The benefits of a skills-based approach are becoming apparent to more organisations, as they move towards a new operating model for the workplace - one which values skills over job titles.
This skills-based approach offers the chance to move from a job-centric, experience-driven workforce strategy to one that is more dynamic and agile.
Deloitte research found that 77% of business and HR executives believe ‘flexibly moving skills to work’ is critical to navigating future disruptions.
There are a range of potential benefits of a skills-based approach, from greater agility to improved employee retention and productivity, as well as more diverse and inclusive recruitment strategies.
Greater organisational agility
A skills-first approach supports speed and agility by redeploying the best talent to the most essential work.
Understanding the skills you have in the organisation helps you hire and move people to roles that will not only support business goals but provide on-the-job learning opportunities to develop people, and help you fill gaps in the future.
According to Deloitte, skills-based organisations are:
Just 14% of business executives surveyed by Deloitte strongly agreed that their organisation uses its employees’ skills and capabilities to their fullest potential.
A skills-based approach addresses this issue, allowing organisations to identify the talent and skills in their workforce, sometimes in unexpected places, which enables them to look at untapped talent.
This can have a beneficial effect on employee performance - making full use of their skills increases motivation and productivity; even more so when they can focus on activities that directly impact the business.
Ensuring that you have up-to-date and accurate data about the skills of your workforce is the optimal way to match people and opportunities and thereby improve the employee experience.
By focusing on skills, employees can be made to feel like unique, valued individuals, thriving in roles that allow them to put their skills into practice.
In the past, people may not have been considered for some roles purely because their previous experience and job titles may not have been a perfect match, even if they had the required skills.
One of the key benefits of a skills-based approach is a change of focus which values skills over experience can have a positive impact on diversity within an organisation and can reduce bias at every stage of the talent lifecycle beyond recruitment.
Employees who feel they have few opportunities for growth or progression can become bored and frustrated, and will naturally begin looking for a new challenge elsewhere.
These issues can be avoided if there are more opportunities for growth internally, and for employees to use their skills effectively.
Moreover, opportunities for development of skills and the opportunity to work on diverse projects can increase job satisfaction and loyalty. Skills-based organisations are 98% more likely to have a reputation as a place to grow and develop, and 98% more likely to retain high performers.
With pay transparency legislation being introduced around the world, establishing clear, skills-based pay frameworks helps organisations put this transparency into practice more effectively.
When compensation is tied to specific skill levels, certifications, or proficiencies, employees can understand how pay levels are calculated, and increases are earned, reducing ambiguity.
Standardised pay for similar skills also reduces bias and discrimination, supporting fair and equitable compensation.
Using skills data as the basis of performance management allows organisations to create a fairer and more transparent system that can drive both individual and team performance.
For example, by identifying employees’ specific skills through reviews, development plans can be created that impact organisational goals and individual aspirations. Through the tracking of skills key to business goals, performance management can also link individual contributions to strategic objectives.
Skills-based assessments based upon standardised skills benchmarks can also help to ensure consistency of reviews across teams and help to remove subjectivity and bias. Managers can then provide more specific and actionable feedback on skill gaps or strengths, rather than general comments about performance.
Another of the benefits of a skills-based approach is that skills data can make workforce planning more effective by focusing on employees' current and potential capabilities rather than job roles or titles.
Current employee skill data can be mapped against organisational needs, allowing businesses to pinpoint skills gaps in critical areas. This insight means that hiring, training, or reskilling efforts are targeted to address future requirements.
Skills data drives greater precision in workforce planning, as it can help identify competencies that are missing or under-represented, which in turn supports more inclusive hiring strategies.
There are challenges involved in switching towards a strategy based around skills, but there are also multiple benefits.
It can help organisations implement pay transparency policies, improve employee retention and performance, improve recruitment, and ultimately drive improved business performance.
In today's ever-evolving business landscape, taking time to comprehensively define potential career paths up and around your organisation has never been more important. This is particularly the case as companies struggle to retain employees post-pandemic.
Gallup recently found that 51% of U.S. employees are watching or actively seeking a new job. In the UK, 39% would like to switch jobs in the next 12 months, up from 33% a year ago.
As retention falls, recruitment costs soar. When costs are factored in for recruiting, hiring, training, and onboarding, replacing an employee can cost up to 21% of the annual salary for a role. When scaled up across all roles, this is a significant cost for any organisation.
Several studies have shown that workers who stay for a while in the same job, without a title change, are significantly more likely to leave for another company for the next step in their career. Employees who do not see a clear progression from their current role to a better position in the same organisation are more likely to turn to opportunities elsewhere.
LinkedIn research underlines this point. It shows that employees who make internal moves are 40% more likely to stay with organisations for at least three years, and have 50% longer tenures overall.
The solution to this is to be clear about the opportunities that exist around your organisation, and to build career paths that show employees a route to get from where they are now to where they want to be.
However, a barrier for many organisations is that their job titles, job content and job architecture are in such a chaotic state that this prevents the development of career paths within functional areas let alone laterally across the organisation. Employees are often left in the dark about opportunities within their business area or those that exist outside of their own team or function.
Career paths, sometimes also called Career Ladders, map out how internal movement can happen within an organisation. They provide a roadmap for employees to identify potential opportunities for the next step in their career based on their skills, interests and career objectives.
At a basic level, they show all the possible career path opportunities within a particular function. At a more advanced level they map out permanent and project-based opportunities laterally across the organisation based on skills requirements.
An example of a simple, vertical career path design within a function would be:
Source: Radford
Some organisations – such as Mastercard, BP and Rolls Royce - have also developed functional dual ladder career paths where employees can choose either a “technical / specialist” or “managerial” career path depending on whether they want to manage a team or not.
Example of Dual Career Path for Engineering roles:
More evolved, pan-organisational career paths will show how employees can use their existing skills to change disciplines, by moving laterally between functions, and where an employee can move up and across an organisation through a cross-functional promotion. These more varied career paths are particularly important as employees move away from wanting to progress through a traditional career path and instead are keen to navigate laterally and vertically, through a more complex web of opportunities, skill enhancements and role transitions.
Well-defined career paths tell employees exactly what the demands and requirements of each role are, so they are clear about what each job involves and what they must do to progress form one job to the next.
Each role in a career path needs a clear outline of the role showing the scope, responsibilities and requirements (knowledge, skills, competencies).
The career paths should make use of job levelling to show how different roles relate to one another in terms of level of responsibility and requirements. It should be clear where the similarities are between roles but also what the key differences are and what training and development is available for people wanting to progress into each role.
One of the main factors that prevents the development of career paths is the state of an organisation’s job structure, also known as a job architecture.
Many organisations exist as a long list of job titles and associated job codes that have been added to organically as the organisation has grown, changed, merged or acquired. Without proper governance or oversight, there is often a resulting state of chaos – hundreds of job titles, many just slight variations of each other, job levels all over the place and inconsistencies in salary ranges across roles, business areas and regions. Job descriptions can be equally chaotic with different formats and inconsistent information making it challenging to clearly articulate the differences in one job to another.
There are many impacts on career paths of this chaos:
Sometimes basic career paths can be defined without a job architecture in place, but these will remain within individual job functions and won’t give a clear picture to those looking for a wider range of opportunities.
A job architecture forms the building blocks of an organisation. It provides a framework for defining and aligning jobs within an organisation based on the work performed.
A well-designed job architecture can play a crucial role in defining career paths around the whole organisation by:
As companies are making preparations for the EU Pay Transparency Directive, job descriptions will play a key role.
The directive doesn’t explicitly mention job descriptions, but they are the building blocks which allow organisations to operationalise many of its requirements.
For this reason, ensuring that you have standardisation and governance over your job descriptions is essential.
This is not always the case though, with RoleMapper data showing that 60% of job descriptions are out of date and fail to reflect the skills required to do the job.
Job descriptions hold the information that can enable you to compare jobs of the same or similar value, to define the criteria for progression, and more.
Job groupings form the first step in our new Roadmap to Prepare for EU Pay Transparency guide, as they provide the means to consolidate and compare jobs of equal value and to justify any differences in pay.
As job descriptions define the work and skills required to do the job, they form the foundations of any job architecture. Job descriptions are the data inputs that enable you to identify equality and similarity of work, skills and value and group jobs to enable comparison and analysis.
Under the directive, organisations must have pay structures in place based on job evaluation and classification systems that use ‘objective, gender-neutral criteria’.
What this means is that organisations need to have a robust, objective, and unbiased mechanism to value jobs. The EU Directive recommends using a job evaluation or job classification methodology that can systematically value roles based on objective criteria.
Job descriptions are generally the basis for any job evaluation and classification methodology. They provide the baseline information of the work, skills, and scope of the role to enable an assessment of the objective criteria and, ultimately, the value of the job.
Article 6 of the Directive states that employers ‘...shall make easily accessible to their workers the criteria that are used to determine workers’ pay progression.’
This means that employers need to be clear on why pay varies in the company, and they should be able to explain the criteria for pay progression and why current pay for one role differs from that of another.
There is often a lot of bias and subjectivity associated with pay decisions. By requiring visibility of progression criteria, the directive is aiming to eliminate bias from compensation decisions.
Job descriptions are where you determine the skills requirements to articulate differential pay progression criteria from one job to another and the criteria to feed into inclusive recruitment practices.
Job descriptions form the baseline content for job postings. It is the job description that determines how inclusive and bias-free your postings will be.
In practice, you will need to review and revise job titles to eliminate gendered titles. So, ‘salesperson’ should be used instead of ‘salesman,’ for example.
Job postings must also be examined for gender-coded languages which might make the job less attractive to either gender. Words like ‘decisive’, or ‘courage’ may send subtle links that companies are looking to attract male applicants.
Under the directive, Member States ‘...shall put in place measures to prohibit contractual terms that restrict workers from disclosing information about their pay.’
In practice, employees will know a lot more about their pay as a result of the directive. They will know how their own pay has been determined, and how that compares to other jobs.
Employees will also have a right to discuss their pay with their colleagues. Without clear job descriptions and an understanding of why there are differences in compensation between jobs, this could be the cause of tension and misunderstandings.
The job description is used to support pay inequality disputes. There have been several high-profile equality court cases where the job description has been used as a basis for debating inequality of pay, with retailer Next being one such case.
In addition to this, Article 19 states that the assessment of equal pay ‘...shall not be limited to workers who are employed at the same time as the worker concerned.’
This means it is important that historical information on the job is held, and an audit trail of changes is retained, as it may be necessary to use it for analysis and comparison purposes.
More and more organisations are looking to move towards a skills-based approach, one which enables them to identify, develop and use specific skills to improve performance.
This approach is seen as necessary to adapt and remain competitive in an evolving business landscape, as well as to adapt to the dynamic nature of work.
A focus on skills can allow organisations to use the talents of their employees more effectively, placing them where they are most needed.
It helps to ensure that training programmes can be directed where they are most needed, as well as being able to identify and address gaps in organisational capabilities.
It’s an approach which has been shown to bring benefits to organisations. Deloitte research suggests that organisations adopting a skills-based approach are 63% more likely to achieve results.
Skills-based strategies also contribute to the ability to place talent more effectively, to anticipate and adapt to change, and to be more inclusive.
A skills-based approach also contributes to finding and retaining talent, as it’s popular with employees, with 73% believing skills-based practices would improve their experience at work, while 66% would be attracted to organisations that value skills over experience.
While the benefits of adopting a skills-based approach are clear to many organisations, there remain several challenges that make it more difficult to put this into practice.
These challenges involve data, resources, and the need for a unified approach to skills.
Putting a skills-based approach into practice requires data. If decisions are to be made around pay, promotions, or placements, then the data this is based upon needs to be reliable.
Organisations also need a single source of skills data so that decisions can be made across the organisation.
In practice, while some organisations have made progress in this area, skills data is often
siloed across departments and systems, making it difficult to achieve a unified view
An effective skills-based approach also requires a common definition of skills which are relevant to the organisation. These can vary between teams, as well as between organisations.
To be able to make effective decisions, it’s important that the language around skills is consistent and understandable. This information can then be used to inform decisions around recruitment and workforce planning.
Skills taxonomies are often large data sets of skills ‘tags’. In practice, more granular skills proficiency definitions are required for specific use-cases.
The challenge for organisations is that building up more detailed skills data requires significant effort and resources.
While off-the-shelf skills frameworks offer the attraction of a shortcut to implementing a skills approach, there can be issues with implementation.
Some frameworks can be too generic and don’t always fit in with the terms used in the organisation. This means greater effort in customising language and skills descriptions,
Building out the skills data across an organisation to the level of detail and granularity that is required for key use cases requires a significant investment in terms of resources, effort and cost.
Once organisations have completed some work collating skills data, there is further complexity in the process of consolidating this data across the business.
Practically speaking, this is about sharing different data sources, managing input and reviewing the process of approval around the business.
Once a skills framework has been agreed and completed, there remains the challenge of constant monitoring and updating. Organisations need to keep up with changing skills and changing needs in the business, and this requires continuous updates.
The importance of digital transformation in HR has never been clearer. As the role of HR becomes more strategic and aligned with business objectives, it has had to adopt technology and the new ways of working that accompany it.
This is because technology has the potential to automate and streamline key HR tasks, freeing up time for teams to focus on more strategic work.
HR digital transformation is a strategic shift that drives efficiency, supports agility, and ultimately positions companies for long-term success in a competitive world.
Broadly speaking, digital transformation refers to the need for businesses to adapt to changing customer behaviour and expectations. This behavioural change has been brought about by technology - the internet, smartphones, social media, and the habits they have brought with them.
The common theme behind digital transformation is the need to adapt existing technology, structures, and ways of working to meet changing customer and employee needs.
The need for businesses to adapt to changing circumstances is not a new concept in itself, but the vast changes brought about by the internet and the technology used to access it have provided new challenges for organisations.
From a HR perspective, the purpose of digital transformation is to improve the employee experience, enhance HR efficiency and effectiveness, and use data-driven insights to support strategic decision-making.
HR digital transformation is about reshaping how human resources function to enhance employee experiences, drive efficiency, and leverage data for smarter decision-making.
Adapting to the modern workforce
With remote and hybrid work now common in most organisations, distributed teams across different countries and time zones, and changing employee expectations, HR must evolve to support a more flexible and dynamic workforce.
Digital tools enable better communication, collaboration, and real-time feedback, regardless of location.
Increasing efficiency and productivity
With HR staff spending as much as 57% of their time on administrative tasks, automation reduces time spent on repetitive tasks like payroll, scheduling, and paperwork, freeing up time to focus on strategic initiatives.
Cloud-based HR platforms can integrate various HR functions (recruitment, onboarding, performance management) into one centralised system, making it easier to manage tasks and track employee progress.
Improving the employee experience
Digital HR systems can be used to empower employees to access and manage their own information. For example, employee self-service portals can provide personalised information, access to HR resources and communication channels.
Personalised learning and development platforms can enable employees to explore career growth opportunities and skill-building resources, fostering continuous learning.
By simplifying processes and putting employees in control, digital transformation helps create a more responsive, supportive, and connected workplace.
The need for data transformation
HR data around jobs is often disorganised and unaligned, and can be lacking key information.
49% of companies say their job descriptions may not be accurate, while 32% are lacking consistency in their job titles. This can be an issue when attempting to hire candidates with a specific skill set or reward employees based on their performance within the demands of their role.
Disorganised job data can also lead to inconsistencies in salary ranges across roles, business areas and regions. This carries the risk of pay equity claims, and makes compliance with pay transparency laws a challenge.
Data transformation can ensure that job data is digitised and centralised can streamline many aspects of business HR admin and improve hiring speed, employee progression and job evaluation.
Data-driven decision making
Digital transformation, and data transformation enables HR teams to collect and analyse vast amounts of employee data.
This enables organisations to make informed decisions regarding talent acquisition, retention, skills analysis, and workforce planning.
Improved recruitment and retention
Tech can streamline and improve the process of creating job descriptions and job adverts, creating greater efficiencies, while also improving the quality of job descriptions. This enables companies to attract a more diverse pool of candidates through well-honed job adverts.
HR digital tools can also streamline the hiring process by using AI to screen applications, match candidates, and even conduct initial interviews. This speeds up recruitment and helps identify the best talent.
Employee development and upskilling
AI technology has a huge role to play in HR generally, and training is one area where it has already proved to be effective. For example, AI co-pilots have been used to coach sales and customer service teams in real time to improve their performance.
With job architecture in place, AI can also identify skills gaps compared to the requirements of roles, enabling HR to target training more effectively, recommending relevant training courses, and ensuring that employees receive targeted development opportunities.
Cost reduction
HR tech from tools such as payroll software to expense management reduces the need for manual processes and saves staff time and admin costs.
Likewise, the automation of the creation and management of job descriptions leads to efficiency savings and reduces time to hire, as well as enabling the creation of more accurate and appealing job adverts which better match the role.
Improved diversity, equity, and inclusion (DEI)
Data transformation also provides a platform through which companies can assess issues around pay equity, making comparisons between the compensation and rewards for similar roles and ensuring equal pay for equal work.
With the EU Pay Transparency Directive on the way, and other pay transparency legislation already introduced around the world, digital transformation is becoming essential. This is because technology enables the creation of automated, flexible, future-proofed job architectures that help govern job creation and pay bandings.
Fostering a digital-ready culture
According to Gartner, 55% of HR leaders believe that their current technology solutions do not cover current and future business needs.
The reason is that HR functions are using technology to automate traditional tasks to free up capacity for higher-value strategic activities, rather than thinking about how tech can positively change the HR function and contribute to business goals.
Digital transformation in HR should ideally encourage a broader shift toward a digital mindset throughout the organisation. It should promote innovation, adaptability, and prepare the organisation for future changes.
In summary: future-proofing through digital transformation
As industries evolve and workforce dynamics shift, HR Digital Transformation provides organisations with the tools, technologies which are needed to remain competitive.
HR digital transformation is as much about organisational change as the adoption of technology. This means cultivating a company culture which encourages experimentation and is adaptable to change.
With a growing trend towards pay transparency, and the introduction of transparency legislation around the world, it’s natural that many organisations will have concerns about the potential drawbacks.
However, it’s important for companies to embrace pay transparency and the benefits it can bring. In this article, we’ll outline the numerous benefits of introducing pay transparency for employers and employees alike.
Equal pay legislation has been in place for decades across Europe and North America, but the issue of gender pay inequality persists. In the US for example, women earned an average of 82% of men’s earnings, according to Pew stats.
Pay transparency (also known as salary transparency) aims to help address gender pay gaps by removing the secrecy that has traditionally existed around pay and rewards. If organisations are transparent about pay, it makes it easier to identify and challenge gender pay gaps.
Secrecy around pay has become the norm over the years, and some employers may be concerned that a more open approach will lead to jealousy and resentment amongst employees.
For some employers, there will be concerns that their wage bills will increase, with employees more likely to ask for increased pay when they can compare their pay with that of other employees.
There is also a lot of work involved in implementing pay transparency, as explained by Joel Gascoigne, CEO and Co-founder at social media tech company Buffer:
“Salary transparency, along with other types of transparency, does inherently create extra work for us. The work in adhering to salary transparency, including our formula and the communication required to guide people through how it works, is not insignificant.”
While these are understandable concerns, the benefits of introducing pay transparency outweigh the potential drawbacks. Indeed, some studies have shown that pay secrecy negatively impacts performance.
Pay transparency has been shown to reduce pay gaps for the simple reason that, without secrecy around pay, employers are compelled to scrutinise their pay practices and structures to identify and address inequality.
In addition, when current or potential new employees know how their pay compares with others, they’re more likely to bring up these inequalities and put pressure on employers.
One example of pay transparency comes from Buffer, which introduced this as a policy a decade ago. As part of its transparency policy, the company doesn’t have salary negotiations, and publishes its salary and gender pay gap data annually.
As a result, the gender pay gap at Buffer has gradually reduced over the last few years, and was down to 0.4% in 2022.
For potential candidates, looking for new roles can be a frustrating process, made more so by the lack of visibility over potential salaries. This can deter potential candidates.
Conversely, transparency over salaries can make job adverts more attractive to potential candidates, more so in competitive industries.
A recent Gartner survey revealed the benefits of introducing pay transparency for recruitment. 64% of candidates surveyed said they are more likely to apply for roles that include compensation in the description, while 44% decided not to apply for jobs because salary information was not included.
Transparency helps to build a culture of honesty and openness, which is a healthy thing, improving trust in management. Buffer CEO Joel Gascoigne sees pay transparency and the trust it creates within an organisation as the foundation of great teamwork.
When employees understand how pay decisions are made, they are more likely to feel they are being treated fairly and equitably.
Pay transparency is increasingly becoming a legal requirement for organisations, with pay transparency legislation active around the world.
In general, pay transparency laws in the US centre around requirements for publishing salaries or salary ranges in job adverts.
For example, California requires all employers with 15 or more employees to include the pay scale for a position in any job posting. They must also maintain records of a job title and wage rate history for each employee for the duration of employment plus three years.
Some European countries, France and Sweden included, already have more stringent laws in place, while the EU Pay Transparency directive will become law by 2026 across the EU.
Trust in fairness around remuneration, and satisfaction with pay leads to higher employee engagement, and a more motivated workforce. HBR research suggests that pay transparency can lead to productivity benefits.
Transparent pay policies can also reduce turnover, as employees are less likely to seek opportunities elsewhere if they feel their compensation is fair.
A survey by PayScale on staff retention found that pay transparency produced a 30% increase in employee satisfaction and a 29% decrease in staff turnover rates.
A positive brand reputation impacts the company in a number of ways, from improved sales and customer loyalty, to being more attractive to potential candidates.
Companies that practice pay transparency are often viewed as more progressive and ethical, enhancing their reputation in the talent market. They also avoid the damage to brand reputation that can be caused by pay equity claims.
Pay transparency can lead to a better alignment of performance with rewards. When employees understand how their compensation is determined, and they have a clear idea of what they need to do to reach the next level, they have more motivation.
The benefits of introducing pay transparency can also include the removal of favouritism and discrimination, as pay must be based on measurable performance, qualifications, and experience.
While the introduction of more transparent policies around pay involves some effort, the benefits of pay transparency are numerous. Most importantly, these policies help to ensure that workers are paid fairly, while it positively affects the ability to attract and retain the best employees.
In today’s dynamic business environment, organisations face the challenge of managing ever-evolving job roles. The skills required for these roles are also constantly changing
By implementing job families, organisations can streamline talent development, simplify reward structures, enhance career progression, and foster a more strategic approach to workforce planning.
A job family framework not only simplifies the creation of clear career pathways for employees but also helps to identify skill gaps and facilitate learning programmes.
Job families provide an organisation with a simplified framework for managing pay and reward. The number of distinct reward structures will be reduced, making it easier to manage pay processes and communicate pay information. If a job evaluation process is in place, a job family structure makes it possible to evaluate the high-level roles within each family rather than evaluating each job in each location/team.
A job family structure can often facilitate better communication and transparency around pay. When you have a job family structure with standardised role profiles and job titles, you’re able to establish your grading and pay bandings at this higher level.
If roles are aligned to a job family structure, and each profile has a grade or level and a pay banding, it makes it much easier to look across your organisation and spot any pay equity issues.
Many organisations are looking at moving to a skills-based approach. To do this you need to have a clear understanding of the work being done on the ground and the skills needed to deliver this work.
Having a job family framework in place makes mapping out potential career paths for employees easier. Mapping job titles and skills into a job family framework makes it much easier to look laterally and develop cross-functional career paths.
Job families based on common skills and/or capabilities help facilitate the development of learning content. A key advantage is that Capability Academies can be aligned to job families, provided these have been categorised based on common skills and capabilities.
A job family framework helps simplify many compliance and reporting requirements, whether that is for equal pay, gender pay gap analysis or other compliance and legislative reporting requirements.
Aligning your jobs into job families is an enabler of better workforce planning and increased workforce agility. It provides you with the framework to consolidate all your skills and work in a structured format, that then allows you to identify commonalities of skills and work and increase your workforce agility.
To learn more, download our latest guide: Five Steps to Building Job Families
The EU Pay Transparency Directive is set to become law across member states in 2026, and the legislation will be significant for many businesses who are active in the EU.
The legislation is designed to combat the gender pay gap by forcing organisations to adjust their practices and become more transparent around pay.
The gender pay gap remains a significant issue in Europe. Women in the European Union continue to earn less than men with the average gender pay gap in the EU standing at 13%. This means that for every €1 a man earns, a women will make only €0.87.
The EU Pay Transparency Directive was agreed in June 2023 and is required to be built into the national laws of EU member states by 2026.
Key provisions of the EU Pay Transparency Directive include:
It’s important to note that this directive sets out the goals that EU countries must achieve. The individual EU member states will then devise their own laws to help them achieve these goals.
The EU Pay Transparency Directive sets out a range of minimum requirements for individual member stats to build into national laws. Some countries may go beyond these requirements, so it’s possible we’ll see some variation between member states.
The EU Pay Transparency Directive applies to all public and private sector employers in the European Union but isn’t restricted to those with a physical presence in the EU.
All employers with 100 or more employees must provide detailed pay transparency information to employees, so a UK company with employees based in the EU would be required to comply.
Even if your business isn’t operating within the EU, pay transparency is an issue which may affect you anyway, thanks to the growing trend of pay transparency legislation being introduced all around the world.
The challenge for most organisations is not just how to keep up with the changes, but how to put in mechanisms and processes to ensure compliance globally, managing increasing changes and the nuances of regional variations.
Pay legislation varies around the world, though one common theme is the increased focus on transparency to address gender pay gaps.
Pay transparency legislation has been introduced in more than 25 countries around the world, with more in the pipeline. It’s a trend which will continue, and something organisations will need to have processes in place for, wherever they may operate.
The lesson here is that, even if your business isn’t directly affected by this new EU directive, the direction of travel is clear, and it’s likely that some form of pay transparency legislation will affect you at some point.
Organisations face several challenges around compliance, from a lack of consistency around job descriptions to the absence of a centralised job architecture, and levelling frameworks.
Businesses need to be taking steps to prepare and be proactive to meet the demands of the directive, but many are still yet to do this.
Research by The Conference Board found that 41% have yet to begin preparing for the directive, so there is plenty of work to do for some organisations.
The research also found that 55% of senior HR executives say that they are planning a single approach to pay transparency across their international operations, or already have such a process in place.
Just 30% of respondents will restrict pay transparency processes to their European businesses.
At the very core of pay transparency, and pay equity, is the ability to look across the organisation at the landscape of jobs, pay and reward, and make comparisons between the compensation for similar roles and dive deep into roles to ensure equal pay for equal work.
For many companies, this landscape is still a very chaotic, with individual teams and departments having their own job structures, titles and pay scales with little governance in place to manage and align.
To prepare for the EU Pay Transparency Directive, an essential first step is to put in place a comprehensive skills-based job architecture with roles organised into job families.
Organisations need the ability to fully analyse their job architecture and pay structures to have confidence in their pay equity position. The underlying structures, job evaluation processes and levelling frameworks must all be in place to support pay decisions.
Innovative organisations are investing in technologies that create automated, flexible, future-proofed job architectures that help govern job creation and pay bandings, manage scope creep, and provide instant access to job and pay inequalities.
There are several potential benefits from pay transparency policies, such as improved employee retention, and the ability to attract the best talent.
Pay transparency is popular with employees and those seeking new roles.
Given the current war for talent, companies should take notice of findings showing that 60% of US employees and 57% of UK employees would switch companies to one with more pay transparency.
However, research looking at the wage data relating to 100,000 academics in the US over two decades, found that increased pay transparency can result in a 20% reduction in the pay difference between individuals.
While some organisations may be paying increased attention to this issue thanks to the EU directive and related laws, it's important to think about how pay transparency can benefit your organisation.
In the world of organisational design, two interconnected concepts play critical roles: job architecture and position management. Whilst these terms are sometimes used interchangeably, they serve distinct yet complementary purposes in shaping how companies structure their workforce and manage their job data.
Understanding the link between these two approaches is vital for HR professionals and organisational leaders aiming to build efficient, adaptable, and strategically aligned workforces.
If you imagine the construction of a building – the job architecture would be the blueprint that outlines the overall structure. Whereas, position management would involve deciding where to place each brick.
A job architecture forms the backbone of an organisation's workforce structure. It provides a framework for defining and aligning jobs within an organisation based on the type of work performed. In its simplest form, a job architecture provides a mechanism to consolidate job titles into a consistent framework of job functions and job families, giving clarity and transparency on career levels and pay.
A robust job architecture is essential for effective position management. It provides the context and structure around where individual positions can be created, modified, and tracked. Without this overarching framework, position management can become chaotic and inconsistent, leading to inefficiencies and inequities across an organisation.
Position management, building upon the foundation laid by a job architecture, is the tactical, day-to-day process of organising and overseeing specific roles within an organisation. It involves creating, modifying, and tracking individual positions to ensure they align with the company's goals, budget, and operational needs.
The link between job architecture and position management becomes evident in several key areas:
A well-defined job architecture ensures that similar positions across different departments are treated equitably. This consistency is crucial for effective position management, allowing managers to create and modify roles that fit logically within an overall organisational structure.
The reward structures defined in a job architecture should guide position-specific decisions about pay, ensuring internal equity and external competitiveness. This is particularly important given the recent changes in legislation around pay equity and pay transparency.
A job architecture should ideally be linked to comprehensive skill and competency taxonomies or frameworks. These frameworks feed into position management, ensuring that each role is assigned the appropriate skills and competencies.
While a job architecture provides a stable framework, it should also allow for flexibility in position management. When new opportunities arise, organisations can quickly create or modify positions within the existing architecture, ensuring both responsiveness and structural integrity.
There are two key job documents that reflect the differences between job architecture and position management – job profiles and job descriptions. Job profiles are linked to an organisation’s job architecture and provide a broader, more generic overview of a role.
Job profiles focus on core elements common across all variations of a particular role, regardless of specific departments or teams. Job descriptions on the other hand are more specific and detailed documents that outline the requirements and expectations for a single position within the organisation. These are more likely to be used within position management to describe the specific requirements and expectations for a single position within the organisation.
In practice, HR professionals and line managers use position management tools and documents for operational purposes, managing their teams, planning for vacancies, and ensuring they have the right people in the right roles.
However, such day-to-day decisions are guided and supported by the strategic job architecture framework typically developed by internal or external Reward specialists.
For optimal results, organisations should integrate both job architecture and position management into their HR strategy
It can be difficult to know where to start with a job architecture. When faced with a chaotic picture of multiple job titles across various business areas and regions, the response can be to put this task into the “too hard” box and delay it for another year in the hope that it sorts itself out.
This can create issues and open organisations up to compliance risk, especially around pay equity and pay transparency, as well as slow down strategic people initiatives.
This is where having an agile job architecture proves invaluable. The ability to change and adapt at pace, ensures HR and Reward professionals are working more seamlessly together to create a more agile, compliance-focused and future-proofed organisation.
Job profiles and job descriptions are two key pieces of content for defining and managing positions within a company.
These terms are sometimes used interchangeably, but they serve distinct purposes and contain different levels of detail.
Understanding the differences between job profiles and job descriptions is essential for effective workforce planning, compensation management, and career development.
A job profile is a broader, more generic overview of a role within an organisation. It focuses on the core elements common across all variations of a particular position, regardless of specific departments or teams.
Generic description of the role
Core Responsibilities:
Skills and Competencies:
A job description is a more specific and detailed document that outlines the requirements and expectations for a single position within the organisation.
It is always connected to a particular job profile to ensure consistency in levelling and salary ranges.
Recruitment and selection is a key use case, with job descriptions often forming the basis for job advert content and often used to design selection processes and evaluate candidates.
Job descriptions also serve as a basis for setting goals and evaluating employee performance. They ensure clear communication of job expectations and requirements.
A job profile provides a broad, generic overview of a role for organisational planning and reward strategies, while a job description offers a more tailored outline of a role for hiring, performance management, and day-to-day guidance for employees.
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