Meet Ken. Having wowed bosses at his interview with tales of leveraging synergies, he negotiated a premium salary. Three years later, however, long-standing employee Breda has the measure of him. Ken is grand, but he’s not exactly a rock-star contributor. Breda suspects Ken is on €20,000 more for doing the same work. But what can she do?
New European Union (EU) pay transparency rules, set to come into effect on June 7th, are about fairness for workers like Breda. The rules should lift the lid on practices that unfairly reward one person over another for doing the same job, or work of equal value.
Ireland is going to miss the deadline, however. The EU Pay Transparency Directive is “crucial to empower workers, and especially women, to enforce their right to equal pay”, the Department of Equality has said – but the legislation required to incorporate it into Irish law isn’t in place yet.
There have been delays in Europe, the Government is working on it and workers can expect changes on a “phased basis”, the department says.
So, what does this mean for Breda, and can she expect compensation when the rules eventually kick in?
Pay secrecy
Unfairness in pay on the grounds of gender is going to be harder for employers to mask and easier to prosecute under the new pay transparency rules.
“The whole point of the new legislation is to reinforce the principle of equal pay for men and women by introducing real transparency and proper enforcement,” says Michelle Loughnane, senior associate at solicitors Mullany Walsh Maxwells.
Breda is one of the more than four in 10 workers in Ireland who say they found out at least once in their career that a colleague in the same position was earning more than them. So says a survey that included 1,000 workers, commissioned by recruitment platform Indeed last year.
It’s no wonder employers are tight-lipped about salaries and that some make staff sign confidentiality clauses, forbidding chatter.
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Just one in four people believe there is full pay transparency in their workplace, according to the Indeed survey. Transparency is likely highest in graded public service roles, or ultra-hierarchical professional services firms.
Many employees appear to collude in the omerta on money. Just 16 per cent of workers in Ireland said they would share their salary if a coworker asked, according to Indeed. More than half think discussing salaries is taboo.
This secrecy often disadvantages women most. They are more likely to be paid less. But a lack of clarity and accountability in companies on how salary and benefit-in-kind perks are awarded has made this harder to determine and pursue.
The pay inequality between Breda and Ken ripples far beyond her pay cheque. For house-hunters, borrowings are pegged to salary, so Ken will qualify for a bigger mortgage than Breda. Their bonuses are salary-linked too, as are their employer’s pension contributions. Ken will get the fatter bonus and will have a bigger pension at the end of the day.
And, at their next pay increase, a percentage increment, Ken will jump further ahead.
Job ads
Job ads are likely to be one of the first things to change under the new rules. This may happen by the autumn, commentators say.
Employers will have to provide prospective job applicants with more information about salaries under the new directive, and they will not be allowed to ask about a candidate’s earnings history.
This change recognises that pay inequality often begins at the hiring stage.
“You will be entitled in the job ad to see either the exact pay level for the role, or the range for the role,” says partner at Hayes solicitors, Catherine Jane O’Rourke.
“So, if the prospective employer asks your salary expectations, you already know the range. I think that’s helpful for women in an interview process,” says O’Rourke.
Research has found consistently that women tend to lowball the value of their skills compared to men.
Based on their role, skills and experience, men expect a median salary of €64,000. Women typically expect €53,000. That is a 17 per cent gap in pay expectations. So said data from recruitment platform, IrishJobs this year.
The figure came from analysing 1.3 million job adverts, alongside survey insights from 470 recruiters and 670 candidates in Ireland, as well as data from the UK and Germany.
It reflects the lingering structural and cultural barriers in the workforce that continue to shape attitudes around pay and real salaries, says IrishJobs parent company, the StepStone Group.
The data highlights how unequal salary expectations between men and women of similar skill can lead to pay disparity.
Those going for interview will no longer have to worry about answering the salary question, says O’Rourke.
Opaque phrases like “competitive salary” have already disappeared from the job ads of some progressive employers.
“The idea with this is people have more rights, right from the beginning of the recruitment process,” says Loughnane.
The whole idea is that a candidate is going to be remunerated for the value of the work
— Michelle Loughnane
The ban on asking candidates what they were paid in their previous role should mean that if Breda decides to move company, her underpayment doesn’t move with her, perpetuating the unfairness.
“If there is any kind of discrimination going on in your existing role that you are trying to get away from, that’s not going to carry forward into your new role,” says O’Rourke.
“The whole idea is that a candidate is going to be remunerated for the value of the work, not for what he or she was lucky or unlucky enough to negotiate with a past employer,” says Loughnane.
But will the rules kill off all salary negotiation for Breda or Ken in a new job? Not really, says Loughnane, though employers will have to be more careful about offering a candidate more than the stated range.
“This will have to be really objectively justified,” she says. “Decisions made today could cause problems under the new laws next year. That defence of ‘he asked for more and she didn’t’, isn’t going to stand up.”
So, that hiring manager who throws a wobbler, demanding €20,000 more from the budget to hire a Ken won’t get the same hearing.
“There is some room for negotiation, but there is a limit to it because criteria will have to justify it,” says Loughnane.
Payback
Long-standing members of staff like Breda can be particularly disadvantaged when it comes to pay. Increased demand for a specific skill set can mean a new hire can command the prevailing market premium, likely exceeding what existing staff are paid.
The new rules should, however, prevent pay for the same work from getting too much out of whack.
“I think the rules are going to impact an awful lot of workers who have been in their role for a very long time and have long periods of service with a company,” says Loughnane.
You will be able to ask for information about your own pay, as well as the average pay for colleagues doing the same work
— Michelle Loughnane
Under the Gender Pay Gap Information Act, companies with more than 50 employees are already required to publicly disclose the difference in the average hourly wage between men and woman workers.
This reporting shows a persistent gender pay gap in many EU countries, attributable to there being more men than women in the highest paid roles, or to more women working part-time, some employers say.
Existing reporting does not capture the difference in pay between men and women, like Breda and Ken, doing the same job, however. This is going to change.
The new directive makes reporting more granular, requiring employers to report the gender pay gap between categories of workers doing the same work, or work of equal value. The figures must be separated into basic and variable pay, like bonuses.
“You will be able to ask for information about your own pay, as well as the average pay for colleagues doing the same work, or work of equal value – so that’s workers in the same category as you,” says Loughnane.
The data will be disaggregated by sex.
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Employees will be able to see the criteria for pay, pay grade and pay progression, which must be objective and gender neutral. That information will have to be provided to an employee within two months of their request, she says.
This should make it easier for workers like Breda to identify unfairness and seek justice.
If her boss isn’t paying her the same as Ken for the same work, the consequences go beyond reputational damage.
“Employees will be entitled to recover full back pay, including variable pay such as bonuses and benefits, so the financial risk for employers could be substantial, particularly if it is an issue that has gone on for years,” says Loughnane.
Employees with long service, take note.
Equal value
The directive doesn’t just cover equal pay for those doing the same job. It means equal pay for those doing work of the same value too – even if that work looks quite different.
This is probably the most complex task for employers. It involves assessing the value of different types of work in their organisation, putting work of similar value into categories and ensuring people are similarly paid.
In UK clothing retailer Next, for example, the mostly female sales staff were found to be earning less than the company’s mostly male warehouse workers. Even though their jobs seem different, the retail staff contributed work of equal value to the warehouse workers, a tribunal found.
Next’s argument that the pay difference was due to the differing “market rates” for the roles was not accepted.
The demands of some work have been consistently undervalued in business – a good customer service person might be described as “kind and friendly” – but this frames emotional and relational work, often found in women-dominated roles, as personality traits rather than professional skills.
The Department of Equality is now commissioning a “Gender-Neutral Job Evaluation Toolkit” and employers will be invited to training to help them compare work objectively – based on skills, effort, responsibility and working conditions – to eliminate gender pay gaps and bias.
Done right, this could upend old pay structures that have unfairly rewarded some skills over others, for no objective reason.
Confidentiality clauses
Get stuck in a lift with colleagues for the day now and you may get out none the wiser about each other’s pay. Once the pay directive is eventually implemented, however, they won’t be able to blame a pay secrecy clause for their reticence.
“You will be able to speak to colleagues about pay,” says Loughnane. “Employers won’t be able to shut down conversations about pay fairness in the workplace, and that should be a major step towards transparency.”
But given that almost one in five respondents to the Indeed survey said even their partner does not know how much money they really earn, the new rules may do little to challenge any cultural coyness around money.
