This may seem like a simple question, but in practice it often proves more complex than expected. This is especially true for organisations that work with agency workers, payroll constructions or other forms of flexible labour.
The concept of ‘employee’ will likely be interpreted broadly
European regulation aligns with a broad concept of employee. It takes into account not only the contract, but also the actual employment relationship.
In other words: does someone perform work, receive remuneration for it, and is there a relationship of authority? If so, they may quickly be considered an employee within the meaning of European regulation. This means that organisations cannot rely solely on their formal workforce.
Agency workers require additional attention
In practice, many questions arise, particularly in agency work relationships. The Pay Transparency Directive contains specific provisions that are relevant to agency workers and other triangular relationships.
In the Netherlands, we already have extensive regulations concerning the equal treatment of agency workers. The pay transparency rules partially build on this.
Employers that structurally work with a flexible workforce are therefore well advised to gain a clear understanding of how these employment relationships are organised and where responsibilities lie for management, employment conditions and remuneration.
Payroll and other triangular relationships add complexity
With payroll constructions and other forms of hired-in personnel, the distinction between formal and actual employer often becomes even more complex.
On paper, the role of employer may lie with one party, while in practice, it lies with another organisation:
- directs the work;
- influences employment conditions;
- determines salaries;
- or fully integrates employees within its own organisation.
This is precisely where discussions may arise about comparable roles, equal pay and transparency obligations.
For organisations with complex workforce structures, it is therefore important to look not only legally at contracts, but also practically at the day-to-day reality.
Why is this relevant for HR?
The impact of the Pay Transparency Directive is not limited to legal compliance. The topic directly affects day-to-day HR practice.
Consider, for example:
- Job classification;
- Pay structures;
- Recruitment;
- Career progression;
- Performance management;
- And documentation of pay decisions.
Many organisations find during an initial analysis that roles have developed historically, that exceptions have not been sufficiently recorded or that differences are difficult to explain.
This is not necessarily a problem, but it does underline why timely preparation is important.
Early insight prevents problems later
Organisations that start mapping their workforce and pay structures now will have greater control over potential risks and will be better able to substantiate why differences exist.
This is particularly essential for organisations with international structures or a high degree of flexible labour.
In our next blog, we will further address the role of the works council and other employee representative bodies in the implementation of the Pay Transparency Directive.
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