Navigating Change -EU Pay Transparency Directive and the Role of AI in HR & Reward

I had the pleasure of hosting and facilitating a Reward and HR Roundtable discussion in the beautiful city of Amsterdam. It was a privilege to join our senior HR and Reward clients discussing and exchanging insights on EU Pay Transparency Directive and Impact of AI on HR and Reward professionals.

We started with some context and facts to set the tone for our first topic of discussion. First the purpose of the directive is to ensure equal pay, the key word being transparency, secondly the what and how. EU companies will be required to share information on salaries and take action if their gender pay gap exceeds 5% for companies. This is because the gender pay gap persists across the EU, remaining 13% on average as of 2022.  The how was very much part of our conversations.

Some challenges and concerns highlighted were employee morale and retention and are organisations tailoring their approach per country or as global and collective effort to avoid a “us and them culture”. Organisations facing some challenges in getting prepared for the EU Pay Transparency Directive, some approaches and strategies being considered to prepare for the implementation and compliance process.

Key Takeaways and Summary:

1. Global Approach to align job family salary ranges are a priority, foundations need to be in place.
2. Collective agreement that organisations need to understand what the country level legislation will look like and how this will feed into best practice processes – one approach.
3. Our roles as HR and Reward professionals need to be carved out to ensure organisations build the right governance to facilitate the EU Pay Directive adoption using best practice.
4. Clear and pro-active communication to employees and stakeholders, hiring managers to educate on processes and ensure everyone is on the same page and promote transparency

Leading on from this discussion – AI and the impact on our Reward and HR processes, we focused on AI Tools and debunking the myth that our HR roles will be replaced.

Some but not all organisations and HR teams are embracing AI and using tools to increase productivity, most commented that they identify with AI being more of an opportunity then a threat. “Mercer’s global talent trends study found that 40% of Leaders now use AI for Reward and Benefit Administration functions and Talent Management.”

Some positive examples of using AI in HR and Reward from our breakout conversations:

• Predictive modelling, policy and frameworks to create job profiles and employee friendly toolkits including content or videos.
• Using AI can be cost effective when building a firm owned AI Model, further efficiency for Reporting Models including pay equity and transparency reports
• Common AI tools currently being used include Co-Pilot, Chat GPT, Power BI, Canva, Syndio.

Risks discussed included governance and ethics. The banking industry being cautious on using AI because of data privacy laws, cyber security threats and data breaches of confidential organisation information. Regulatory compliance surrounding AI is still developing including global variability.

Navigating the intersection of AI and the EU Pay Transparency Directive presents both opportunities and challenges. The Directive purpose is to increase fairness and visibility in pay practices, which AI tools can support through enhanced data analysis, reporting and personalised compensation strategies.

I learned so much through this engagement session. Sharing knowledge and insights is extremely empowering to understand how we as talent partners can support our global clients through the current legislation changes and impact of AI when hiring and providing data to ensure our clients remain competitive and informed in their respective markets.

We look forward to hosting our next roundtable in early 2025 to continue these conversations, with some added solutions and further valuable input from our clients who joined us on Wednesday.

Feedback from attendees

We asked our attendees to provide some feedback on the event, the below is a summarised response.

What were your key takeaways?

• We are all in the process of building foundations, and knowledge sharing is beneficial.
• Addressing governance for the EU Pay Directive is essential, with practical AI use cases in rewards being valuable.
• Started working on transparent rewards agenda immediately and felt energised by the setup.
• Timeline and requirements on the EU directive need attention.
• Shared journey in Pay Transparency, with a need for further clarity on action steps.
• Collective journey with ongoing learning; leveraging existing work is essential.
• There is still uncertainty regarding the EU Pay Transparency directive, and AI adoption in HR varies, with the banking sector being more conservative.