The New EU Equal Pay Directive: What’s in It for Employees?

The recently ratified EU Directive on Equal Pay and Transparency outlines many requirements for employers to ensure fairness and transparency around compensation, which may result in both costs and benefits for employers. And, similar regulations could be coming to the US soon.

But, how about the employee perspective? The regulations are designed to ensure workers are treated fairly when it comes to compensation. Yet the impact on employees is likely to be more far-reaching than just the paycheck. In what ways will employees likely benefit? 

Whether you are in the EU, the US, the UK, or any other country, you may want to give some thought to the benefits of taking the leap to full pay transparency and equity. 

Benefits for employees

Fair and transparent pay practices, as defined by the directive, can have a positive impact on employees in several ways:

Motivation and Engagement: Employees are more likely to be motivated and engaged in their work when they feel that they are being fairly compensated for their efforts. When employees feel that their pay is transparent and equitable, they are more likely to be committed to their work and to go above and beyond to achieve their goals. A study conducted by job recruiting site Indeed found that 81% of workers are more productive and engaged when they perceive themselves as paid fairly. 

Retention: Fair and transparent pay can also contribute to employee retention. When employees feel that they are being paid fairly and that there is a clear path for career advancement, they are more likely to stay with the organization long-term. Another survey by PwC found that 71% of employees consider fair pay to be the most important factor when considering a change in their work environment.

Trust and Respect: Fair and transparent pay can help to build trust and respect between employees and the organization. When employees feel that their employer values their contributions and is committed to paying them fairly, they are more likely to feel respected and valued. An atmosphere of trust provides a foundation for collaboration and teamwork.

Inclusivity: Fair and transparent pay can also contribute to a more inclusive workplace culture. When pay practices are transparent and equitable, employees from diverse backgrounds are more likely to feel that they have an equal opportunity to succeed within the organization. SHRM found that 91 percent of employees who believe their organization is transparent about how pay decisions are made also said they trust that their organization pays people equally for equal work regardless of gender, race, and ethnicity.

Job Satisfaction: Fair and transparent pay can contribute to overall job satisfaction for employees. When employees feel that their pay is fair and that they are being treated equitably, they are more likely to be satisfied with their job and feel a sense of pride in their work. A survey by Clutch found that the most important workplace values for full-time employees are fair pay (55%) and fair treatment (54%). 

Protection: The directive also includes measures to protect employees against retaliation for requesting pay information or for taking part in pay transparency measures. Employers must ensure that employees are not penalized in any way for requesting or sharing information about pay levels, and must provide a safe and supportive environment for employees to discuss pay issues.

Overall, fair and transparent pay can have a positive impact on employees by contributing to their motivation, engagement, retention, trust, respect, inclusivity, and job satisfaction. Motivated, engaged, loyal. Doesn’t that sound like the kind of employee you would like to have?

A growing trend globally

Of course, pay transparency is a hot topic outside the EU as well. beqom’s 2023 Leveling the Paying Field report surveyed worker attitudes toward pay equity and transparency in the US and UK and found that a large majority of Millennials (68% US, 72% UK) are more willing to work at a company that discloses its gender pay gap.

The idea of government action (like the EU directive) to enforce pay equity is not unique to Europe either. When asked whether there should be national legislation to address the gender pay gap, more than half (58%) of US respondents said there should be a law mandating companies to disclose their gender pay discrepancies.

However you feel about regulations, it seems that pay equity and transparency can yield major benefits for both workers and employers alike.

To learn how beqom can help your organization support fair and transparent pay practices, contact our rewards specialists for more information.

Download beqom’s 2023 Leveling the Paying Field Report for insight into employee experiences and perspectives on the gender pay gap, pay transparency, and other aspects of compensation.