Change to the Remuneration System – Key Highlights
- 5 days ago
- 3 min read
Ina Muckienė – Attorney-at-Law, Associated Partner, Zaleckas Partners advokatų profesinė bendrija
I often encounter clients’ concerns regarding the necessity to revise their remuneration systems in anticipation of the entry into force of the Pay Transparency Directive.
For your consideration, I am sharing several key aspects from my practice that may help assess the scope of the required changes. For those who already have an objective, transparent, and “living” remuneration system – one that reflects actual processes – the adjustments will be minimal.
More detailed information is provided below.
The Directive’s requirement to ensure no more than a 5% pay gap does not in itself mean that salaries within a specific employee category (group) may fluctuate only within that margin. I have heard concerns such as: “Do we now have to equalize all men’s salaries within 5% accuracy?!” It is important to remember that the pay gap must disappear between men and women, not absolutely among everyone. Within the same category, some employees may have one year of experience, others three; some may hold only the basic education required for the category, while others may have additional certifications.
Accordingly, one employee may meet 100% of the requirements for that category and fall within the upper end of the salary range, while another may meet only 60% of the requirements and fall within the lower range. Even in all VDI-recommended guidelines, deviation from the median within a given category may range from 15–25% in either direction. However, if salary bands are excessively broad and/or significantly misaligned with those actually applied in practice, changes are necessary.
All five criteria (skills, qualifications, effort, responsibility, and working conditions) used for comparing positions will become mandatory. However, they may already exist in your system under different names: skills may be expressed as a requirement for relevant experience, qualifications as a requirement for a certain level of education, etc. Thus, these criteria are not new.
On the other hand, previously the “weights” of each criterion within each category were often neither technically calculated nor sufficiently detailed, which made high-quality role comparison difficult. Once the Directive enters into force, failing to address these aspects will significantly limit an employer’s ability to defend itself in the event of a dispute.
The search for categories of equal value should not become an artificial exercise of “let’s find equal value at any cost” — perhaps in your company different roles inherently represent different value. However, attention must be paid to employee groups dominated by one gender — is it possible that after “weighing” all the above criteria the roles are in fact of equal value, yet compensated differently due to the stereotype that “this is what everyone pays”?
It is also important to determine which employees are included in the assessment — only permanent employees, or also temporary staff? Only full-time employees, or part-time as well?
Overlap of salary bands within the corporate hierarchy is not prohibited in itself. However, assess whether such overlap is illogically large and applied consistently, or whether it occurs only in exceptional, objectively justified cases. If it occurs systematically — for example, because men in “lower” categories negotiate salaries more successfully than women in “higher” categories requiring greater responsibility — the bands should be adjusted, and women in the “higher” categories may need a salary increase.
When using sources recommended by the State Labour Inspectorate for reviewing remuneration systems, remember that all of them are recommendatory in nature, may contain internal inconsistencies, and that “best practice” is a relatively abstract concept. Therefore, they should be applied with critical thinking, focusing more on their underlying principles and the specific nature of your organization than on the templates provided.
Personally, I also value the International Labour Organization’s publication “Gender Neutral Job Evaluation for Equal Pay: A Step-by-Step Guide”: although it is not listed among the VDI’s recommended sources, it provides important highlights for an action plan, methods and useful questionnaires — even helping to properly choose a consultant;)