EU Pay Transparency Directive
A&M pulse survey: participant report
Alvarez & Marsal Tax LLP
Alvarez & Marsal Tax, LLP Park House
16 - 18 Finsbury Circus
London
EC2M 7EB
Dear survey participants,
Thank you for taking the time to participate in A&M’s pulse survey on the EU Pay Transparency Directive over the summer. As a valued contributor, your insights and honest feedback have been invaluable in helping us understand how organisations across the UK, Europe and further afield are gearing up for this significant shift in response to the Directive.
With the EU Pay Transparency Directive on the horizon, it's clear that being prepared is just one piece of the puzzle. What really stands out from our findings is the chance for all of us to use this as a catalyst for positive change - building trust, strengthening our employer brands, and driving meaningful cultural shifts within our organisations. Your contributions have provided us with a wealth of knowledge, and I hope you find the results as enlightening as we do. We have developed two survey reports:
1. An insight into key considerations when navigating the EPTD preparation journey for public distribution; and
2. A participant report, summarizing the key results (this report), which is only available exclusively to survey participants.
We are also providing the opportunity for our survey participants to have a working session with us to explore their own current positioning against the wider market and any potential implications and key considerations.
Our goal is to give you practical insights that will help you not only comply with the new regulations but also use transparency as a strategic advantage.
Thank you once again for your time and for sharing your perspectives. It's this kind of collaboration that will help us all navigate these changes more effectively and create a more transparent and equitable future for everyone.
If it would be helpful to discuss the findings and any specific implications for your own organisation, please do not hesitate to contact me.
Kind regards,
Alasdair Walls
Managing Director
+44 (0) 7341 690733
awalls@alvarezandmarsal.com
Survey methodology
Survey methodology
Overview of our approach
A&M’s survey aimed to assess organisational preparation progress for the EU Pay Transparency Directive, covering levels of understanding, and strategic, cultural and operational readiness. The goal was to uncover pay transparency sentiment, an insight into current readiness levels, and identification of any actionable insights for consideration. Reward and HR Leaders from across multiple industries and countries were invited to submit data via an online questionnaire during July and August 2024.
Our survey was designed to explore several key areas…
Readiness for compliance
Evaluating how prepared organisations are to meet the Directive’s requirements
Management alignment
Assessing the perceived level of understanding and strategic alignment among management
Integration into strategic planning
Measuring how deeply pay transparency is integrated into strategic goals
Cultural readiness
Gauging readiness for the cultural shifts required by the Directive
Communication
Reviewing stakeholder engagement activity and planning
While participants were able to opt to receive a copy of this report and the summary results, the survey is committed to anonymity within our analysis, results, and commentary to encourage radically honest feedback and input.
To generate the most insightful information on key issues relating to readiness for the EU Pay Transparency Directive, the data was collected, analysed, and segmented by various factors, and included multi-dimensional analysis focusing on critical dimensions such as…
The impact of transparency on employee morale Alignment on pay transparency strategies Current pay transparency culture
The extent of any anticipated cultural shift resulting from the new Directive
Survey demographic data
We received input from across multiple sectors and from organisations spanning a wider geographical footprint
Results summary
Where do companies stand today? (I)
Only one third of organisations report to be either somewhat- or fully-ready for EPTD compliance at the time of our survey
Organisational readiness (% of participants)
I am confident in my organisation’s ability to operationalise the requirements of the EPTD effectively by the compliance deadline
However, there is widespread optimism about organisational ability to operationalise and comply with the EPTD requirements by the compliance deadlines
Where do companies stand today? (II)
Organisations more advanced in their readiness journey have a significantly more positive perception of the impact of the EPTD on their workforce morale
Organisational readiness vs. sentiment towards impact on employee morale
Organisational readiness vs. confidence in Management’s understanding of EPTD requirements
Total Unconfident Confident
We also found that confidence in Management’s understanding of the EPTD requirements and its implications is higher amongst those organisations that are more advanced with their preparation for EPTD compliance
Management understanding of the EU Pay Transparency Directive
64% of organisations reported low confidence in their Management team’s understanding of the EPTD
Confidence in management understanding of EPTD
Confidence in management understanding of EPTD vs. having clear implementation plan in place
There is however a positive relationship between building Management understanding of the EPTD and having in place a clear plan for implementation of EPTD compliance requirements
Management understanding as a driver of EPTD readiness
High confidence in Management understanding of the Directive enables strategic prioritisation; underpins stakeholder alignment on pay transparency; and gives momentum to the readiness journey
To what extent has your organisation integrated pay transparency into its strategic planning
Our organisation has a clear strategic intent on what pay transparency means for the organisation
We are strategically aligned on the topic of pay transparency between the Board, Management, and the People Function
I am confident in our organisation’s ability to operationalize the requirements of the EPTD effectively by the compliance deadlines
Clarity on pay transparency and what it means for your organisation
c.36% of organisations have taken the time to clarify what pay transparency means for their organisation going forward and this appears to be paying off for them as two thirds of them are well progressed with their readiness journey
Our organisation has a clear strategic intent on what pay transparency means for us going forward
Percent of organisations that are well-progressed with their readiness and have a clear, shared understanding of what pay transparency means for their organisation going forward
We are either somewhat-or fully-ready for EPTD compliance implementation but don’t have clarity on what pay transparency means for us going forward
We have a clear understanding of what pay transparency means for us and are either somewhat- or fully-ready for EPTD compliance implementation
Strategic integration and pay transparency planning
A significant proportion of companies have not yet included pay transparency in their strategic thinking and planning
To what extent has your organisation integrated pay transparency into its strategic planning?
Our organisation has a clear strategic intent on what pay transparency means for the organisation
We are strategically aligned on the topic of pay transparency between the Board, Management, and the People Function
We have, or are progressing with, a clear plan for the implementation of the requirements under the EPTD
Pay transparency culture
Only 10% of organisations report having an open pay transparency culture today. However, 80% of these organisations are well advanced in their readiness for the EPTD compliance deadlines
Our organisation has an open pay transparency culture today Pay transparency culture today vs. organisational readiness
A pay culture shift is coming for many
48% of organisations believe they will experience a significant pay culture shift post-compliance with the EPTD
I anticipate that our organisation’s pay culture will shift significantly post-disclosures & compliance with the EPTD
Pay transparency culture today vs. we are well prepared to handle potential cultural changes resulting from the implementation of the EPTD
However, only 22% believe they are well-prepared for this culture shift. Those companies reporting an open pay transparency culture feel more positive about their ability to manage the culture shift than those with closed pay cultures
Communication and the employee voice
Only 15% of survey participants report having engaged with employees on the topic of pay transparency; a range of employee-concerns have emerged from workforce engagement
Have you engaged with employees to understand their views and perceptions of pay transparency?
What concerns have employees expressed regarding pay transparency, if any?
Key challenges to navigate
Largest perceived challenges: all organisations
Observations
▪ Resistance to the changes associated with EPTD compliance – either cultural or from leadership – is cited as the most significant challenge to address across all survey respondents
▪ The data highlights that smaller organisations are most concerned about cultural resistance; understanding the requirements; and making changes to existing pay practices
Largest challenges for those organisations citing either a positive or negative impact of EPTD compliance on employee morale
▪ By contrast, concerns for larger organisations also include data collection & analysis, and training staff
▪ Organisations that predict a positive impact of EPTD compliance on employee morale broadly follow the trend of the survey findings
▪ However, for organisations that predict a negative impact on employee morale, their largest concerns relate to changing existing practices; data collection & analyses; and training staff
Anticipated impact of pay transparency on pay structures
Views segmented by perception of impact of EPTD on employee morale
▪ The most significant area of impact of the EPTD on existing pay structures is perceived to be ‘greater scrutiny during the annual salary review process’, highlighting that (i.) organisations will likely put more emphasis on ensuring fairness and consistency in salary decisions to meet new transparency standards; and (ii.) a likely need for more detailed and structured processes during salary reviews, possibly involving more data analysis, benchmarking, and justification for pay decisions
▪ The second most significant area of impact is perceived to be the introduction of more standardised pay-scales, reflecting – perhaps inevitably in the early years of compliance – a shift towards more structured pay frameworks for many organisations
▪ Only 8% of the participants report performance-based pay as an area of greater focus that will result from the EPTD. This is interesting as may suggest the risk of an oversight as performance management outcomes, and the linkage to reward, is a key area of focus within the pay gap reporting requirements
Where have organisations focused their preparation to date?
What steps have you taken to prepare for the operational impact of the EPTD?
▪ The area with most focus to date is pay audits (54%), which is a foundational stage of compliance and signals initial efforts to meet (or assess the gap to) legal requirements through technical understanding of the current position
▪ Almost half (48%) of organisations have revised their workforce reward strategies or philosophies in light of the EPTD, which we believe reflects a growing awareness of the need for strategic alignment with pay transparency requirements, beyond just compliance
▪ The drop to around a third of organisations engaging in HRIS updates and new pay policies suggests that while some are progressing, many have yet to fully operationalise their pay transparency efforts but does, for many, demonstrate a recognition that effective pay transparency requires both updated technology and policy frameworks as a supportive infrastructure
▪ Based on our other findings from the survey, we believe that the lower levels of engagement in the other areas of preparation e.g. communication planning should not be interpreted as a lack of attention to these areas but simply a result of where organisations are in their readiness journey and preparation at this current point in time
▪ Interestingly, those that have taken more steps tend to have a more positive view of the impact of EPTD compliance on employee morale and engagement
Conducted pay audits Updated or revised our workforce reward strategy and / or philosophy
Updated HRIS systems Implemented new pay policies Implemented changes to reward practices or pay levels in response to audit findings
Established a pay transparency task force
Trained HR and Management staff
Developed a communications plan for the workforce and wider stakeholders
