The EU has approved a new pay transparency directive which aims to close the gender pay gap.
The directive will mean employees have the right to request information about their individual salary level and the average salary level, broken down by gender, for categories of employees doing the same work or work of equal value.
It will also mean employers must inform candidates about the initial wage level or pay scale in the job announcement or before the interview.
Employers will not be able to ask future employees about their pay history.
More on the gender pay gap:
Gender pay gap stagnation signals lack of attention
Women have stopped earning for 2022, the same as in 2020
Pay gap reporting is failing women as pay gap widens
With the UK’s recent gender pay gap reported at 9.4%, the same level as in 2017-18, should the UK adopt a similar initiative?
Pay transparency is important, but action must follow
Catherine Garrod, author of Conscious Inclusion: How to ‘do’ EDI, one decision at a time, said: “When it comes to inclusion, transparency combined with practical actions are key, and I’m all for employers advertising salaries on job adverts.
“Hiring managers and recruiters already know the budget and can assess a candidate’s experience without knowing whether they’ve been historically underpaid, appropriately paid or overpaid.
“If a candidate is being underpaid, basing their new salary on their previous earnings means organisations are perpetuating individual pay disparities, and let’s not forget this impacts bonus and pension too.
“So, advertising salaries is one practical action organisations can take to help close all pay gaps. I encourage leaders to empower hiring managers and recruiters to do it before the UK tells us we must.
“Another practical action is making diverse shortlists standard for all roles with grades above a certain level.
“Using gender as an example, this means finding the three best women and the three best men to create a shortlist of six candidates to interview.
“I also encourage organisations to report on their CEO to average worker pay ratio and use this insight to influence future wage policy.
“I love data and it’s powerful, but reporting alone isn’t the answer. It’s the combination of both significant and everyday decisions that lead to an organisation being inclusive.”
Gender would be a good start, but what about ethnicity and disability reporting?
Toby Mildon, who runs diversity and inclusion firm Mildon Consultancy, said: “I like the idea of sanctions for non-compliance to drive accountability. And seeing a requirement for companies with more than 100 employees to report every three years is a good move.
“In terms of the UK, I have not seen any indication from the current government that adopting such a directive makes sense – I hope they will. But I’d hope that if the UK did adopt this directive – or similar – that it would go beyond gender.
“The gender pay issue is a critical concern, but what about moves to ensure ethnicity and disability reporting, for instance?
“In the UK, businesses with more than 250 employees need to report the gender pay gap. In fact, some of my clients report before this 250 employee threshold, and also report on ethnicity pay and even sometimes disability pay.
“This kind of business behaviour must become the norm rather than the province of just a few forward-thinking businesses.”
Current UK pay gap reporting does not go far enough
Tim Grimes, co-founder of flexible job platform WorkYourWay, said: “Although the UK mandatory pay gap reporting has been in force since 2017, it simply hasn’t done enough to drive true nationwide and organisational change.
“Eight out of 10 firms in the UK are still paying their male employees more than women, which shows that very little progress has been made in closing the gender pay gap.
“The EU’s new pay transparency directive shifts the balance of power from the employer to the employee, and gives individuals the right to request information about their individual salary level; something the UK needs to implement.
“Transparency at an employee level would bring about more upfront accountability and could force companies to match salaries or risk losing staff.
“To really drive home equality at work, however, we must go one step further and ensure all organisations list salaries on job descriptions if we truly want to tackle the gender pay gap.
“We know women are much less likely to apply for a role without a salary being shown, and yet only 60% of jobs disclose it. Transparency from the get-go would be a huge step forwards.”
Companies need to be held more accountable
Alison Wilde, co-founder of people transformation consultancy Birdsoup, said: “The gender pay gap is increasing, not closing, which is all the evidence we need to know that current reporting isn’t making any difference whatsoever.
“There are no mandated action plans, no follow-up and no enforcement that follows the reporting.
“Given how much of a flop this has been to date, there’s no clear suggestion that salary transparency will make any significant difference either; unless we start to hold companies accountable, there’s little point in just having the data.
“Having salary transparency in job adverts, on the other hand, would go a long way to getting to the heart of the issue.
“An upfront salary attached to any job sets the bar on the role vs the person, and we know that women are less likely to negotiate on salary, so this would be a big step forward here.
“The only downfall could be putting women off applying for the role in the first place if the salary feels disjointed to their perceived worth. Companies should look closely at the wording and language in job adverts to be as gender inclusive as possible to overcome this barrier to entry.”