Louise O’Byrne 

My name is Louise O’Byrne, and I’m a partner here at Arthur Cox. You’re very welcome to our podcast on Pay Transparency. I’m joined today by my colleague, Hannah O’Farrell. Over the next 15 minutes or so, we’re going to discuss Pay Transparency themes, with the overall objective of providing some practical takeaways as your organisation moves towards implementation. 

So, some stats, Hannah, before we begin. As you know, the current gender pay gap in Ireland is in the region of 11%, whereas the pay gap across Europe was just over 13% when it was last reported. When you read the directive and look at the rationale for it, it is very clear that there’s still a sense within the European Union that pay discrimination exists, that bias exists in relation to pay determinations. The directive notes the disproportionate impact that the pandemic had on the female workforce, particularly as it relates to pay. 

So, as you know, we’ve had gender pay gap reporting in Ireland since 2022. The vast majority of organisations in Ireland with 50 or more employees are now reporting on their gender pay gap. 

Employers will obviously be asking themselves the question: What is new? What does pay transparency mean for me? What changes do we need to be mindful of? Can you briefly bring our listeners through that? 

Hannah O’Farrell 

Sure. So, I suppose Ireland has had mandatory gender pay gap reporting since 2022, like you say, and that largely does meet the requirements of the directive, but there are going to be some important new requirements that will require legislation. 

The first thing to say is that the public reporting obligations are for larger organisations, at least initially, so that’s employers with 250 employees or more. But there will be changes across the board, even for smaller organisations. 

The key ones we want to talk about today are: 

Firat of all, pay transparency prior to employment, that means employers will have to provide information about the salary level or range, either in the job advertisement or in advance of the interview, so that the candidate knows what the salary is for the job without having to ask for it. Likewise, employers will be prohibited from asking an applicant, “What was your previous salary?”, the idea being that if there was some unequal treatment in prior employment, they’re not carrying it forward into the new employer. 

The second thing, then, is pay transparency once you’re in employment, so you’ve passed the interview and are an employee, or are an existing employee. Employers will have to provide gender-neutral and easily accessible information, including a description of the criteria used to determine pay levels. 

The whole idea of this directive is a focus on pay transparency and career progression transparency. Sp, the information exchange is really a key part of this directive. 

That brings us on to the right to request an information breakdown. So this is the one that will apply initially to employers with 250 employees or more. This means that an employee would be able to ask their employer for information concerning their individual pay level and the average pay level broken down not just by sex, which we see through gender pay gap reporting obligations, and those obligations will still exist, but under the Directive, the information will have to be broken down by category of worker i.e., workers performing the same work and workers performing work of equal value to them. An employer has to provide this information within two months of receiving a request. Also, an employer has to remind employees of their right to request this information.  

So, you can imagine a situation where this reminder email goes out, and that invites an influx of pay information requests. So, I suppose it begs the question, how will this really work in practice? It’s going to involve significant consideration of how to define, you know, what categories of workers will be, and how those categories of workers will be made out. So, maybe, Louise, you could cast some light on that? 

Louise O’Byrne 

Yeah, and I think that’s the piece of the directive that most of our clients are struggling with, or certainly challenging themselves about at the moment. It’s not a one-size-fits-all. Every organisation is different, every organisation manages its people differently, manages their pay structures differently. 

So where do you start as an organisation? It depends on the sophistication of the organisation to begin with. Unionised environments, for example, a lot of the time are quite used to a fairly significant level of transparency when it comes to pay. You know, roles are banded, roles are graded, and there’s a very set formula for negotiating pay increases across the piece, for moving through the bands on an annualized basis or as it relates to CPI, or, you know, inflationary-related increases. A lot of those organisations have very structured positions in place. A lot of those organisations also, historically, ever before we spoke about pay transparency, were evaluating their roles, and there were IR mechanisms by which you could challenge your status, or where you fell within an organisation. That’s one subset of our clients. 

Another subset of our clients are smaller, without the same resources, and make decisions around pay largely on a discretionary basis. So, (for example) Hannah’s doing exceptionally well, Hannah is going to get a pay rise, Hannah is going to get a bonus, whatever the case may be, case by case, entirely discretionary. And that’s actually the piece the Transparency Directive will focus on because Europe is convinced that many of those decisions are inherently biased, and inherently biased against women 

When you are an organisation that makes pay decisions largely based on discretion, you are now going to be called to question the exercise of that discretion and what factors are brought into consideration when dealing with that, as it relates to categories of workers. So, how do you define your categories? You spoke about the same work or work of equal value, they are concepts that have been in existence for forever and a day through the Equal Pay legislation under the Employment Equality Act, but not as it relates to ‘siloing’ your workforce. 

through, through the Equal Pay Legislation under the Employment Equality Act, but not as it relates to siloing your workforce. 

So, you look at your organisational structure, and is there a sense where it makes sense that somebody at executive level, at one level down, is that easily definable or do we have roles that sit on a wide different variety of levels through the organisation? So, at first instance, you need to understand who’s in your organisation. You need to understand their roles, so a job analysis needs to be conducted. Lots of organisations, for example, don’t have detailed job descriptions. So, what exactly are people doing and how can we analyse that to define what is the same work or work of equal value? 

This involves quite a bit of work if it’s not something you are doing intuitively as a matter of course. Then, what are we aligning from a role perspective? Because it’s not going to be the case that we have 25 accountants, 25 HR people, and 25people working on the factory line. No organisation is that simplistic. 

So, that is going to involve a fair level of subjectivity, a fair level of consistency, and a fair level of collaboration across the workforce. Are you applying a job evaluation criterion? That’s very detailed, it can often be expensive. It will involve invariably bringing in third-party support. Some organisations have historically done that, they’ve engaged Hay for evaluation reports et cetera. But that’s not for everybody, and it’s the gold-plated standard in terms of categorizing your employees, but I’m not convinced that that is actually what’s going to be happening across the piece. 

And then obviously, as you said at the outset, there does need to be a sense of, well, what are our pay grades, what are our pay bands? How do you move between those and what does career progression look like for me in an organisation? And a lot of the time organisations are not that definitive in terms of those factors. And now they will, for the first time, under the Directive need to articulate these so people understand ‘success for me and progression for me in this organisation can be achieved’, having regard for the criteria put in place.  

So it does involve thinking, it does involve collaboration, I think. So, if this is a case, and we talk about implementation, we talk about project teams, etc., it is a really bad idea, in my view, to just assign this project to ‘somebody sitting over there’, who’s not embedded in the organisation,  without collaboration with people managers, and the workforce more generally, it will invariably lead to problems, in my view. When you talk about the annual request, and what’s read between the lines on foot of having an annual request et cetera, collaboration in terms of this categorisation piece and bringing the important people in the room when you’re making those assessments is really important. And when you’ve it done – it does sound like a turgid exercise. But if you do it right at the outset, it will be a rinse-and-repeat thereafter. But it does involve a thoughtful exercise with the right people in the room at the outset, and that now is the time to be doing that and thinking carefully about that. 

We then moved on, in your discussion about what’s changing, to the fact that, you know, there will be a different legal consequence potentially. We all know that equal pay is something that everyone has been entitled to for many years, but the law is changing in terms of how one will potentially progress a claim and what employers will be held accountable for, if a claim is ultimately progressed. Can you briefly touch on that? 

Hannah O’Farrell 

Yeah, sure. The directive means there’s going to be way more information available to employees, and the nature of that information is going to be different. It’s going to probably more accurately identify the underlying cause for a gender pay gap, and it’s going to require a lot more work on the part of an employer. And it’s going to lead inevitably to more claims, in our view, because more information gives rise to more questions about pay and more WRC claims. 

So, taking a look at how the directive impacts those claims on the ground just briefly, you can see again the emphasis towards transparency and the emphasis towards a more pro-employee attitude to pay claims. So we know that through the directive, the requirement to identify a comparator is removed. So, many HR professionals will know that typically the requirement to identify a comparator has been a stumbling block for many employees in bringing home, uh, an equal pay claim. And that requirement’s going, so an employee no longer has to identify an appropriate comparator. They can identify a hypothetical comparator, they can identify someone who used to work for the business who they consider to be an appropriate comparator, so we can see a lot of latitude there 

Likewise, the burden of proof is changing. So typically, an equal pay claim involves an employer kind of sitting back and waiting for the employee to show a kind of prima facie case of discrimination before the burden shifted to the employer, arising from which then the burden would shift onto the employer, and they’ll have to rebut that presumption. Under the directive, the burden starts off in the ballpark of the employer, and they have to explain, you know, that the treatment was not unfair, and the burden of proof is on them. 

Finally, in this kind of WRC adjudication, third-party objective view, there’s the concept of intersectionality. So that means that, where a WRC adjudication officer says, ‘here’s a case based on gender-related discrimination’, they can actually take account of another protected ground. So they can take account of the fact that maybe gender is at play, but also maybe family status is at play. And that allows an adjudication officer to see the case in the round and decide whether there is discrimination, um, arising based on maybe a combination of factors rather than one factor on its own. So, in practice that means that an employee might not have enough to bring a gender-related pay discrimination claim, but when taken with another ground, the picture painted by the employee might look different and the adjudication officer can take account of that. So again, we can see that focus on the enforceability of the directive, not only the information that’s being increased, but also the way that information can be used for a discrimination claim, having a big impact. So, Louise, what can employers do now, in preparation of the Directive? 

Louise O’Byrne 

Yeah, and look, when you talk about what the landscape will look like post-implementation, you know, and the fact that there will undoubtedly be bigger obligations on the employer, it is really, really important to start on the right foot, because there could be unintended consequences from rushing into job categorisation, by rushing into the evaluation that you bring as an organisation to bear in relation to pay decisions and progression. So, they need to be really thoughtful decisions. So, you need to understand your workforce. That’s absolutely essential. You need to bring the right people into the room at the right time, and engage on this topic now because it’s not going away. 

And then you need to communicate effectively, both with the right people in the right room and then when you’ve decided what your message is and how you’re moving forward within an organisation, distilling that internally so that this becomes part and parcel of the way you do business, there’s not a cynicism around what you’re communicating and how you’re going about pay-related decisions. It’s very clear, it’s very digestible because the directive, and a lot of the legal commentary around the directive, is not very clear and is not often very digestible, so that is the worst place you want an employee to be in. So, it is engaging your people now and determining your communications plan, in advance of June, so that it’s abundantly clear what the next steps will be for an organisation, and how you will be doing things on a go-forward basis. I think they’re fundamentally the most important takeaways or certainly what I see working well within organisations that are moving towards pay transparency readiness as we speak.  

Hannah O’Farrell 

Thanks, Louise. Well, that’s a nice note for us to end on, I think, for the moment. And thank you so much for joining us. If you have any questions in relation to the Pay Transparency Directive, please feel free to get in touch with Louise or myself or indeed, anyone on the employment group at Arthur Cox, with whom you usually make contact. 

Thank you.