I would like to make about categorisation is people are getting very worked up about it and it does matter, but you're unlikely to eliminate pay gaps by doing some fancy categorisation. Pay gaps are almost certainly inevitable, particularly in an organisation where you've had flexibility and discretion around pay. So, the key to success is not getting a categorisation just so, it's much more about being able to explain the gaps by those categories and if you can't explain them, resolving them.

David Lorimer: Yeah, I mean I think Bernadette you've had some experience of living through the categorisation conundrum haven't you in practice?

Bernadette Daley: Yeah, and I think we're probably going to end up with a mix of the top two frontrunners in this one. So to a large extent, our salaried kind of our professional workforce, we use the MRSA IP tools. I don't know whether there may be people in the room who are familiar with it. Thank you for some nods. So for that one, we are hoping that the IP categorisation will be sufficient because we do use a scoring system to try and get a robust process. We do have a mix though, so that that covers our professional salaried workforce.

But we've also got manufacturing operations as well. So that's where we've got people working on the shop floor, hourly employees, and we don't use the IP tool in the same way. So that is where we may need to do a little bit more work in what our own internal categorisations are for that level of work. So probably a hybrid in the end.

David Lorimer: Yeah, I mean, that's a good kind of illustration of how there's kind of no one size fits all, no necessarily within organisation or certainly between organisations. But again, a good illustration of the best starting point, if you haven't started to think about this, is what have you got at the minute? And if you've got some level of sophistication in your job architecture and grading approach, particularly if it's underpinned by some kind of scoring evaluative of approach, then that's going to be a good place to start.

There are limitations where we move further away from the Cummins model and get towards the kind of job slotting. You know, does this look broadly, does this job description look broadly like it corresponds to level 15 on the WTW global grade salary intel that we've got? That's obviously going to be a bit more tricky to justify and you might be wanting to tweak that or test it. But yeah, that has to be, I mean, a good starting point, I think. 

Right, I think that's quite enough on categorisation. We've basically solved it, haven't we? So, let's move on to the patchwork. We've already started to talk about this, haven't we? But where are we up to on implementation, Síobhra? And what difference is it going to make to planning?

Síobhra Rush: Yeah, I mean, I think countries vary and I'll get into where various member states are at, but I suppose there's, the directive overall tries to ensure consistency in pay reporting and equal pay and pay transparency. But obviously, member states might go their different ways in terms of implementing it. So, we might see some divergence in, for instance, how pay is and things that we've talked about. So, what elements of pay are included, how will categorisation apply? Who's a worker? So, who's actually going to be in scope? Will self-employed contractors be included in some circumstances? They can be in Ireland, they are covered by equality legislation, so could be included and in scope depending on their working arrangements. The worker representation I've also talked about on how they are appointed and then how compliance with individual pay transparency obligations will apply.

Now, I suppose for a lot of clients who do have operations in various member states, they're already addressing this. And I think the intention is to use their existing job architecture, try and comply with the directive as is, and then diverge from it where local law applies and probably take a risk-based assessment in terms of, well, if we don't, what's the risk? Are we going to be fined? Or for instance, like our gender pay gap reporting, there's no fine for non-compliance, there's no compensation for employees, it doesn't really have teeth. I expect that we will get something with a little bit more teeth when we implement the directive. But you know, just important to note, I suppose, balance that as against if you have a lot of jurisdictions and you want to be as consistent as possible, you know will we keep that consistency rather than change it for a low-risk option? So, I think that's the sensible option.

What we're seeing so far can be quite varied. Some countries haven't really addressed implementing the directive yet, but that doesn't mean that they're not either looking at it or they might already have gender pay gap reporting in place. So, I think the Irish government was probably taking that view, not realising that there was a lot more than just the gender pay gap reporting required and are now kind of trying to catch up.

So, we're seeing countries like the Netherlands, Finland, Lithuania and Sweden who've taken a holistic approach. They're adhering quite closely to the directive. Ireland, we're going to see a more piecemeal approach. We've seen draft laws that address the pay secrecy and the job salary range, and the requirement to disclose the salary range for a role. Now, in actual fact, our draft legislation goes further and requires those ranges to be in the advertisement for the role as opposed to just disclosing it at interview stage. So, I think we will see a more piecemeal implementation of the directive there. And I suppose for countries that do have gender pay gap reporting and if the thresholds are lower than the 100 employees in the directive, I can't really see governments rolling back from that and saying, oh no, we're going to increase that threshold now. I just think it would be socially unpopular. 

Some countries have gone further. So, the Netherlands in their legislation have gone a little bit further and interestingly have proposed that, so people will be aware that, where there is a 5% gap within a category and it can't be justified objectively and cannot be fixed within six months, that gives rise to a joint pay assessment. The draft legislation in the Netherlands says that that gap must be reduced to zero as opposed to, you know, 4.7%. I think, Tom, you've been quite vocal about how statistically that's going to be near impossible.

Tom Heys: Well sure, if paying everyone exactly the same thing, in terms of pay and bonus and benefits, it would be impossible, it wouldn't happen.

Síobhra Rush: Yeah. And then also, I think that they are looking at in scoping outsourced agency workers, which, you know, that could just create a nightmare, particularly in terms of the information that's available as between kind of the two different employers and then the meaning of the definition of employer. I think in the Dutch draft it doesn't just focus on legal entities. So, there's a lot of work to be done in terms of implementation. Some countries are moving, some are a little bit slower, but I suppose this time next year, hopefully everybody should be on board in some shape or fashion.

David Lorimer: Hopefully. Yeah, I think the question then comes, I guess, what can we do about all of this? I suppose, I mean, I can hear the hum in the room already about the Netherlands. So one word of reassurance is that our excellent colleague Hylda has got together a merry band of employment lawyers who are taking the fight in paper, of course, not physically, to the Netherlands legislature and feeding back on quite how difficult some of those aspects that Síobhra has called out might be so let's you know thoughts and prayers to Hylda and her valid efforts. 

Bernadette Daley: I do think that's an interesting point. I think we didn't talk about government relations or regulatory affairs or whatever, if you have an internal body that does your advocacy. Lawyers, particularly, I think UK lawyers traditionally don't do a lot of lobbying. We try to be apolitical in a lot of it. But actually, for some of this, it might be worth thinking about, do you want to start to influence the legislation in your country? Do you want to get your government relations folks on board to help you having these conversations, or you can help them to have those conversations?

Síobhra Rush: That came up for me actually in a, I did a PTD session in Dublin last week and I was outlining kind of the legal obligations that might arise, and somebody put their hand up and said, you know, the equivalent of the BICC, has IBEK gone to government about this? You know, this is really going to be very, very difficult for small and medium sized enterprises to comply with. So, I think we'll see a lot more of that.

Tom Heys: I did a little bit of that a few months ago in Malta. I was invited to speak to the government there and I tried not to scold them too much but tried to you know, give them the outline to some of the key problems.

David Lorimer: Well done, Tom, for taking up the good fight. But look, there is going to be divergence. And I think the right thing, the right approach is going to be, first of all, Síobhra, you said this right at the start. There's enough there in terms of a framework to be getting on now and developing methodologies for categorisation, working out your gaps, trying to fix them or justify them or both, frankly. But also there is an option to, in a slightly cohesive way, bring in this implementing legislation when it's finalised and to make tweaks if you want to, but also to ask some pretty important questions around, okay, if this method of categorisation is strictly required in Spain, to pluck an example out of the air that I've been talking about this week, then what's the risk if we go a different way? You know, if you're going to reflect the salary register obligations that are in place already in Spain and that requires you to do something a bit like job evaluation, but we're not doing it now. Why are we going to be required to do it in six months’ time when you keep many of those obligations in place? And can you tell us, are we going to be fined? Those, I think, are the kind of pragmatic questions that we need to be surfacing because many of you in the room who are represented across the member states will absolutely want to take a single unified approach, not least because you'd have to explain taking a different approach to your employee population to guess what? Talk across borders. So yeah, I mean the practical challenges around that patchwork approach are there for everyone to see, I think.

Bernadette Daley: Yeah, and certainly this came up when we were looking at the whistleblowing directive and trying to roll out a global policy and then a European-wide policy where we had countries coming online at different times and some of them very late and some of them after the date they were supposed to come online. So, the two things that came out of that is one is tracking the legislation. It's really important to have a good tracker to know when stuff is coming in. Trying to get ahead of it as much as possible, so that I think you were talking before, David, about at least doing the most that you can do and then you might need to take things out of scope as you go along, but at least that will maybe put you in a better position to flex as and when local countries come online and recognising to your point Tom that whilst we'd all love consistency, there are going to be exceptions and there are going to be variations. So how are you going to deal with that both in terms of your data analysis and then also your reporting and your communication around that.

David Lorimer: Yeah, absolutely. 

Well, look, I think we've solved implementation as well, haven't we? So that kind of puts to bed the five topics. Hopefully a little bit of hopefulness in there. I know some problems, but we're, I suppose, all charged with working together to kind of work through those and come up with some solutions.

We're delighted that there's been so much interest in this. Unfortunately, we've run up against time. Thanks again so much for your participation. Thank you for sharing in the polls. Thank you for all of your questions. And you’ve beaten me to it but thank you to the panel.