Job Architecture and the EU Pay Transparency Directive: What’s Really Required?

As organizations make the shift from planning to action on the EU Pay Transparency Directive, many Total Rewards leaders are asking whether they need a new or different (point-factor-based) job architecture. A well-structured job architecture plays a key role in compliance, but that does not necessarily mean you need a massive overhaul. In fact, many companies already have what’s needed to comply. The real question is what, if anything, needs to change. Understanding what the Directive really requires will help organizations prioritize efforts and avoid unnecessary and costly overhauls.

So, what job architecture changes may be required? Let’s break it down.

Your job architecture may already fit the Directive.

The EU Pay Transparency Directive (2023/970) aims to eliminate the gender pay gap. To comply, it does not demand a brand-new job architecture. It does require transparency and analysis based on factors typically defined within a job architecture.

As a refresher, there are five key components of the Directive (skip ahead if you’re already familiar):

1. Ensuring equal pay for men and women performing work of comparative value, where pay is defined broadly (inclusive of benefits) and “comparative value” is based on workers performing the same work or work of equal value
2. Pay and career transparency, where organizations must make accessible to workers “a description of the gender-neutral criteria used to define their pay, pay levels, and pay progression”
3. Right to Information, where employees can request “individual pay level and the average unadjusted pay level broken down by sex, for categories of workers doing the same work or work of equal value”
4. Public pay reporting, including the mean and median gender pay gap (overall and in complementary or variable components), the proportion of women and men receiving complementary or variable components, and the proportion of women and men in each quartile of pay
5. Joint pay assessment in coordination with works council or representative, in the event an average pay gap is 5% or more in any “category of worker”, not justified by objective and gender-neutral factors, and not remediated within six months of the gender pay gap report

Some of these concepts may already be familiar. The Directive’s references to categories of workers — those performing the same work and work of equal value — align with common job architecture elements such as functions, job families, jobs, job levels, and salary structures.

Additionally, the mandate for employers to provide workers with a description of the gender-neutral criteria used to define pay, pay levels, and pay progression is already embedded in job architecture leveling criteria and guidelines. While your job architecture may not be perfect, it likely contains many of the key components needed to comply with the Directive.

Assess your existing job architecture before a major overhaul.

Job architecture projects come with significant costs and can take years to complete. Companies can’t afford to do a complete overhaul — nor should they take the time — unless it’s absolutely necessary.

Instead, take a strategic approach by beginning with a Current State Analysis. This will help you identify what you already have in place for compliance with the Directive and allow you to focus on and prioritize only what truly needs to be adjusted.

Step 1: Start with the data you have.

The Directive’s expansive definition of “pay” means companies must gather data from multiple systems. Different data are needed for different requirements: pay gap reporting and calculations rely on payroll data, while adjustments to close gaps will likely involve data stored in your HRIS.

To begin, identify who has access to the payroll data required for each legal entity in each country where you operate. Then, start collecting information on which pay elements and benefits are stored in those systems.

Step 2: Run a preliminary analysis.

For the EU Pay Transparency Directive, employers will need to report on the 2026 calendar year. Some companies plan to use data between January 1, 2024, to December 31, 2024, while others will use base salaries effective January 2025. When assessing the state of your job architecture, running a preliminary analysis is more important than focusing on the specific data set or timeframe you will eventually use.

Use the data you have — even if it feels incomplete. While you will need all forms of “pay” to complete your pay gap analysis, you don’t need all of the data outlined in the Directive to begin analyzing your current state.

Follow these guidelines for an effective analysis:

• For Categories of Workers, use existing levels for “Work of Equal Value”.
• Run a diagnostic pay equity analysis for each legal entity in each EU Member State in scope for your organization. As a first pass, focus on countries with 100+ employees. (Use our Global Pay Data Reporting Calculator to understand where your company meets employee thresholds.)
• Calculate gaps by level first, then analyze by job functions and families, and apply neutral controls like skills, education, and training requirements.
• Identify where gender pay gaps exceed 5%.

This step will help you prioritize the areas requiring the most attention. Pay equity technology makes this process fast, simple, and repeatable — especially as you run subsequent analyses leading up to the Directive’s deadline, and beyond.

Step 3: Drill down into problem areas.

Next, investigate levels and job functions where you identified pay gaps. Determine if these gaps are based on neutral factors such as scope of responsibility; educational, professional, and training requirements; skills; effort required; and/or working conditions, as outlined in the Directive.

Again, using technology for your pay audits makes the process fast and easy, helping you identify opportunities for improving your data and prioritizing areas for deeper dives, such as:

• Are there job requirements you haven’t yet captured?
• Are specific jobs in the right levels?
• Are employees in the correct jobs?
• Are there groups of outliers indicating a pay practice you haven’t yet accounted for?
• Are there jobs dominated by one gender that are paying more or less?
• Are employees below or above the ranges?

Because of the Directive’s transparency and analysis requirements, it’s important that your job architecture be comprehensive enough to explain how your company values jobs and the requirements for employees to advance to higher level jobs. This step will help you figure out how to make incremental improvements that will not only improve your job architecture, but ease your path to compliance.

Step 4: Calculate the scale of the issues.

As you look into problem areas, determine if additional criteria may exist that haven’t yet been captured. For example, do you pay premiums for jobs with specialized skills and training? Are your groupings accurate, too broad, or too small? Is there another level in a career path for a specific job family you haven’t yet captured but are paying for in reality?

Determine if you have gaps, and then understand their size, the span of employees they impact and the costs associated with closing them. From there, calculate the current size of pay gaps to have a general understanding of the cost of current gaps and the work needed to justify them.

Step 5: Evaluate if job architecture changes are necessary.

The previous steps will give you the information you need to assess whether your job architecture is sufficient.

While not an exhaustive list, you may need to revisit your job architecture if:

• You had low confidence in the job groupings and comparisons, uncovering broader issues with job leveling consistency and accuracy
• You found significant pay inconsistencies among jobs evaluated as similar, or noticed misalignment with career paths (e.g., lower-level roles being paid more than higher-level roles)
• Issues were widespread, affecting more than just a handful of groups and impacting a large portion of your workforce
• Your job architecture lacks the necessary detail on skills, experience, and education to differentiate job levels and functions effectively

However, if you were able to complete most of your analysis with confidence, an overhaul may not be necessary. Instead, you can save time and resources by focusing on targeted refinements to ensure compliance with the Directive.

Make your analysis repeatable by using software.

Complying with the EU Pay Transparency Directive isn’t a one-and-done exercise, but a methodology you will need to build, repeat, and justify over time. The Directive has yet to be transposed across all 27 EU Member States, which means additional analysis may be required as regulations evolve.

Flexible software solutions can help by providing the configurability needed to adapt to new data and calculation requirements as further guidance becomes available. You can set up the analysis now to incorporate as much data as possible, adding more over time as you collect it. This approach will save you time and resources by allowing you to repeat and refine the analysis, without starting from scratch.

Don’t rush into changes before fully understanding what you already have. Conduct a current state assessment and leverage software for a more focused analysis. This will help you determine if targeted refinements to your job architecture will be sufficient, saving you both time and money.

Syndio’s experts and technology solutions can help you get your arms around the complexities of the Directive. Want to learn more? Access our EU Pay Transparency Directive resources or Request a Demo today.

 

 

The information provided herein does not, and is not intended to, constitute legal advice. All information, content, and materials are provided for general informational purposes only. The links to third-party or government websites are offered for the convenience of the reader; Syndio is not responsible for the contents on linked pages.