The directive on "Pay Transparency" aims to eliminate the pay gap between men and women for equal work or work of equal value, thereby combating wage discrimination. To achieve this, several measures are being implemented. Greater transparency in pay would help expose unjust gender-related wage differentials for equal work or work of equal value. For clarity, the principle of equal treatment concerning pay does not prevent employers from compensating employees who perform the same or equivalent work differently. However, these differences can only be based on “objective, gender-neutral, and unbiased” criteria, such as job performance and individual skills.

EU 27 vs. Belgium: A Significant Difference

Zooming in on the EU-27 countries, we observe an average gender pay gap of 12.7%. In other words, women earn, on average, 12.7% less than men for performing the same role. According to Eurostat, the primary factors contributing to this are the overrepresentation of women in part-time roles and their larger presence in sectors that typically offer lower pay. Social services, education, and healthcare—sectors of great societal importance but generally with lower remuneration. Another critical factor, according to Eurostat, is the underrepresentation of women in managerial positions within the EU 27.

The situation in Belgium is significantly better. Our country scores 5.8% when measuring the gender pay gap, placing it in the top five alongside Luxembourg, Romania, Slovakia, and Poland. This is a very sharp result, especially compared to neighbouring countries such as the Netherlands (13.5%), France (15.4%), and Germany (17.6%).

Considering the factors mentioned in the first paragraph, Belgium would have almost no gender gap, leading to an "adjusted gender pay gap" of only -0,1%.

Nevertheless, the directive, which is to become national legislation within approximately eighteen months, will profoundly impact our labour market. You may think, "This does not apply to me," perhaps because your company employs fewer than 100 people.

It is true that only companies with 100 or more employees will be required to report frequently and transparently on the average salaries of men and women.

However, this directive and the legislation that will follow go further. For instance, you will not be allowed to ask applicants about their salary history. Furthermore, employers must clearly communicate the starting salary or salary range for the position during the recruitment process.

And this applies to all companies, regardless of size.

Job Advertisements with Salary Information

For companies, it will be crucial to answer all salary-related questions clearly and accurately. This may be somewhat easier for larger organisations where salary scales are not only shared but even published.

For smaller companies, this could be more challenging.

If your company employs fewer than 100 people and you are hiring, it will be essential to carefully consider how you will communicate the salary package and benefits. You will be competing directly with companies that have clear and internally transparent salary scales. These companies can easily extend salary publication to job vacancies, as is already often the case in the Netherlands and in the UK. All internal employees can see the salary indications in these vacancies, so as a smaller company, it is wise to prepare well to avoid uncomfortable situations.

Roundtable Discussion in September

During the roundtable discussion we held with several companies on this topic, Pay Transparency was extensively discussed. We received valuable insights from Emma Braeye, who, together with her team at In The Pocket, has already carried out thorough preparatory work.

The key recommendations are:

Develop a clear pay policy within your organisation, regardless of size.
Discuss salary options openly with employees from the start.
Eliminate any non-objective disparities.
Involve your employees in your actions and be transparent: communicate where the company stands and what steps it plans to take. Determine how far you want to go regarding transparency.
Ensure regular, clear, and comprehensive communication about salary packages and additional benefits. Invest time and resources in this. This is fundamentally important to every employee.

A crucial element is ensuring that every employee can trust their employer to act fairly in terms of compensation. An interesting concept here is "organisational justice" (Professor of Reward & Sustainability, Xavier Baeten, Vlerick Business School), which distinguishes three critical aspects: distributive justice ("Am I being fairly compensated compared to others?"), procedural justice ("Was a fair process followed in determining my salary?"), and interactional justice ("Am I treated with respect and given accurate information?").

The obligations brought about by the Pay Transparency directive will not only create a significant shift in how we recruit and hire but also necessitate that every company pays close attention to internal communication about compensation at every stage of the employee journey.

Every people manager must know precisely how to respond to questions regarding pay and development, as each answer can significantly impact employee satisfaction and, by extension, retention.

Would you like more information or wish to discuss this topic further?

Let’s connect!

Sources:

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023L0970

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Gender_pay_gap_statistics

https://commission.europa.eu/strategy-and-policy/policies/justice-and-fundamental-rights/gender-equality/equal-pay/gender-pay-gap-situation-eu_en

https://www.eumonitor.eu/9353000/1/j9vvik7m1c3gyxp/vl59mpupm0vq?ctx=vk4jic6t1dxz

https://ec.europa.eu/eurostat/documents/3888793/13484385/KS-TC-21-004-EN-N.pdf/69965821-22ed-7c56-c859-cd7b10e011c5?t=1633341826751

Baeten, X., Braeye, E., & Van Belle, I. (2024, juni 12). Pay Transparency Unwrapped. Vlerick Business School.