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Anna Edwards, Acting London Bureau Chief & TV Anchor, Bloomberg leads an exciting conversation with an expert panel from Dow, JDE Peet’s and Baker McKenzie to talk about the challenges, pitfalls and impact of the EU Pay Transparency Directive – landmark rules entering into force this year requiring organizations to disclose gender pay gaps and create action plans for parity. This panel is part of the 2024 Catalyst Awards. Watch the replay and learn:
- Practical steps for compliance and using data to promote parity.
- Analysis of pay gap reporting models and impacts.
- Conducting accurate gender pay equity audits.
- Creating pay transparency and wage-setting best practices.
Speakers include:
- Ilham Kadri, CEO, Syensqo
- Luisa Boaretto, Head of Inclusion Diversity and Equity EMEAI, Dow
- Johan Van Gossum, CHRO, JDE Peet’s
- Stephen Ratcliffe, Partner, Baker McKenzie
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Transcript
00:00:05,125
Dear all, it is an honor to open the discussions on gender pay equity during this year’s Catalyst Award gala. Let me first start by congratulating Lorraine and the Catalyst team for continuously raising the bar on inclusion and reminding all of us that the road to equity is a race without a finish line. At the current pace of change, it would take us another 257 years to close the global gender pay gap.
This is indeed sobering, and the reason why we need action and a collective one. The chemical industry I represent sorely misses gender diversity like many other industries.
We need more women in science, in technology, in engineering, in mathematics, in academia, in research, in the industry, in management, and in leadership roles. Today, only a few women are leading multinationals.
But let me tell you, it’s not because you put a woman at the top that the problem is resolved. In fact, this lack of diversity at all levels in an organization perpetuates gender stereotypes, biases and injustice, including the gender pay gap. Women, like minorities, face a glass ceiling and they have statistically more family responsibilities.
Therefore, they may have less flexibility and availability at crucial moments in their career, such as welcoming a baby. It is well-known that they face discrimination, such as pay gap in our own corporations. I often say, “Diversity and equity is what you see. Inclusion is what you do.”
I believe that companies that understand the impacts of inclusive and equitable workplaces on their P&L and balance sheets will address and therefore resolve from within the gender pay gaps in order to become an employer of choice.
I have had the honor to lead a company called SOLVE for the past five years, and in December last year, as the company separated into two entities, I took the helm of its specialties businesses called Syensqo. Syensqo’s Diversity, Equity and Inclusion Heritage stems from the work we have done in the past five years. And to address differently DE&I issues, we did something we believe is different from what I have been doing in my career. We put human dignity at the heart of everything we do. We started creating an environment where everyone feels welcomed, heard, valued, safe and equal.
On pay equity, we did our coming out. We committed to assess the gap and close it, should there be any. Believe it or not, by December 2023, we closed 951 gender pay gaps in our company. And by the way, this goes both ways. In Belgium, men were less paid at equal jobs than women. Yes, it happens, although it’s an anecdote. Now, closing the gap is one thing. Avoiding the future pay gap is another. Going forward, we committed first, we will conduct gap analysis every year just like we run budgets processes. Second, we’ll train again and again our top 200 leaders on unconscious biases and inclusive leadership. To that end, we integrated the MARC, the Men Advocating for Real Change Catalyst program, as well as several other gender equity models from Catalyst in our e-learning platform. Third, we dare change policies where it makes sense.
One of my proudest policies is the launch of 16 weeks co-parental leave back in 2021, available to all parents and co-parents, regardless of their orientation or location. It helps women to be supported at critical times of their lives and careers. Lastly, we invest in youths in high potentials and women who have an ambition, a will, in the pursuit of their passion. We are part of the A Effects, A for Ambition program and as of today, 325 women have participated. And since 2021 and another 110 women will be trained in 2024.
Listen, all of these initiatives are here to dismantle barriers, challenge stereotypes, empower women and minorities, and simply place human dignity and social justice back at the center. Let us never forget that when we close the gender pay gap, we not only uplift women, but we strengthen our entire society. We paved the way for a more equitable future for our kids, and we advance humanity.
Thank you. And I wish you a lively discussion.
00:06:18,666
Thanks, everybody, for joining us.
Good morning.
Good afternoon, wherever you are.
Thank you very much for being with us. We are going to have a conversation now about how to achieve pay equity and we’re going to be looking specifically at the EU Directive on pay. So I’ll introduce the panelists that we have in front of us today. It’s a real pleasure to be speaking to Stephen Ratcliffe, Partner at Baker and McKenzie, Luisa Boaretto, Head of Diversity, Equity and Inclusion and Employee Experience for the EMEA region and India over at Dow. Also Johan Van Gossum, who’s the CHRO, the Chief Human Resources Officer for JDE Peet’s.
I’m Anna Edwards from Bloomberg TV and Bureau Chief for London for Bloomberg News.
Thank you all very much for joining us.
This is going to be an excellent conversation. We have legal views represented on the legal expertise on the panel, DE&I expertise, broader HR expertise from the chemical sector, the beverage sector. So a whole host of experience to bring to this conversation and the EU obviously taking action on this front because of that 13% gender pay gap that up until 2021, Eurostat still found to be present in the European labor market.
So let’s dive into the conversation. And just because this centers around the EU Directive on Pay, useful for everybody to get up to speed, for the global audience to be up to speed with what that is all about and what that legislation means. So if I could ask Steve, if you could first give us that brief explanation then of what the new legislation says.
00:07:44,833
Yeah, I’ll do my very best. I mean, look, this directive packs a lot in, so I’m going to do a very high-level summary. I’m just going to focus on some of the bigger issues because it’s called the Pay Transparency Directive. And so you might think its primary focus is on transparency and there is a lot of coverage of transparency in there. There’s a focus on, for example, transparency of pay scales before somebody joins your employment, for example.
But the bigger part of it, the more significant part of it and the bit that’s really game changing is the the section that deals with gender pay gap reporting. So many of us are familiar with gender pay gap reporting already. We’ve got it in the UK, other European jurisdictions. And just by way of reminder, this is a directive, so it needs to be implemented by every EU jurisdiction and it doesn’t impact the UK or Asia or the US or anywhere else outside of Europe. It’s Europe only.
But what it does is it implements a form, or it requires countries to implement a form of gender pay gap reporting.
First of all, not just on basic pay, but on other aspects of pay as well. But more importantly, what it does is it says if you end up, having done your gender pay gap report, if you end up with a differential in pay between men and women, which is more than 5%, then you are, and that differential is not justified by effectively nondiscriminatory factors, then you have to do what’s called a joint pay assessment.
Now that is an assessment of the differences in pay between essentially men and women doing comparable roles. And I’m going to come back to that concept in a second because that’s an important one. The difference in pay, of what you’re going to do to address the differences in pay and correct historic liabilities. Now that, on the face of it, maybe doesn’t sound as significant as it is, but when you think about the way in which this does the comparison, that’s where it gets really interesting, because for years and years and years, the EU has had equal pay laws.
In fact in the UK, we’ve had them since 1970. It’s several decades in the rest of the EU as well. And one of the aspects of that equal pay law is the question of how you compare male and female workers and who’s comparable with whom. And the classic way in which we do it is we compare what’s known as “like work.”
I’m an employment lawyer. I compare myself with a female employment lawyer because we do basically the same job. But there’s another aspect to the legislation known as “equal value,” and that’s where you get people in different jobs and you effectively score the job. You go through, well, how demanding is it in terms of the intellectual rigor? Or what about do you have to, is it physically demanding? Do you have to work in the cold? Is it late at night?
You know, and you effectively score different jobs and you end up in a situation where some quite distinct jobs are found to be comparable. So it’s not the employment lawyer compared with the employment lawyer. It’s the employment lawyer comparing with the accountant, for example. The really interesting thing about this directive is what it requires you to do when it comes to gender pay gap analysis is compare, not just apples, apples with apples, but apples with oranges and pears and everything else.
You have to do an equal value analysis and effectively you do a gender pay gap publication by reference to roles at the same value. And that’s incredibly significant because most employers, in my experience, don’t do that at the moment and not in any sort of sufficiently detailed way. And what we’ve seen in the UK is where that’s been done. There have been some absolutely colossal and colossal equal pay claims.
By way of example, anybody has been keeping up with what’s going on with Birmingham City Council and the fact it’s just effectively announced bankruptcy will know that that was due to an equal pay determination which resulted from an equal value analysis and led to a bill which some suggest is upwards of £750 million.
So it’s big. It’s really big.
00:11:42,333
Okay. So that’s interesting. So that sets out the concept of equal value, which no doubt will come up during our conversation.
That gives us a sense of the stakes as well of what is at stake with this. And just just briefly, Steve, when does this all come in? You said it has to be implemented by the individual nation states across the EU.
00:11:58,000
That’s right. Yes.
So it’s got to be implemented. It’s got to be in local law by June 2026.
The first gender pay gap reports will be 2027 for the larger employers. It then cascades down up to 2031 for smaller employers and employers of 50 or more relevant workers. So it’s sort of imminent, but we haven’t yet seen the implementing legislation locally. And we’ve seen other directives to be implemented, you know, right up to the wire, and sometimes in some jurisdictions, even after the deadline.
So we may not have absolute clarity until quite close to that June 26 date.
And it covers that transparency, that reporting. It does also cover some other areas, which no doubt will come up in conversation around recruitment.
And there’s a new, new guidance in some of that field as well.
00:12:41,291
Absolutely. Yeah. And that boils down primarily to that word, “transparency.” You know, we’ve seen many of us that that there are some employers who’ve started to publish pay scales voluntarily as a means of being kind of open and honest.
We’ve also seen a lot of us, I think, some quite negative coverage of the practice in some quarters of not telling people what the pay scale is until they’re some way down the application process. Part of what the directive does, it seeks to try to address that. And it also it also restricts the ability of employers to to ask employees, well, what were you paid in your previous role, the theory behind that being, well, statistically speaking, men move more often than women.
00:13:22,416
And generally speaking, when people move, they move for a pay rise. And so, you know, the kind of fact that you’re kind of building in a pay rise on top of what somebody earned previously, if men are moving more than women, then that’s, that’s kind of baking in a pay differentials between men and women.
So it’s part of the recruitment process, an important point to underscore then that it does say that you can’t ask what, what people, what people are earning at the moment or their previous role.
00:13:46,375
Steve, thank you very much for that. So that sets up the the legal backdrop to this conversation and we’ll be back with Steve, of course, during this conversation as well. But let’s also bring in then Luisa from Dow and Johan from JDE Peet’s to get business perspectives.
Luisa, if I can come to you first. Just set out your stall if you could. Give us a broad, a broad overview of what this means for your business, what this new this change in the rules means for your business.
00:14:13,375
Yeah. Thank you.
And thank you for the invitation. And good morning. Good afternoon.
Good evening, everyone watching. And I think Steve did an excellent job introducing and if I look through the lenses of inclusion, diversity and equity first, I want to make sure everybody also tunes in to the purpose of the EU Pay Transparency.
And it’s really not just about rectifying errors, even if that would be an important piece. It’s really the aim to achieve organizational equity and eventually let’s say a fairer society. So keeping the purpose in mind, of course, is that we bring changes. And like any change, I mean, for Dow business, but for any other business, it will bring some internal changes.
I mean, I think the company will need to make sure they have their house in order. And really like Steve mentioned, starting to enter in also equal value kind of mindset. Dow has been doing pay equity studies since over 20 years and publishing in our corporate social responsibility report.
But I think we still have opportunity to look at it in a consistent and formalized manner. Now, I do think as Steve was mentioning, one of the biggest impact and change is also about the external engagement.
It will have a big impact on talent attraction, but also retention of employees and will also be possible for potential talent joining a company to really start seeing, comparing company, understanding more.
And that, in my opinion, is a big and very positive change, that I’m looking for, worth to add.
00:15:46,125
Okay. Thank you. So, Luisa, the interesting there, setting out, putting the house in order, the fact that this takes in that equal value mindset that Steve was talking about and also what it does in recruitment and making the business more attractive.
So those are the areas in focus for Luisa.
Johan, How does this sit with your business, this new legislation?
00:16:03,458
Well, thank you very much for the question. The new or the directive itself would not have an immediate impact for us, as we didn’t wait for this directive to come into play, nor the legislation that will be coming into place. So we know that equal pay is key in fostering diversity, equity and inclusion, and it is also key in ensuring that every one of our people, wherever they may be across the globe, are equally empowered to unleash their possibilities.
So we do, just like Luisa at Dow, we have been doing gender pay equity studies for quite a few years, and we did our first global one a number of years back. And then the when we did that, not specifically for Europe, because today we’re talking about Europe, we immediately covered the whole of the globe because obviously that’s a commitment that you make your people, wherever they may be.
You make that commitment everywhere, not only when legislation is requesting that of you. And when we got the first results back, the first results were showing us the average pay of women compared to the average pay of men. What typically would be called to or referred to as the “raw pay gap.”
And when we got those results back, actually, we found that the average pay of our women is higher than that of our men ever so slightly. However, the variation was less than 1%. But what we have applied is beyond equal pay.
We look into pay equity.
So we look into just about 20 drivers together with external experts on what are considered to be acceptable drivers for pay differentiation. And when we did that full, proper study and looked at what would be the unexplained gap, then the gender pay gap flipped in favor of men.
But we were, we were we saw that that gender pay gap was equally small, so also below 1%.
What we find most important in this is that there were no statistically significant differences anywhere across the JDE Peet’s group and that with the variation being what it was, it was considered to be not meaningful by the external experts.
So we were we are in a good situation, if you will, because well below 1% to well below the 5% threshold that the EU is looking to request and which we fully subscribe to.
So we are starting from a good position.
So no immediate impact, but obviously not complacent because as Luisa said, you need to keep your house in order. This is in every decision that you make, wherever you make it on every one of your people, that this comes into play.
So for us it is and maintaining what we have in place and ensuring that equity in anything and everything that we do that involves our people.
00:18:33,500
Steve, just worth reiterating that point, as Johan was suggesting, if you find a pay gap that is less than 5%, that’s deemed to be compliant, is it? Is it any more detailed than that?
Well it’s, I wouldn’t say it’s compliant.
I mean, it doesn’t mean that in an individual case somebody can’t bring a claim because you are looking at a statistic, you know, an average basically, but it doesn’t push you over into that territory of having to do that mandatory joint pay assessment, which is kind of like the thing Johan’s just explained actually.
So that kind of audit that Johan did, that’s a lot like the kind of thing that will be required under the directive. But the big difference is you’re going to have to bring in employee representatives and sort of, you know, open up the books in a way and kind of show the pay differentials, which of course means that claims are in and of themselves more likely to arise.
00:19:18,625
Okay.
Let’s talk a little bit about some of the positives around this, the experiences you guys have had in in looking in detail at your pay structures, the organizations, the pay scales and the like, and how you’ve managed to work your way through this.
Johan, if I come to you to find out a bit more detail perhaps about how you’ve gone about this, you mentioned bringing in a host of experts, I think to, to help to do this or to measure yourselves up against a host of criteria.
Give us a bit more detail as to how you went through doing that.
Well, actually, because you will need those experts and Steve will be happy for me to say that because it is, it sounds very easy when you start the conversation.
00:19:55,000
Comparing pay does not sound to be that overly complicated.
And making sure that you do that properly doesn’t seem to be overly complicated. But this is not something that you would do on a rainy Wednesday afternoon. This is actually very complex and and requires a lot of work and a lot of preparation if you want to do this properly, if you want to do this right.
So the first piece of advice that I would have on this journey is plan ahead so that you have the proper time to collect all the information, all the data, structure it properly, make sure that you scrub that information, that you learn from what the analysis are telling you, that you have the opportunity to course correct.
And yes, we did this together with external experts so that we would also know that we would have someone that is looking over our shoulders, that is that is judging our homework, that helps us to assess what is indeed deemed acceptable, what is not acceptable.
And what also helped us is that we started with a pilot group. So we started small, to truly get the learnings from this before you start asking HR teams across the whole globe to be preparing for this and to help in the analysis for that.
So start early.
And the education of your stakeholders, equally most important, because many stakeholders will not understand why you would even need to do this, because as an organization you have one rewards philosophy. You have one pay benchmark that you apply for everyone. You have one set of pay ranges that you apply for everyone.
So how could you even end up with a pay gap?
The mere insinuation that there could be a pay gap is taken personally by a number of our leaders because that could be seen as suggesting that they themselves may be biased or may have inequitable practices at play that they’re not aware of.
So that education and that communication and the onboarding of your leadership, most important in this journey. So preparation, communication, I would say were two key ingredients on setting this up for success.
That’s really interesting,
00:21:51,416
Johan. Yes, and bringing winning hearts and minds and bringing people along with you on this exercise will dedicate a bit more thought to that in a little while.
And Luisa does the process that Johan was describing there, does it ring true to you?
How did you go about doing this at Dow?
00:22:06,166
Yeah, I think Johan did an excellent job in describing what corporations and big companies with multinational impact are doing at the moment.
Again I do compare may be simplistic to a big change management project and in every change management project you start with the stakeholder alignment. So what Johan was referring to is very important.
If a charge is legal, it’s IT.
There is a system component.
The companies like ours, Office of Inclusion, Inclusion, Diversity and Equity, Employer Resource Group. And of course, as Johan said, very, very well, external help is fundamental. Nobody I think should expect to do this job by themself, especially because it’s the first time we’re going through that.
So it’s — and it’s evolving.
So also definition of scope and continuing to monitoring the legislation because again we will have at least in the EU 27 countries adopting that legislation and that again Steve will be happy to talk about that.
But there’s many local nuances that we need to continue looking at. And then Johan pointed to that. Education, communication. Again in every change management program, they are key and because we are talking pay, it’s going to be pretty sensitive, I would say, for certain employees.
Now I do think, and again Johan was already alluding to that, when we define the scope, there is an opportunity for big company to decide if you just want to be compliant with a directive in Europe, in the European Union, some 27 countries. Or if you want to adopt that approach globally.
But that means depending on, you know, many countries and different legislation, you are operating in may bring another level of complexity.
But again, if we talk about equity, that definitely something companies should evaluate that because it would make the workforce as external stakeholder feel that the company is approaching in an equitable and fair way.
00:24:10,041
Yeah, Steve, maybe you could just help us set this in an international context, actually. And obviously you referenced how, you know, you’ve got experience in the UK setting, but obviously the US will be doing its own thing, parts of Asia doing their own thing around this.
I know Japan taking action on these things. And Europe has its own policies. What are we learning from outside Europe? Or how is Europe influencing other geographies in the way that this is being done?
00:24:37,166
Well, I mean, the short answer is very considerably, because I agree completely with Luisa. You know, global organizations will very typically want to take a if not a one size fits all approach, then then certainly apply a level of consistency to the way in which they’re approaching pay equity.
And on individual laws, I’m sorry to say, don’t necessarily always lend themselves to that.
So, for example, this concept of equal value, which doesn’t exist in the States, it was considered, I believe, in the eighties and sort of you know, wasn’t invented because of concerns about the, honestly, the level of science in it. So what you would need to do, I think as a global organization and those organizations with whom we’ve worked on multi-jurisdictional pay audits have done this, is decide for yourself what is the standard we’re going to apply?
Are we going to apply the approach that is typical of the states, which for various reasons may not fly under the directive?
00:25:31,666
Are we going to apply the approach into the directive unto Luisa’s point?
Which countries approach under the directive? Because it might be that Germany is different, France is different from Spain and effectively set an approach which you are comfortable with from an internal policy perspective and which ticks as many of those legal boxes as possible.
Now, my experience of multi-jurisdictional audits is very typically the the sort of processes is kind of similar,which basically the same regardless of how many countries that you are you’re addressing.
You identify gaps in pay, you try to analyze the reasons for the gaps in pay.
You assess whether those reasons are themselves discriminatory and then you deal with remediation.
Those are the full steps. The bit that gets a little bit tricky is that there are some common factors relied on to explain differences in pay in, for example, the States, which just wouldn’t work under legislation in the EU in particular, things like tenure which are considered very broadly speaking to be somewhat discriminatory indirectly in the EU.
00:26:33,375
That’s interesting. Tenure. Okay, so that’s an interesting one. We’ll park that for a moment but perhaps come back to it. So, we talked a little about the way that your businesses, Luisa and Johan have managed this so far and the way you’ve got ready for this, for this directive to come in.
And we talked about the international context.
I got a hint at some of the hurdles you’ve had to overcome or some of the areas where this could go awry and maybe other businesses can learn from your experience, or just from some guidance. And Luisa, I think you referenced this.
So even within the EU, it’s going to be implemented perhaps differently in different places.
00:27:04,583
I mean, your business no doubt operates in lots of different European geographies. Do you have any sense of how it’s going to be different in different places yet?
Or we wait to find that out still, I suppose.
00:27:14,791
Well, I think again Johan referred to that there is many steps companies are already doing and they’re already preparing for.
But we shouldn’t forget that’s the very first ever time we’re going through that.
And again, it’s implementing in 2026.
So I’m sure there will be a lot of learning when we look it back. But now, you know, we have to learn, as we’re going.
You reference to it, I mean, there is a natural complexity because we talk about many different countries and jurisdiction and that what we are also very careful and making sure we do involve local stakeholder, we do involve local external partner, we do involve local firms.
I think there is an element of legal risk that companies are looking at and that is natural is naturally at global but is natural, especially in individual countries how things are going. Now something I believe we are doing and we are really looking intentionally is making sure that we are reviewing the full talent lifecycle.
So there are many touch points.We talk about attraction, promotion is another piece, performance reviews and making sure that all those touchpoints are set up in a way that are gonna be useful for the pay equity transparency.
I give you an example. In Dow, we are applying, since years now, inclusive hiring standards.
So when we hire talents, we do have the process, an inclusive process, that makes sure that every talent is going through a fair interview with diverse talent pool, with diverse talent and interview panel, but also with a standardized process so that we try to eliminate in this cloud all potential personal biases.
Why I’m saying that is because, in the spirit of the EU Pay Transparency, that helps to get the process as unbiased as it can be.
00:29:03,458
And then again, back to Steve’s point and to the legislation, pay is one of the elements that will come into play, but with a rigorous process for that.
00:29:12,125
Yes, Johan, so that I mean, that takes you down into that conversation you were just hinting at earlier about training and about educating managers and perhaps you were getting some pushback along the way around, around some managers who thought they might be found at fault through this process.
What kind of training did you have to do for managers to make sure that, for example, in recruitment, they don’t ask, they aren’t in the future or now going to ask questions around. What was your last pay packet? What did that look like? Can we match or improve on that?
What kind of training have you had to put in place?
00:29:44,625
Well, excellent question. And if you allow me, I’m first going to take a small step back and I’m going to build on what Luisa was also saying, because that will help with answering this question too. What you can see clearly see from Luisa.
And then Dow is that they’re starting at this from an authentic commitment to pay equity, and diversity, equity, and inclusion. And then you don’t need to be concerned about the actual implementation of the legislation across all of the EU member states, because if you have the fundamentals right, if you’re committed as an organization and as leaders of an organization to pay equity, then the implementation is simply a follow on or something to adhere to.
If you start on the other hand from compliance, then yes, you will be concerned about all the different implementations that you’re going to find.
00:30:29,583
And the same applies, Anna, to the question that you just asked. How do we prepare our leaders for this? It first comes from why we are doing this, why we believe in this, why we are committed to this. And that has nothing to do with the EU directive, per se. So that has nothing to do with compliance, per se.
This is our commitment to our people.
And when you first get everybody to understand where this fits in and when you get people to also understand what the true value of diversity, equity and inclusion for an organization is, that this is not an HR thing that everybody is expected to do, but actually has real business value and is most important as the role that we have in society.
When your when your leaders understand that, the training becomes easy because they will become self-regulatory or regulating, they will be self filtering themselves as well.
So first get everybody on board. That, I would say, is most important. Then the training is just practical guides that you add on board.
00:31:23,916
Okay, Luisa this, thinking about the long history that pay has takes us into another point which you raised with me ahead of this conversation, which was about considering overall compensation and the benefits that people were awarded with decades ago when they first joined a business might not be the ones that people get now, and I wonder how that really complicates things when you’re looking across the piece and trying to work out where, you know, how equitable these things look when you’re taking into account not just their pay but also all of the other areas of compensation.
00:31:57,375
Yeah and thank you, Anna. I think that it’s an excellent point also to highlight for our audience because as you correctly said, that we are not only talking about compensation and salary, but we are looking to the broader lenses of benefits and rewards and how equitable they are.
And historically again, take retirement benefit plans.
There is a different age at which men and female are going to retire, depending on different countries, and that may cause a difference in their total reward system.
And that’s something that the company will need to look at. Parental leave. Usually that burdening parent, you know, the mother in a traditional family, will have maybe a longer extended period of unpaid leave or unpaid work, and that will lead again in a difference in pay.
So I think, you know, there is a lot to consider, but also to keep in mind this should be taken as a broader approach.
And I think Johan’s put it very well. It’s not about complacency and compliance.
It’s really about a fundamental philosophy and approach that the company are taking towards this topic.
00:33:05,416
Okay, so not about compliance, per se, but about the approach and about the overall culture. Steve, thinking about some of this, I mean, some of this it sounds simple at one level, but then also you quite quickly get into some complexity and I’m sure there’s even more complexity beneath the hood here.
People on different contract types thinking about that and doing it, thinking about how that adds complexity. Yeah, contract workers, intermittent workers, trainees, apprentices. Are you going to have, are businesses having to think carefully about all of these different groups and how this applies to them?
They absolutely are. And that’s the most challenging thing I think about this, which is that you’re going to have to find some way of assessing value across the entirety of the organization.
Now we’re, you know, we, Baker & McKenzie, that is, we’ve built a tool which is intended to assist employers to do that.
We’re getting ahead of the curve because, as I say, it may well be that local implementing legislation, which gives us more detail of how that value analysis is done, isn’t enacted until the 11th hour or possibly past the 12th hour, frankly.
So we’re trying to get ahead of the curve and build something that we think will be a representative example of how value will be analyzed.
But there’s still a huge amount of leg work to be done. I really would encourage people to start early because as you say, that there is such a myriad of data that you need to you need to put into that sort of tool and your analysis more generally.
And even once you get to the stage of well, we’ve decided that this apple is comparable with this pear, you then have the further, deeper dive on, well, each element of pay, where are the differentials and what are the reasons for the differentials?
And that gets very, very tricky because my experience is every time I’ve done an equal pay audit, whether it’s a domestic one or a global one, there’s a problem somewhere.
You just don’t know where it is yet. And a lot of the time the reason for that problem is because, look, we think there’s probably a very good reason why employee A is paid this much, employee B is paid that much.
But that differential in pay has been there for 20 years and nobody has a record of the decision that was made 20 years ago.
So, you know, organizations which are mature in their pay philosophy often find that that they have a they have a point in time where the data just sort of ceases to exist because they became mature only after that point.
And that itself could provide challenges.
00:35:20,041
Lusia, Steve was mentioning earlier some of the ways that the international backdrop complicates things, and one he referenced was that in the United States, maybe he wants a reward for tenure in a way that might cause problems in Europe being an international business, how do you manage to overcome some of those issues?
Well, it’s a great point.
Again, to be honest, instead of really looking at the legal backdrop as an issue, I think the organization can can look it through the other lenses of seeing it, that a way to align, as Johan was referring before, to a broader society, value and expectation.
And then if you frame the pay transparency as also the proactive step because there is an element of compliance, but there is also an element where companies can bring their own perspective into that, then I think that can really announce reputation for sure.
00:36:11,541
But for me what is very important is also building trust among employees. And trust, I think nowadays is one of the element, one of the values that company want and should relook at that.
So again, yes, for sure there’s legal risk, legal backdrop. But again, it’s going back. What’s the purpose?
What’s driving company?
And if it is done in an authentic way, I think it’s amazing opportunities for companies to go into that path.
Yeah.
00:36:40,500
Johan, would you would you go along with that, that assessment?
Absolutely.
And if you look at it from a global perspective and you build in all the drivers that you would expect to be, except the drivers, then you’re also able to switch off one driver for one location versus another. So for instance, when tenure is not allowed, then you switch off that driver as an explained driver. Or then, and then, you look at what remains as unexplained and whether that variation is what is within acceptable or not acceptable. So if you build the model such that that you immediately look at any potential drivers that would under the strictest of regulations be accepted, then it’s easy to switch one off versus others.
00:37:21,833
And you’re set, also at a global level. Luisa, for businesses that have been managing this risk or thinking not about the risks that happen, but the opportunity that this presents for a very long time, it’s clear that this is something that’s quite resource intensive and quite systems intensive, that if you’re going to be managing this properly, I suppose that’s something you’ve had to learn along the way.
00:37:42,833
Yes, I mean, definitely resource and system can be some of the areas that companies want to keep an eye because as Steve is educating us, is very complex and nobody is trying to undermine it. At the same time, I think organizations do have resources and it is a matter of being very clear what they need to achieve, as we said before, also getting help and making sure that they start now. Again, one of the beauty of the legislation is to have two years to start preparing.
00:38:11,041
Hopefully local legislation will not come in last minute. That’s definitely something everybody’s looking. But I think whatever step can be done now, in order to anticipate, that should be taken. And again, it’s an invitation for companies who haven’t start yet really to put their heads down.
And as we said, start with alignment, start with the scope, start to understanding it better and do your own due diligence internally and making sure what you know you can rely on and what maybe areas you want to start looking more intentionally to fix.
00:38:42,000
Johan, if we speak more about how you win those hearts and minds and how you take a workforce along with you on this particular endeavor, I mean, there can be areas that you might get pushback around.
I mean, we were hearing earlier, as Steve was talking about, how there’s a trend towards putting pay scales on jobs and putting pay on jobs more openly than perhaps in the past.
And many people who are in the job market might think that’s a brilliant idea. But people who already have jobs with businesses might say, hang on, that person’s getting recruited at that salary.
And it adds transparency in a good way, but also might cause some people to push back.
00:39:14,666
How do you manage that kind of protest within an organization? That’s an excellent question and I wish I had a real solid answer on that yet, but I can already explain our journey on this.
Actually, winning hearts and minds on gender pay equity is really hard because everyone, everyone of your people, all of your employees will automatically assume that there is a pay gap because that’s what they’re reading about it.
That’s what they’re hearing about. So they never – you hardly ever hear that that there is a region in the world where there is no pay gap. So everybody automatically assumes that there is a gender pay gap.
And when you come back with results that actually are quite, that some would assess as being quite good, well that would not be celebrated because all that you’ve done is you’ve confirmed that you’ve done what you should always have done.
You pay people equitably.
So it’s not that that is winning here. It is, if anything, you’ll be met with skepticism when you would come back that there is no gender pay gap or that the gender pay gap is mine, that I can easily be addressed because that would be met with with skepticism.
And so, yeah, as such, winning hearts, hearts and minds on this is not easy.
And Anna, I’m sorry, but I forgot the second part of your question.
00:40:25,791
No, no, that’s fine. That’s fine.
Luisa, I was going to come to you on, you know, have you have you had people pushing back and how have you gone about winning hearts and minds on this?
00:40:34,583
Well, I think going back also to what Johan was sharing true, you know, you’re touching something very sensitive for people, but it’s also true you really have an opportunity, as I said before, to build and rebuild trust.
And when you are able to build a culture of trust in the company, then it becomes a totally different ballgame. It’s not about employee versus employers, but becomes becomes about a general culture of the company, which is important.
Now pushbacks. I think if you look from the top of the house, from senior manager, from the C-suites, there is no need to convince them. They think strategically. They do understand the strategic impact.
As we said before, we can add on companies, on talents, on reputation. So it’s more a matter of equipping both senior manager and middle managers. That’s maybe the area where he needs a little bit more education, communication, understanding, because those middle managers, those people leader, will need to have a big conversation with their employees.
They will need to be the first one that employees go back and say, “What’s going on?” Again, “Why this job is posted at this range?” And level set.
So I think again, important, important piece would be education, good communication, and as we are talking about it, transparency is going to be key.
00:41:57,708
Right. And perhaps those are important things to consider here as well. If I if I think about some of the ways that the DE&I conversation is evolving and I look at the US, which often leads some of this narrative, Luisa. And there we’ve seen obviously legal challenges in some contexts around some DE&I initiatives and they’ve made news of late.
Now, obviously, this is athis is a directive in Europe. So this isn’t something that people are perhaps going to be able to change within organizations. It’s just something that companies have to comply with.
But I wonder if it makes it a harder sell if the news is running stories around pushback to wider DE&I initiatives.
Is that something you’ve encountered, Luisa?
00:42:37,208
I think it’s something definitely to keep in consideration. As I said, there is a lot of noise and drama and different opinion about that. But it goes back to what we were saying at the beginning with Johan is really depending where organization wants to position about that.
And again, I think everybody is really seeing as an opportunity. Now there will be huge learnings on the way. There will be probably also some cases where corporation will look at with I didn’t want to use too much about fear, but that definitely with some good level of attention.
But it’s a journey and I think everybody, at least I would say in the EU, does appreciate and is comfortable with this type of legislation getting into place, learning through that, leveraging best practices.
One of, what I hope would be one of the positive factors and maybe that will also help corporations, it will be the increased best practices sharing. There will be corporations who are going to do it best in class.
And then it’s an amazing opportunity for everybody because inclusion, diversity and equity is a space of collaboration and not of competition.
So there is going to be an opportunity for everybody to benefit out of those frontrunners. So, best practices, which again, I think eventually will lower the risk piece because there will be best practices and good example to leverage.
00:43:58,041
Yeah.
And Johan, in your, in your case, I mean a lot of these legal challenges around DE&I have maybe taken place in the States, but this all comes back to New York via news, and we’re all aware of those kinds of stories.
Does it make any of this a harder sell taking on board?
00:44:12,750
It is a directive, so it’s not as if people have a lot of wiggle room here, but this is it a harder sell internally if the news is full of those kind of stories?
00:44:20,916
It is if you’ve waited until now or if you’ve waited full stop and it has become a compliance matter because it’s not, a lot of people get very excited about compliance.
So Luisa is spot on when she just said, well, if as an organization, your intent and your commitment are authentic and real, and were not driven by regulation that may be coming your way, then you got ahead of this.
00:44:43,375
Now, indeed, the regulatory the regulatory space is changing around us, litigation is picking up, etc.. Now you’re at a more difficult period of time.
But then my advice would be the same on get ahead of this and start from an organization and your commitment to this rather than that compliance, that conversation, because then it becomes then it becomes more difficult.
00:45:04,250
But at the same time, global organizations always have the beautiful complexity of having regulations across the globe being different. No different here.
So yes, this is typically whenever you talk about people and as Luisa said, especially pay, that is a very sensitive topic.
But just like any other beautiful complexity with a global organization, this one fits in that as well.
00:45:25,958
Steve, does this get into conversations with clients? Do clients look around the world and see what’s going on in the US and ask, you know, what’s the future of this kind of of directive in Europe?
Or do European clients just put that to one side and say, no, this, this is where we’re at, this is the directive we focus on and let’s get to it?
00:45:42,458
Look, I think this directive is, and I should I should say I agree completely with what Johan and Luisa just said.
This isn’t about compliance.
This is about your wider pay philosophy, your DE&I philosophy, frankly. This is just the cherry on the cake.
Right.
That there have been multiple regulatory moves towards greater transparency when it comes to pay towards gender pay gap reporting. Whether you look at the EU or the US or elsewhere, there are cases there are pieces of legislation, there are the movement, the trajectory, frankly, of this topic is is very, very clear. The other aspect, of course, is your employee populations. They are demanding increasingly transparency over what’s going on in fact, they are implementing their own transparency, whereas 20 plus years ago when I started at work, you got a pay rise. You didn’t tell anybody else about your pay rise. This is much, much more likely that the next generation of employees will compare notes. So we talked a lot about trust. I mean, that the other side of that coin is transparency. And as I say, this directive seeks to kind of codify that.
But we were already moving in that direction.
00:46:53,416
Yes, I mean that’s worth mentioning isn’t it. I think one of the other parts of the directive is that you can’t stop people from talking about their salaries in the way that perhaps some industries might have wanted to in the past.
00:47:03,083
Luisa, just to bring this to a close then, and Johan, you talked, Luisa, earlier on about how this was part of a wider, you know, organization organizational shift towards more equity and then even further than that, about a fairer society.
00:47:17,791
In a sense, we’re asking a lot of businesses bottom up, aren’t we? To make our societies fairer through the way they operate.
This is this is quite high stakes stuff in that sense. It is. But let’s be honest, you know, corporate world, the companies do have a role to play in society.
You know, we cannot just delegate that to create and build a fairer society to individuals or to government, business is playing a fundamental role in creating a more equitable society.
And I would even go sometime business have even local presence, resources, strategic view, all that it takes, I’d say, resources to really progress in this journey.
So yes, it’s a lot to take, but let’s be honest, business plays a fundamental role in society and as such you need also to play also on the advancing the society to a more fairer.
So I think companies just to live up to these roles they do have and not just hide behind saying that is not their task or not an expectation from them.
00:48:19,375
Johan, we’re expecting a lot of business here. It seems.
00:48:22,916
Absolutely. And we have to contribute to the society that we are part of. But what I personally find very encouraging when I look at the leadership of our company and I’m pretty sure that Luisa will see the same when I look at our leaders, they want to do this, they want to do what’s right. They know that this is right. So, yes, they will be playing our part.
We have to play our part as an organization as well.
00:48:45,250
Okay.
Thank you all very much.
Thank you to Steve.
Thanks to Johan. Thanks to Luisa.
Thanks very much.
Thank you.
Pleasure.