In practice, we see that employers do not yet always have a clear understanding of who exactly falls within the scope of these obligations. This is crucial, as different requirements depend on the number of employees within an organisation.
The pay transparency rules go beyond the question of whether men and women are paid equally. Employers will also face reporting obligations, information requests from employees and stricter requirements regarding remuneration policy and objective pay criteria.
One question quickly becomes important: who is the employer?
The concept of employer is not always straightforward
Within many organisations, employer status is less black and white than it appears on paper. Especially in international structures, groups, payroll constructions or organisations that work extensively with flexible labour, there is often discussion about which entity should be considered the employer.
This is relevant because various obligations under the directive depend on the number of employees within an organisation.
European regulation primarily looks at who the formal employer is, but also at the factual situation. Who directs employees? Where are employment terms determined? And which entity exercises actual authority?
This can become complex, particularly in international matrix structures or groups with multiple legal entities.
Why is the number of employees important?
The Pay Transparency Directive uses different thresholds. The larger the organisation, the more extensive certain obligations become.
Reporting obligations are linked to the number of employees within an organisation. Employers with larger numbers of employees will have to report periodically, likely to the Labour Inspectorate, on pay differences between men and women.
This raises the question of how many employees an organisation has far more relevant than many employers currently realise.
Which employees should be included?
In practice, this count often proves to be complex. Because who exactly should be included? Only employees with an employment contract? Or also agency workers, payroll employees, on-call workers or other flexible employment relationships? Care should be taken with flexible workers such as agency workers. They play a role for both the hiring organisation and the supplying organisation.
The directive gives reason to look more broadly than just the traditional employee list. Not only the type of contract, but also the actual working relationship plays an important role.
For organisations with a large share of flexible labour or international structures, this can lead to complex questions. Consider, for example, employees who are formally employed by another entity but in practice work entirely within your organisation.
This is precisely why it is important to gain timely insight into:
- Which employment relationships exist within the organisation;
- Which employees should be attributed to which entity;
- And which groups may count towards legal thresholds.
Why is this also an HR and governance issue?
Many organisations still primarily approach the Pay Transparency Directive as a legal compliance project. In practice, the topic touches on broader HR and governance issues.
Pay transparency also relates to:
- Job frameworks;
- Salary structures;
- Recruitment processes;
- Performance management;
- Documentation of pay decisions;
- International HR structures;
- And employee participation.
Organisations that are best prepared will bring together HR, legal, data and governance in good time.
Starting now prevents rushing later
Although the Dutch implementation of the directive is still to follow, preparation takes time. Many organisations currently have insufficient insight into their pay structures, job classifications or potential pay gaps.
Employers who start with an initial analysis now will later have more room to make strategic choices, rather than having to make corrective adjustments under time pressure.
In our next blog, we will further explore which employees exactly count under the directive and the role flexible employment relationships play in this.
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