BRUSSELS, June 24, 2024 /PRNewswire/ -- A new report from
The Conference Board, based on a survey of 78 of Europe's largest employers, finds that the
EU's new Pay Transparency Directive is pushing businesses to set
global policies on pay. 55% of senior human resource executives
surveyed say that they have, or are planning, a single approach to
pay across their international operations. However, the report also
highlights the need for accelerated action to implement the
Directive, with 41% of respondents–whose companies collectively
employ approximately three million people globally–saying that they
have yet to begin preparing.
Under the Directive, effective starting June 2026, companies that employ more than one
hundred workers in the EU must disclose information about pay
levels to employees and candidates, and report annually on their
gender pay gap. If the gap is higher than five percent, they must
take mitigating action or face mandatory fines.
The report, Countdown to the EU's New Law on Pay
Transparency, notes that there are strong concerns among
employers about the new requirements. Many are apprehensive about
how the regulation will affect wage bills, competitiveness, and the
ability of managers to reward their best performers.
The report was launched at The Conference Board's Future:
Reward Europe event, held in Brussels. In a separate live poll conducted at
the gathering of senior executives responsible for pay, 44% of
participants said that they were "concerned or very concerned"
about the impact on wage bills, with only 3% "not at all
concerned". Of the 75 respondents to the live poll, 43% said that
the Directive could increase their European wage bills by between
2.6% and 5%.
"Our analysis shows that complying with the Directive is
data-intensive and requires a high level of cross-functional
collaboration, so it is a concern that many businesses have not yet
begun to prepare for it," said Jean-Marc Verbist, Leader of The Conference
Board Human Capital Center, Europe. "Compliance is likely to come with
a significant cost. Beyond the anticipated short-term rise
in wage bills, businesses will also need to invest in training,
data gathering, and internal and external communications. Chief
Human Resource Officers need to ensure their boards and senior
managers are aware of the risks of non- and low-quality compliance:
not just potential fines, but also increased workplace tensions and
loss of productivity."
Key highlights from the report include:
SETTING GLOBAL STANDARDS:
Pay transparency is gathering momentum around the
world:
- 10% of survey respondents already have a global framework for
pay transparency in place, while 45% say that they are planning a
global approach.
- 30% say that they will restrict pay transparency to EU
regulatory requirements, while 15% remain undecided.
REGULATORY READINESS
Businesses are off to a slow start in preparing to comply
with the EU Directive:
- 16% of businesses assess themselves as being a significantly
long way from readiness, and 41% have not yet begun preparing for
implementation.
- Less than 2% of businesses believe that they are already
compliant with the regulation, while 10% believe they are close to
readiness.
- 44% of respondents say that their internal systems and data
require additional work to capture and analyze the data required by
the Directive.
IMPACT ON EMPLOYEES
Managers see the upside of pay transparency regulations, but
there are risks:
- 30% of respondents believe that the Directive will help them to
address the gender pay gap and improve female representation at a
senior level.
- 25% say that the Directive will enable managers to have open
discussions with staff and debunk perceptions around pay.
- In discussion, executives voiced concerns about the impact on
labor relations and negotiations with social partners, including
unions and works councils.
About The Conference Board
The Conference Board is the member-driven think tank that delivers
Trusted Insights for What's Ahead™. Founded in 1916, we are a
non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt
status in the United States. www.ConferenceBoard.org
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