Soundboard


Pay transparency is becoming a new tool in the fight against pay discrimination based on gender. The idea is simple: if everyone knows what others earn, it becomes obvious when women earn less, and pressure to adjust salaries — read: increase — mounts when inexplicable differences exist. And yet, the new European directive on pay transparency risks overshooting its goal and causing other damage. By seeking to eliminate gender discrimination through draconian regulation — a noble goal — Europe not only undermines the autonomy of organizations but also weakens their competitiveness and sows unrest in the workplace.

Belgium is already a difficult country when it comes to wage policy. Automatic indexation, the strong influence of seniority, and the wage norm already make a flexible and strategic compensation policy challenging enough. This European directive adds to that, with an obligation to provide salary transparency and the duty to justify any difference. The proposed sanctions are significant.

A strategic HR policy must be able to pay attention to individual differences. This has always been difficult when it comes to remuneration. And yet, there is a need to differentiate between individuals in pay. We know well that this differentiation cannot be excessive to avoid unjust inequality. We must not forget that by differentiating, organizations can attract and retain people with, for example, scarce skills. This benefits the entire organization, including those who may receive lower pay. And there is no reason whatsoever to treat men and women differently in this respect.

On this principle, transparency should not be a problem — provided that discussions about it proceed calmly and rationally.

People Compare Without Self-Insight
But people are not rational beings, especially when it comes to money. They compare constantly, but through a biased lens. When they earn less than another, they see that as unjust. When they earn more, they view it as justified. This behavior is very difficult to manage.

Transparency does not necessarily make people happier; often, the opposite is true. Explaining legitimate salary differences based on performance, scarcity, or history will not satisfy people’s desire to earn at least as much as — preferably more than — their colleagues, even if there is no reason to increase their pay.

The directive painfully ignores this reality. That such conversations are difficult should not in itself be a problem. But the consequences for organizations will be severe.

Serious Consequences
To comply with this directive, organizations will regularly — and upon employee request — have to conduct detailed statistical analyses, explain every difference, document every salary decision in detail, reconstruct historical pay decisions, and above all: engage in endless individual conversations about pay, potentially fueled by specific, local, or individual conflicts. The regulation will ignite debates about pay, even outside discrimination contexts, and tensions will undoubtedly rise, even where they did not previously exist.

And what about historically grown situations — mergers, acquisitions, individual negotiations? What about coexisting employment statuses that could not be harmonized? What about unique positions for which no market benchmark exists? What about sectors already under severe pressure where wage flexibility could offer relief? What about discretionary bonuses for exceptional performance, or sign-on bonuses to attract talent with rare skills? And what about genuine differences in contribution to organizational success? This regulation takes none of that into account. Employers are left hoping that such reasons will be considered acceptable justifications for pay differences. There is no legal certainty.

Moreover, if companies shy away from differentiation even further, they will lose attractiveness to highly sought-after profiles. Those may opt for freelancing or jobs outside Europe, where salary freedom still exists. There will be less appetite to negotiate with scarce-talent candidates, for whom employers may no longer inquire about salary history but can still ask about salary expectations. Is that progress?

The administrative cost per employee will — especially in the early years of implementation — rise without improving organizations, employees, or the economy. This is not only undesirable but also practically unfeasible.

Perverse Effects
Undoubtedly, this regulation will also produce perverse effects. The collectivization of pay policy, with an initial drive toward leveling by raising lower wages — what then about the wage norm? — and the weakening of competitiveness, is a possible consequence. Returning to rigid salary scales, which allow little differentiation, will not lead to greater satisfaction but perhaps to less discussion.

A further juridification of employer-employee relationships will inevitably prevail. Institutional distrust will be further fueled. Everything will be documented to be protected against potential future complaints — a trend that has been ongoing for some time.

To avoid legal uncertainty while still allowing mild differentiation for certain profiles, organizations will need to reform their pay structures, potentially becoming highly creative and thereby offering less transparency. More trees, less forest.

What Problem Are We Actually Solving?
The directive seems written for countries where discrimination is systemic, where wages are kept secret, and where equal treatment is hard to find. Belgium does not belong to that category. Europe is not a homogeneous zone, with significant differences between countries on all fronts. Belgium performs very well in this respect. We already have an obligation for wage gap reporting, albeit imperfect. Today, there is already collective transparency with accompanying discussions, and at the collective level, the gender gap is under control. Forcing transparency and discussion down to the individual level goes too far. It is not that employers wish to discriminate; they do want to differentiate — where necessary and fair.

The chosen approach is bureaucratic, blind to the reality of human behavior, and takes no account of the situation in member states. The directive aims to promote fairness but primarily creates uniformity, unrest, and a loss of agility. Instead of strengthening organizations, it weakens them. That is not progress. That is bureaucracy disguised as morality.

In Belgium, we need a different kind of debate — not about disclosing individual salaries, but about how we can maintain fair compensation in a complex reality. How we can ensure people a decent net income and how we can remain attractive and competitive. And about how we can attract and retain local and international talent without falling into the trap of restrictive equality.

We are truly shooting ourselves in the foot here.

Hrpro.be


Photo by Rahul: https://www.pexels.com/photo/blue-sky-with-white-clouds-2162909/