All right. So very excited to see everyone joining. So let's just give it a couple of moments for everyone to log in. And then we'll get started on our webinar on the new EU directive on equal pay and pay transparency.
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And for those who have joined already, there is a Q&A button. So if you have any questions that come up during the webinar, you're welcome to ask a question to us. And we'll make a great attempt of responding to it during the webinar. If we're not able to, then we will get back to you after the webinar with a response.
So I can see that the participant list is still increasing. There still people joining the webinars. We'll just give it 30 more seconds before we get started and start introducing. But maybe what we can do is go over to the agenda so you can see what's one topic for today's session.
All right. So it is now 32 past the hour. So a very warm welcome to everyone who has joined our webinar. At Mercer, we are really, really excited to be with you today to discuss the new EU directive on equal pay and patron's presidency, together with a representative from the European Commission.
We have been supporting clients in this space for many, many years. And are very excited to share our practices with you, but also to hear from you, what your thoughts are. And as mentioned, you can please use the Q&A functionality to ask any questions. We will attempt to respond during the webinar. And if we-- for those questions, we're not able to get back-- to respond to, we will get back to you after the webinar.
So on the agenda for today is some introductions as to why is it even important to talk about pay equity. Then we will go deep dive into the actual directive, the key highlights of it. Then we'll talk a bit about how can Mercer support. And then we'll have a roundtable discussion, where Lucye Provera, Audrey Neveu and myself will discuss some of the key questions related to the directive. And then we'll do a wrap up.
And all of that, we tend to do within the next 57 minutes. So starting with introductions. I'm really, really pleased, and thank you so much, Audrey Neveu, for joining us in this webinar. So Audrey is-- she works at the Gender Equality Function in the European Commission. She's a lawyer by background. She has specialized in European Public Law, International Criminal Law, and Human Rights.
She's been with the European Commission for four years. And she has been part of the actual team drafting the EU directive on equal pay and pay transparency. So thank you so much for joining us today.
And then we have Lucye Provera, my colleague. She is our global pay equity solutions manager at Mercer. She's been with Mercer for 17 years now in progressive roles, in rewards-related space. And she's been based in both the Middle East in the US and now in Milan. And Lucye and I, we work very closely, supporting our clients in this space.
My name is Lea Lonsted. I'm pay equity leader covering Europe and UK. I've been with Mercer for four years. Before that, I was part of MASK, of United Nations, and other international organizations. So I've worked in the space of human resource and organizational development, and diversity, equity inclusion across also Europe, Middle East and the US. So very, very pleased to be with you today.
So the first question is really, why is it important to discuss pay transparency? And why now? Well, basically, the pressure is mounting-- it is increasing. So what we focus on today is more around the legislative aspects, the reporting requirements, which we can see are increasing both in Europe, but also in the US and in other global locations.
But another pressure point is investors and shareholders that are putting pressure on companies to take a stand, but also be more open and be more transparent in disclosing what are actual pay gaps, and what are they doing about them.
And similarly, we see a similar pressure coming from the outside, coming from tenants, coming from internal tenants, the existing workforce. Basically, people want to work for an organization that is fair. And they also want to know what's going on.
If we look at some of the studies we've been doing at Mercer for the past many years, we can see that there is a correlation between representation and a focus on pay equity policy and process. And we can actually see those companies that have the strongest focus on these areas, also those companies that are closer to equal representation at top management level.
But when it comes to compliance, we can see the compliance. It is still a key driver for transparency across continental Europe and UK. So this is some data from some of the studies we do at Mercer. And this is from last year's real time insight survey.
We basically ask companies, how are you approaching pay transparency? So 43%, they are focused on compliance. That is the only reason for being transparent when it comes to pay. But 32%, they are exploring it in general. And for 25%, they say pay transparency, that is a key priority.
Now then when it comes to what are they then disclosing in terms of pay? We can see that 81% of them are only disclosing if it's required. But almost 9%, they are disclosing whether there is a legal requirement or not. So this shows a little bit about the readiness.
So we also ask companies, so do you plan to review your approach? And actually, for 56%, no, they don't plan to review their approach. It might be different if we ask them today, but interestingly, 44%, they said, yes, we do plan to increase our pay equity-- sorry, pay transparency approach.
Now what is really interesting here is to see the reasons why. So amongst those that are planning to increase the pay transparency, the key driver, the key reasons for doing so was related to employee experience, employee engagement, and pay equity.
So what we can see from that is that there is an increased focus on broadening this out, going a little bit away from legislation, but moving more towards an employer value proposition.
So coming a little bit back to the statement I made before, related or linking this to representation, this is data from another one of Mercer's core surveys, called the Total Remuneration Survey. And this is from our latest data net.
And what we can see here is representation across 10,000 organizations represented in the EU. And at paraprofessional level, we can see that 39% are women. They're almost equivalent at professional level, where we have 40% women represented.
Now when it goes up to the management level, we have slightly fewer women with 33%. And then at executive level, we only have 27% women represented at this level.
Now, if we look at the gender pay gap across these particular levels or categories, so to say, we can see a paraprofessional, the gender pay gap is 1%. So that's almost insignificant.
Now a professional level is at 9%. At management level, it's at 6%. And then at executive level, we're at 15% gender pay gap. So that actually calls for action and calls for consideration, which I think is exactly what the EU directive is trying to address.
So let me invite Audrey to talk a little bit about the EU directive and some of the key highlights.
Good afternoon, everyone. And thank you very much, Lea, for giving me the opportunity to present the new pay transparency directive. So I will start with the state of play regarding the directive.
As you may know, this was proposed in March 2021 by the commission. And last December 2022, the council and the European Parliament reached the political agreement on the text. So the formal adoption of the directive will take place between March and May this year.
And then once formally adopted, the directive will enter into force most likely end of May or beginning of June. And after this member states, we'll have three years to implement the directive into national law. So that the implementing legislations should be transposed by 2026.
But on the next slide, I will show you why we need this directive. So this directive is actually directly linked to the principle of equal pay for equal work or work of equal value between men and women. And this has been around for more than 60 years already because it's enshrined in the founding treaties of the EU since 1957.
So all member states and all employers in the EU are actually already required to respect this principle. And the requirement to ensure equal pay is also set out in the [INAUDIBLE] directive 2006/54. And this was also complemented by the commission recommendation 2014 on pay transparency.
So there has been work going on. But despite this legal framework, we still see challenges in the application of the principle of equal pay in practice. And we know that the gender pay gap in the EU is still 13%. And while it has several factors, one of them can comprise pay discrimination, especially due to conscious or unconscious bias in pay settings and the undervaluation of women's work.
So the main obstacles that are found that work against the application of equal pay between men and women in practice, obviously, is a lack of transparency, but also, a lack of legal certainty of concepts related to it. So what consists of pay and what work of equal value. And as well the difficult access to justice of victims of pay discrimination.
On the next slide, you can see that the objective of the directive then is to strengthen this principle of equal pay through pay transparency. And this is done by creating pay transparency at worker and employer level, and by giving a better clarity of existing legal concept and better enforcement of the principle.
On the next slide, you'll see measures that relates to pay transparency prior to employment. So under the directive, applicants must receive information on the salary range for the position they're applying to. And this is to be done before the job interview. And this work to ensure an informed and transparent negotiation on pay.
And there is a prohibition for employer to ask about the current and previous salary history of the applicant. And this works also to prevent that pay inequalities perpetuated over time.
The second set of measures is on pay transparency during the employment relationship. So under the directive workers have the right to request information to their employers. On the average pay levels, broken down by sex for the category of workers performing the same work or work of equal value within the organization.
So with this information, workers can evaluate whether or not they may be victim of pay discrimination, and of course, ask more questions about it. And it will also inform the employer of possible unjustified pay disparities within a category of workers.
There are confidentiality clause that they are completely prohibited because apparently, those exist in some companies. And so the workers should not be prevented at all from disclosing their pay to their colleagues or to their representatives if they want to.
So this rights and obligations apply to all workers and all employers in the EU. And also, in order to ensure that there is no discrimination between men and women in terms of pay setting and pay progression, the directive requires employers to be transparent and make accessible to workers the description of their pay setting and pay progression policy. And this must be based, of course, on gender neutral criteria.
On the next slide, down measures on pay transparency at employee level. And this concerns pay reporting obligation. So it requires regular publication of certain information that is relevant to detect pay disparities between men and women in an organization.
And the idea is that this will raise awareness on unjustified pay gaps. And employers will be triggered to remedy and justify different stats come to light.
So there are two degrees of pay reporting. There is a basic pay reporting, which contains information on the overall pay gaps in the organization. And this is to be made public. Externally, the monitoring body set up by member states. But employers can, of course, always make this public on their website if they want to.
And next to this, there is a strengthened pay reporting, which allows in addition to see the pay gap between men and women in categories of workers doing the same work or work of equal value. And this is to be made public only internally by the employer to its workers and the workers representatives, if they exist.
Also, the labor inspectorate and the equality body may ask this information. And the employer should provide it upon their request. And workers and their representatives will also have the right to ask the employer for additional clarifications and details regarding any of the data provided, including explanations concerning any gender pay differences.
And I don't know if you're all acquainted with the work of equality bodies, but these are present in every member states. And they promote equal treatment by providing assistance to victims of discrimination and by publishing reports on matter relating to discrimination.
So these obligations apply not to all employers, but only depending on the number of employees, according to a periodic time frame. And under this time frame, as you can see, employers with at least 250 workers will have to report every year as of 2027.
I know that I mentioned that the directive will be implemented by 2026. But employers actually have to start to report one year later. So then the employers with workers who have workers more than 150 to 249 will have to report every three years as of 2027. And for the smaller one, between 100 and 149 workers, they will have to report every three years as of 2031.
And these specific obligations, they do not apply to employers with less than 100 workers, unless required by national law. But it's not prescribed by the directive.
On the next slide, you will see the joint pay assessment. And this is triggered only if certain criteria are met. So for instance, if the pay reporting of the organization reveals the gender pay gap of at least 5% in any category of workers, plus the employer cannot justify the gap on objective gender neutral factor, and the employer did not address this gap within six months, then the employer has to conduct a joint assessment in cooperation with a worker's representatives. And this includes deeper reporting obligations then for the pay reporting that we mentioned before.
And for any differences that cannot be justified, of course, by gender neutral factor, the employer will have to take remedial measures to correct them. So these were the main transparency measures provided by the directive.
And on the next slide, you will see that the directive also clarifies concepts such as what is to be taken into account as pay and as work of equal value. And these clarifications that are based on the case of the Court of Justice.
So as you see, pay represent the basic wage and any complementary or viable component. So this means that it should also include bonuses and also take into account statutory sick pay or occupational pensions, et cetera.
And in order to assess whether workers carry out work of equal value, the job positions must be compared on the basis of skills that are necessary to perform a specific job and how those skills are valued.
So for this, employers are required to have pay structures in place to assess whether workers are in a comparable situation when it comes to the value of work they perform. And this assessment should be made on the basis of objective gender neutral criteria. And these criteria should include skills, efforts, responsibility, and working conditions, plus any other factors that are relevant to the specific job, as long, of course, that they are not related to sex.
And finally, on the next slide, I can present you the last chapter of the directive, which deals with enforcement measures to address specific obstacles that have been shown to exist in access to justice for victims of discrimination. So victims should have the right to be supported by equality bodies and workers representatives.
Victims should have also sufficient time to act in case of discrimination. And this is related to limitation periods to bring a claim to court. And this should not be less than three years. Victims should be also fully compensated for any harm suffered due to pay discrimination and sanctions for violation of the right to equal pay strengthen. And this is with the imposition of fines that are to be set by member states.
The role of social partners in matters of equal pay is also reinforced. It means that member states may entrust the social partners with the implementation of the directive. But the directive, of course, takes into account the autonomy. And it acknowledges the diversity of labor market models across the EU.
So the directive also reaffirms that this does not affect the right of social partners to negotiate, conclude, and enforce collective agreements.
And I will end my presentation with the monitoring body under the directive which should be designated by member states. So each member states will have a monitoring body to especially raise awareness on the equal pay principle and right to pay transparency. And it will analyze the causes of the gender pay gap, also devise tools to help assess pay inequalities.
It will also collect data received from employers from the pay reporting that I mentioned, and publish them. It will collect the joint assessment report and aggregate also data on pay discrimination claims and complaints.
So I hope that I could provide insightful information about the directive. And I thank you for your attention. Thank you so much for that. And also, thank you to everyone for asking questions. We are taking note of the questions. And some of them will definitely be answered in our roundtable.
But moving over to Lucy. Lucy, can you tell us a little bit more about what Mercer does to support clients in this space?
Absolutely. So at Mercer, we have been working with organizations for quite a number of years now to help them to prepare to have increased transparency. And what we outlined here are six key steps that we suggest to help guide you as a roadmap.
The first step is to assess your situation, to understand what are your foundations, what are your programs in place. Do you have a job architecture in place? Can you measure and explain your pay gaps?
The second step is to define your pay transparency story. What is the story that you want to tell? To whom and when and how will you share it?
The third step is to solidify your foundations, to really understand your rewards ecosystems to look at your HR governance, to make sure that you are able to understand and explain and close any unexplained pay gaps. And begin to educate your managers and HR on the directive. It's only then that you can begin to implement transparency measures, both internally and externally, and to share your story, communicating it in a way that resonates with your culture and organization.
And then finally, it's very important to measure using tools such as candidate surveys or employee engagement surveys, you can assess the impact on your business. You should also continue to measure your pay gaps and ensure that they stay closed and are objective, even if you don't have to report them year over year.
But we would really like to hear from you. And maybe Nils, if we open the first call, we can see where do all the different organizations stand today with regards to their journey. Are you assessing your situation? Have you started to develop your story or implement and solidify?
It looks like early respondents, which we have quite a number of participants on the call today, that many are still assessing. However, some have progressed. There's definitely a lot of work to do and a lot to consider.
Let's see. Let's give a couple more minutes for additional responses to come through. We have participants from all over the world today here in Europe, but also in the UK and US, as well as other parts of the world.
OK. And I think that we still have some of you still voting. However, we do see that the majority are still assessing their situation, which is completely fair, given this directive is still in the early stages.
So thank you so much for sharing and contributing. And as Lea said, thank you also for sharing your questions. We will make sure to share all the answers to your questions with everyone on this call, as well as share the materials that we are presenting today.
In terms of assessing your situation, because this directive is tied to not only pay transparency but also equal pay, it's very important to understand and assess your pay gaps. And when we look at pay gaps in organizations, there are a spectrum of different types of measures that we can use. If we start with a raw pay gap or the unadjusted pay gap, this is something that is reported, for instance, in Ireland, currently. And you're looking at the average pay difference between men and women in the organization.
Now, the difference is mostly due to differences in gender representation or in location. And it's very difficult to close these gaps with that sort of statistic.
If we move towards the right, we can see that there is equal pay analysis that our organization can look at. This is similar to what we see in the Swedish legislation, for instance. And here, you're beginning to cluster or look at differences in roles, looking at similar grades, for instance, or locations, and job titles. You can consider other factors such as age and tenure in the organization. However, it's in a more qualitative manner. There's also difficulties because you might not necessarily have comparisons for everyone in your organization.
And so finally, if we look at the far right hand corner of the slide, we can see a pay equity analysis. And this might be new to some of you on the call. But this is something that at Mercer, we've been helping organizations with well over-- a well over 20 years. And here, we are using regression-based methodology to understand and isolate out what is the adjusted pay gap, and understand what are the objective drivers of pay through the regression analysis.
The power of this analysis is that we are able to look individual by individual to see exactly where there might be gaps in the organization, and make adjustments as necessary in an unbiased, and comprehensive, and efficient way. Many organizations are using pay equity analysis currently today to enhance their disclosure and to help support a remediation strategy to close any pay gaps.
But let's take a deeper dive and see what this means, Lea. On this slide, we can show you exactly how we are decomposing the raw pay gap or the unadjusted pay gap to see what is the explainable portion, and what portion is unexplained. This is the main purpose of a pay equity analysis.
In this example, we have an average men payments of 100,000 euros. And this is compared to the average woman's pay of 80,000 euros. So there is a 20% gap. But we see that there is a portion of it that is explainable.
And it's explainable for differences in roles. It's explainable in differences in locations. It's explainable because of differences in performance. But there is also this unexplainable pay gap. And through our pay equity analysis, we're able to decompose and to understand exactly where to focus in terms of remediation.
We use the same process with all our clients. And we outline that on this slide. It starts with a comprehensive data collection, where we're looking at employee level data, understanding the different compensation elements. And that can be aligned, of course, to the directive.
We would then look at individual attributes, such as gender, race and ethnicity, looking at things like experience, tenure, promotion, performance history, education, and skills if this is data that you collect as an organization. We'd also look at where the position is located in the organization, looking at things like the grades or the job families, or if it was a part-- full time or part time status employee.
Then we would move to model developments. And here, using statistical models, we're able to see and understand what is a predictive pay or an internal benchmark for every employee in the organization. So we're no longer comparing individuals to others in the organization, but creating an internal benchmark that is a comprehensive and holistic benchmark, looking at all the factors in the models that we are including.
And I'll show you an example on the next slide. However, before that what we do with this data is to look at the pay equity assessment. And here, we're able to understand what is the unexplained pay gap for the whole organization, but also drill down into any risk area in the organization, be it at the country level or even at the rural level.
And we can see, together using our tools, to look at different remediation strategies to see how we can prioritize and help to close gaps in the organization on an employee by employee basis using our tool to pay equity calculator.
But on the next slide, Lea, we can see exactly how we do this calculation. And we see that for each individual in the organization, we're able to compare their actual salaries, which of course, includes their gender. And we compare this to the modeled expected based salary.
And we can see that we can have females that are paid, perhaps, above their expected based salary. In the same case, we can also have male one, where we have a 3.8% negative gap. It is below the predicted salary.
And we can see that overall in the organization, if we look at the average for females versus men, that we have an unexplained pay gap of minus 3.5. So this is something that we would work with our clients using our equity analysis to see exactly where they need to focus.
We would also use this analysis to help with more comprehensive disclosure and narratives to really explain why there are pay differences in the organization. So it is a very powerful and comprehensive study that can be used across multiple geographies as well.
And we have tools at Mercer, which is also very exciting when we implement and look at the remediation strategy. We have our Pay Equity Calculator tool. And this allows us to really drill down and see the gaps in any part of the organization, to compare remediation plans, and to assess the impact of those plans.
We're very excited to announce that there will be new features to this tool in 2023. One would be a local pay compliance tool, which will have a EU equal pay disclosure module, and allow organizations to already start to practice and to look at the calculations for the EU disclosure. As well as the other countries where there are current requirements, such as in Ireland or in Spain or in Sweden.
We'll also have another module where we'll be looking at the starting pay. And this will allow us to use the pay equity analysis to really help organizations to see where they should be bringing in individuals and what the range could be that they could be publishing sizing on each of the job posting from a pay equity perspective. Or if an individual is changing roles, where they would need to be placed in the pay bands. So this is a very exciting tool that we're also happy to be announcing.
And then finally, at Mercer, we're very pleased to have a certification partner with the Universal Fair Pay Check. And here, any organization that completes a pay equity regression analysis with us can apply. There are different levels of certification, depending on where your pay gaps land. But at the end of the day, this is a great way to showcase and to be transparent on your fair pay principles.
So thank you, everyone, for listening to me to share some of the tools and methodologies at Mercer. But I know there are a lot of questions from the audience. And we also had collected some questions prior to this. So really happy to open it up to Lea and Audrey to have this panel discussion as well.
So Lea, maybe you want to kick it off with a couple of questions that have come through.
Yes, exactly. And I'm trying to keep track on all the questions coming in as well. So-- but let's start with those we had collected from your questions upfront.
So first question. I think I also saw similar questions in the chat just before. But Audrey, I mean, curious to understand, what is the connection between this equal pay gap reporting and a focus on equal opportunities or equal career opportunities? Any thoughts? What are your thoughts on that?
Well, I believe that these two concepts are really interconnected-- closely interconnected because equal pay represents one aspect of equal opportunities. And by ensuring that men and women receive equal pay for the same work or work of equal value, companies already make an important step in promoting equal opportunities at the workplace.
And that's why also, the directive sets obligations related to transparency on pay in job advertisement and on pay settings and pay progression policy. Because this way, by being more transparent and by reporting on pay gaps and by having transparent pay setting mechanisms, companies can be more aware of any unconscious bias, and identify really the areas where they may not be providing equal opportunities, and then take steps to address them.
And this will also, I think, then participate in ensuring that all employees have equal opportunities of equal access to recruitment, promotion, training, or any other opportunities at the workplace.
Thank you so much. Audrey, we have another question that is also popping up in the chat. And that's around the workers categories and the definition. I know that you had a slide and you presented on this. But maybe you could go into a little bit more detail.
So the category of workers that I mentioned, it means a group of workers performing the same work or work of equal value that are grouped in a way that is not arbitrary and based on gender neutral criteria I mentioned earlier. So at least skills, effort, responsibility, and working condition.
The directive as such does not prescribe calculation method. It's the duty of employers to define the categories of work. So the jobs, positions, and if these are of equal value based on a combination of weight of criteria.
So also, depending on the level of social dialogue, this may be done in cooperation with workers representatives. But you have to know also that to facilitate this work and also limit the administrative burden of companies, the directive requires member states to establish tools or methodologies that would support companies in assessing and comparing the value of work in line with bias free criteria.
And this may include, for instance, gender neutral job evaluation and classification system. And this exists under several guides that are available at national and EU and international level.
There are the ILO guide, but also the commission's guide on gender neutral job evaluation for equal pay. And under national in member states, also, there are several guides developed in Spain, Belgium, France, Portugal. So that's-- these are also relevant for employers, if they want to check out. This should be done in practice.
Excellent. Well, thank you so much. It does sound like there is already a lot of guidance out there. But maybe a question around best practice because we discussed that when we prepared for this session as well. And I know you're also curious to understand what is best practice around companies.
But maybe Lucye, if you can share some examples from the companies you're working with when it comes to transparency.
Definitely. I mean, I think we can share a couple of examples. There was actually also a webinar last week that Mercer held, where we had some cases, Workday, PVH, and Adobe presented. I think that in terms of companies starting out, it's very important to have fair guiding principles about what they want to communicate and how they're going to be doing it, having a playbook, and having the governance that will allow you to execute on that.
The other key practice that I think is important is once you understand your baseline to really to educate and train your managers internally before going externally so that you're really prepared.
Lea, do you have any other additions that you're seeing with your clients?
Yeah, no. I would say, I mean, having a foundation is absolutely critical. I mean, see this as a change process where you don't want to leave your managers hanging out there, and go from zero to full transparency overnight.
I mean appreciate that it takes time that you need to prepare. You need to have a story to tell. But you also need to both equip your managers and your HR to be able to support through the change process. So we see a lot of companies.
A lot of companies are also asking, why should we focus on this now when the directive only will come into effect in three years and we need to report in four years. Well now, it's your time to really prepare and get your house in order, so to say. And set those structures as Audrey mentioned.
Definitely.
And Audrey, I think another question that we have popping up quite a bit is how will the directive differ from the local legislation in France or in Sweden or in the UK. Do you envision that there will be greater EU consistency? Will the gender pay index in France, for instance, still remain?
So first, the directive sets minimum requirements. And so therefore, this will lead to greater consistency because all member states and companies will need to comply with these minimum standards that are enshrined in the directive.
Of course, they are also free to go beyond these minimum standards, but some obligations under the directive may already be in place in some member states such as France or Sweden. But they are-- the directive will complement these measures.
Member states are-- they can keep their own measure or not, but they have to, in any case, complement these measures with the directive standards.
Regarding the UK, the UK is not a member anymore. So the directive will not be required to be implemented in the legislation.
Thank you. And one other question around the 5% threshold. Why the 5% threshold? And I believe you mentioned that it really applies to any category of worker. But where does it apply?
So the 5% is used to differentiate between a proactive and a reactive pay assessment made in larger companies. So with a gender pay gap lower than 5%, the employer would need to engage in more profound pay assessment only upon individual complaints or finding of pay discrimination. So questions asked by workers representative or labor inspectorate or equality bodies. The companies that have jumped a bigger than 5% in any category of workers and cannot explain why we need to engage proactively in pay assessments, to check for any possible discriminatory practice.
I see. And what do you think in terms of the 5%? Do you think it's enough in your perspective and your clients?
Yeah. Well, I think, I mean, what's interesting here is that when we talk about the external certification, but also just looking at general practice at a global level, we see that there is a tendency towards companies. They don't want to disclose unless they have less than 1% gap. So you can say, that's actually stricter than what we see in the legislation from the EU.
It is a requirement if you want to apply for a higher level certification with fair pay level. It is a requirement that you have an unexplained pay gap or an adjusted pay gap, which is less than 1%.
So that seems to be the norm outside, at least for global players in this space. So it's really interesting to see how-- what that will drive. But my-- I also know through conversations with clients that many have questioned the 5% from the EU, but also from-- especially from smaller companies that it might be too hard to achieve and put too much pressure if it was to be even stronger than 5%.
So I think that what I hear is that it would make it easier to implement it with the current EU requirements.
But I'm wondering. I can see we have a lot of questions from all of you. We're probably not going to be able to go through all 151 questions. But before we do that, we actually have a question for you, for the participants.
So Nils, if you can pop up our poll. So we'd love to hear what are you currently doing to prepare for the EU directive. Are you at the process of redefining our job architecture, meaning, we're sorting out our grating structure, career levels, et cetera? Or are you at the next level where you are already reviewing pay equity equal pay? Or have you come to a stage where you are disclosing your pay gaps, both internally, externally? Or are you at the next level, where you would be training managers, training HR in transparency measures?
So I can see a lot of responses are coming in. And it's really interesting. We will share them with you. But it's really interesting to see where you are because again, reflecting on what Lucye mentioned before with regards to the transparency journey, you need to understand where you are to be able to take the next steps.
All right. So I think we are almost there. So it seems like-- so it was a multiple choice. So let's have a look and see what the results are. All right. So many are in the process of defining job architecture, as well as reviewing pay equity equal pay. But not so many and the process of disclosing and training managers.
So Lucye or Audrey, any thoughts, any reflections from your side on these results? Does it-- are they surprising?
I think that we do see a number of organizations looking at pay equity and equal pay right now. I think that in terms of the different requirements across Europe, we do see every year, new countries coming into play.
However, more and more organizations are wanting to look at this globally and to use more in-depth analysis to really get to the root causes. It's surprising to see that there are so many organizations that are still defining their job architecture, looking at the job grades and career levels. We do obviously-- we're a number of clients doing this work. But in terms of what we see with organizations having accurate job grades and career levels is something that continues to be important.
Lea, what about you? What do you think?
I fully agree. I mean, I'm also paying attention to almost 20% saying they're already disclosing pay gaps internally and externally. So I think that potentially also goes hand in hand with becoming more prepared for these transparency steps. So I think this is great.
All right. I think let's close the poll. And let's try to see if we can address some of the questions that came. One of the questions or some of-- there has been a couple of questions around, will this actually go into effect?
So Audrey, will this actually go into effect?
Yes. Well, it should go into effect. It must go into effect because member states, actually, they are represented by the counsel that was part of the negotiation and that agreed on the last version of the text. So member states agreed with this directive. And they will have to transpose it, in any case, by 2026. So it will go-- yes, it will go into effect.
And if it's a bit late, the commission is mandated to go after member states that have not transposed the directive. So at some point, it will go into effect. And hopefully, by the transposition deadline in 2026.
OK. Excellent. And just to clarify because I know that question came up as well. So that's basically-- we expect that the legal process will be concluded in terms of the EU in June or by mid '23. And then member states have three years to transpose it or implemented international law. So that would be '26.
And then basically, companies would then have one year. Companies with more than 250 employees, they have one year to report.
It's based on 20-- on the year 2026. I believe it's--
The '26 figures.
Yeah.
Excellent. Then there's another question or quite a few questions on what defines an entity. Are we talking legal entity or the total head count in one country? All the total head count across EU. So when we talk 250, what are we referring to?
Well, an entity is-- well it's the company that sets all relevant elements of pay. So if you have a holding company in a member states that has several-- that sets to pay for all smaller companies, this will be the entity. The whole thing will be the one reporting.
Basically, all the company that has-- that sets all relevant elements of pay should be the reporting one. Yes.
OK. Excellent. Thank you so much.
All right. Let's see. There are also some questions related to GDPR. So-- and some of the skepticism that has also come through is this new GDPR exercise, where companies will need to do a lot of administration to fulfill some requirement. So any thoughts on that?
If it's linked to GDPR, you mean?
Yes. Well, the requirement, the transparency requirement, it does not concern personal data because it's only averages that are calculated. And then you can, of course, ask more questions. But there won't be any data protection issues. And that was also the European Data Protection supervisor that was consulted. And it didn't note any concerns in terms of privacy or protection of personal data.
So there is also a provision in the directive that mentions that if there would be any concern related to the sharing of personal data, that would be a third party that could be workers representative on an equality body to gather the data so that the privacy of the person concerned-- the salary of the person concerned is respected. But it should not really happen in practice.
OK. Excellent. So I think that we are at the stage. We have a few moments left. We have room for one more question. And again, to all of our joiners, we will be taking a look at the questions and get back to you.
So any sort of favorite question from your side, Lucye, that you have picked out of all of these many questions?
Well, there's one that I would like to say. There is one at ask, will there be more webinars and updates on this topic? And I would say, absolutely. We can see from today's discussion, there's lots to talk about.
And Lea, I think, maybe you could just share some of our wrap ups and also some of the exciting materials that we do have to share.
I would love to. Absolutely.
So in terms of wrapping up. So just some key takeaways from you, and maybe also a little bit of a call for action from our side. So first of all, equal pay and pay transparency is not a passing fad. It's not going to go away. Once you open up that box, it's here to stay.
And that both comes to legislation. We can see it in the US. And thank you for the US and global questions as well. It is increasing. In the US, we see transparency laws coming into effect at state level. We see the same here in Europe. We see it in Japan as well and Australia with increasing and strengthening of legislation.
But also from an employee perspective and an employee expectations perspective, there will be a requirement and an expectation for more transparency and disclosure. Appreciate that we are at different stages. And where you are, that should be your starting point.
So don't think that you can go from not disclosing anything to full disclosure overnight. It does require preparation. And we encourage you to appreciate where you are. And then build it from there.
Leverage what you already have. Leverage your existing practices. For example, we work with a lot of companies that embed transparency training preparation into their annual rewards processes so it's not-- so it goes hand in hand with what is already there, the process which are already there.
And then in addition to that, when you think about communication, don't forget that your employees are also following you on social media. So whatever you say externally, they will ask for this to be validated internally.
So if you say you have a fair organization, if you say you disclose gaps and have equal opportunities and all of that, you need to practice what you preach. You also need to make sure that that is actually the case, and that is the experience of your existing employees. So those really go hand in hand.
And then finally, we have been talking a lot about legislation today. But legislation is only one driver. And if you only focus on legislation, that is, in our view, a little bit short sighted. You need to also see-- I mean, to a point that automate, you need to see this as awareness building as well.
So yes, in the equal pay directive, it may not embody strict measures on career equity, but it should create the starting point and the foundation and more awareness of, oh, wow, why don't we only have 27% women at executive levels, for example? How does that influence our gender pay gap? So see it as a starting point for something bigger.
All right. And then a little bit on resources. So we have a couple of white papers and point of views that we'd love to share with you. We have recently updated our pay equity point of view. So a fresh version is ready on our website.
We are also working on a white paper that is a little bit more detailed on the actual transparency directive. That will go live within the next couple of days as well. And then we have a paper that's also for a lot of our UK participants on overcoming racial inequities in UK organizations. And we have a paper that goes a little bit more into methodology on pay equity, and how you can take a regression-based approach.
And there's a ton of more material. And these are just some examples. Then we have a couple of videos. We have a video where we talk about the universal fair pay check certification. We have a video which is a recording of the webinar we did in January on racial inequities. And we'll also include a link to this particular webinar when we're done and the recording is finalized.
So you can also rewatch this on our website. And then you can also listen to us talking about pay equity in the energy sector. We have a couple of podcasts on that. We have podcast on equal pay and pay transparency. And we have a podcast on what's going on in Germany when it comes to pay equity and diversity, equity inclusion. It is in English but it is built with a focus on Germany.
And we have a ton of more resources I put in the address for our website. In the top, we will share all material with you. But for now, I just want to say really, really thank you so much to all three for taking the time and joining us today. It has been very, very insightful. So thank you so much.
Thank you so much to you too. It was very interesting webinar.
Fantastic. And thank you, Lucye. And thank you to all of you who participated in our call today. Have a wonderful day.