For a very long time, one of Ireland’s great social taboos has been to ask someone what they earn. Among the typical responses to someone with the temerity to ask the question has been the very Irish, “sure a priest wouldn’t ask me that”. People frequently don’t know what the colleagues who work beside them are being paid and that secrecy can even extend to families. It was noted some years ago that resistance to wages being paid into bank accounts among a certain cohort of workers was because they didn’t want their spouses to know what they were earning!
That’s all about to change. The EU Pay Transparency Directive places obligations on employers to be transparent with workers and candidates about pay and pay progression. It also introduces a ban on pay secrecy clauses and prevents employers from asking job candidates about their pay in previous roles. The directive came into force in June 2023, and Ireland has until June 7th, 2026, to implement the new rules.
While Ireland may be late to the table in implementing the directive, that doesn’t indicate any lack of enthusiasm for its provisions. In fact, the Government appears to be determined to go further than many other member states in its interpretation of the directive. That includes the disclosure of pay rates in recruitment adverts.
“If you look across the EU member states, including Ireland, you’ll get a slight tapestry of transposition,” says Mark van Zon, a client partner with global management consultancy firm Korn Ferry. “Based on where the member states’ current pay transparency and equity laws sit, there will be a slight variance in how it is transposed.”
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In Ireland’s case, the indications are that the Government is seeking to take a leading position on the recruitment phase and requires employers to put the pay levels or the pay ranges in the job advertisement. “This is an interesting part of where Ireland has taken a slightly different or more progressive interpretation of what’s required under the directive,” van Zon notes.
He explains that this is aimed at minimising what he describes as the “information asymmetry” between the employer and the employee. One way to do that is obviously to prevent employers from asking candidates for their existing pay and then the second piece is to have the employer disclose in advance what the pay is for the job. By doing that, you level the playing field when it comes to the access to the information about pay.”
This will lead to challenges for smaller businesses, which simply can’t afford to compete on pay with larger organisations. “Do you want to enter into what I like to call a compensation arms race?” van Zon asks. “Those organisations that may struggle with that need to think very carefully about the other benefits and the wider aspects of their employee proposition and use to market themselves instead. Compensation is more or less the hygiene factor, and the attractiveness factors are the non-tangible benefits about working for your firm such as career progression, the employee culture, the growth perspective and those other elements of the employee value proposition.”
Employers will also have to publish far more information about how much their staff are earning, including the gender pay gap between “categories of workers” that do the same job or “work of equal value”.
“This becomes a challenge because in the eventual implementation of the directive that information then becomes widely available,” says van Zon “So, what is a pay equity solution also potentially becomes a pay parity topic that needs to be carefully explained. From our point of view, we talk about transparency and trust. While there is information disclosure to the individual employee, it’s critical for employers to make sure their employees trust that what they say is what happens in reality.”
This is the topic that keeps chief HR officers awake at night, he adds. “The setting of pay at an individual level is highly nuanced and in some organisations it’s quite strictly governed and in others, there is a high degree of manager flexibility to set pay. There is a lot of pressure on employers to think very carefully through the communication of this. Potentially, you’re going to have a manager having to answer this question many times over to many of their employees to explain why their pay is different.”
Consistency is important. “We see HR teams grappling with how they are going to narrate that message. ‘What is the story that we have to tell and how are we going to tell it and how are we going to make sure that we take our managers with us on this journey because they could be confronted with employees coming to them on what is a highly emotional and sensitive topic’.”
With the directive due to become law in seven months, employers need to start preparing now. “There are four buckets that we see employers take to get ready,” van Zon advises. “The first one is the internal governance. Who are the people within the HR team and the wider team including legal, communications, and the IT systems data people that are working on the topic. It’s multidisciplinary.”
The second is the grading. “Can the employer determine equal pay for equal value. In order to do that effectively, you need to know how your jobs are classified, ideally in an objective way. The third point is then to run the analysis to see what gaps you have and can you justify them using gender neutral criteria. That’s a lot of work in its own right, because the European Union looks at the basic pay, variable pay and complementary pay. That’s quite a complex activity.
“The fourth piece, which arguably from our perspective is the most important because it cuts straight through to trust, is how you’re going to communicate the story externally, internally and across the management structures. The communications challenge is potentially significant for employers to make sure that the narrative is lining up with the facts around their pay gap issues.”
There’s a lot to do, but at least employers still have some time to do it.
