How to select software for EU Pay Transparency

You may be wondering if you need software for EU Pay Transparency and, if so, what it should be able to do. This is a short overview of the types of tools available on the market and what to look for.

Do you need software at all?

It is very difficult to manage pay transparency in spreadsheets. You would need to combine every job description, job evaluation score and payroll record, keep it current, manage versions and share access securely. The data doesn't necessarily suit a spreadsheet either. A job profile is a structured document, and it is hard to edit well in a cell. That said, not every company needs new software.

If you already have a job architecture in place and a strong analytics team, you may be able to work within your existing systems.

If you have neither, it is very likely that you need software and it helps to know what good software should be able to do.

There are three stages to preparing for the EU Pay Transparency Directive: building your job architecture, analysing pay, and meeting your ongoing obligations. 

Below is what to look for in software that can support you across these three stages, with suggested questions to ask in a demo.

Stage one: Building your job architecture

This is the most laborious part of preparing for EU Pay Transparency, and it is where most tools fall short.

Look for: Job architecture builder, not just storage. Many HRIS systems say they offer job architecture. What they usually offer is a place to record a code for job family and level once you have already evaluated your jobs somewhere else. This means that the HRIS won't hold the documentation behind each evaluation, which is what you need if you are ever asked to defend it. 

For EU pay transparency, jobs need to be evaluated in a structured way based on skills, effort, responsibility and working conditions. For companies with more than 15 jobs, it is recommended by the EU to use a point factor job evaluation method. Employers need to be able to explain the methodology that they have used to evaluate jobs and defend it. 

Software that simply records a job level is not enough to be ready for the Directive.
Ask to see how a job gets scored, not just where the score is saved.

Look for: Job profile support. Job descriptions are the biggest stumbling block for most companies building job architecture. Pre-existing job descriptions are often missing, out of date, or written for talent acquisition rather than with the details needed for job evaluation. Good software should give you a standardised library of job profiles to work from and/or a way to generate standardised job profiles.
Ask whether they have a job profile library or generator, and how it helps you get started.

Look for: Job title management. Many companies have far more job titles than they need, sometimes one title for every two or three employees. To prepare for pay transparency, you will need to rationalise your titles and distil them down to the core titles in the company. If you don’t do this, it will create a lot of noise and additional work when it comes to analysing your pay. Your software should allow you to record your catalogue of standardised titles, along with the title variants associated with each one and used by employees in practice.
Ask to see how standard titles and variant titles can be managed clearly.

Look for: Scenario testing. The process of building job architecture can require some iteration to find the right fit for the organisation. Software should let you test the effect of changing the number of job levels, or adjusting any of the evaluation factors.
Ask to see what happens to your jobs if you add a level or change the weight of a factor.

Look for: Calibration and audit history. Job evaluation is an important process and needs input from several stakeholders in the business. You need an easy way to collect feedback from managers and others involved, and a record of every scoring decision and change over time. If you are ever asked to explain why two jobs sit where they do, this is what you will rely on.
Ask to see how a colleague reviews a score, and where that decision is recorded.

Look for: Permissions and data security. The permissions on offer in the software are also very important. Each of your stakeholders should only have access to the information they need and no more. Permissions should be configurable by data type (job data or pay data), by action (read or write) and by legal entity. You will also be sharing sensitive pay and employee data, so check how the software keeps it secure and where it is hosted.Ask to see how access is set up for a manager who should only see one legal entity, and whether they can share their security policy.

Stage two: Analysing pay

Look for: Payroll data, not only contractual pay. Many tools work only with contractual pay data, the figure in the employment contract or offer letter. Your pay gap reporting under the Directive must be based on what people are actually paid through payroll. Payroll data is messy, and mapping it initially for pay equity analysis takes effort. A tool that cannot handle payroll cannot make you compliant.
Ask how payroll data is treated for pay analysis, both during initial implementation and on an ongoing basis.

Look for: Statutory reporting by country. Each member state is transposing the Directive into its own law, and the details differ. You need reporting templates that match the rules in each country where you employ people.
Ask which countries they already cover, and how quickly they update when local rules change.

Look for: Justification of gaps of 5% or more. Where a gap of 5% or more appears in a category of workers, you need to be able to show whether objective factors explain it. These could include time in the job, time in the company or performance rating. A large company might do this through regression analysis. Regression needs a lot of data to give reliable results, and in a smaller company many categories are too small for it. A simpler approach often works better, comparing each employee's expected pay position with their actual one. Ask how their analysis handles small categories, and what they would recommend for a company of your size.

Stage three: Fulfilling ongoing obligations

Reporting is only part of EU Pay Transparency. The Directive also brings ongoing obligations, and your software should help with them day to day. Look for support with:

• responding to employee requests for pay information

• flagging when a job category is too small to disclose under GDPR

• checking pay ranges when you are hiring

• suggesting evaluation scores when you create a new job

• reminders for reporting deadlines and other key dates

Ask to see an employee information request handled from start to finish.

Where different types of software fit

"Pay transparency software" describes some very different products. Most fall into one of four groups.

HRIS add-ons. Many HR systems include a job architecture or pay equity module. These are useful for storing job levels, running basic reports and early exploratory pay equity work. They are not usually enough for compliance on their own. They tend to rely on you scoring jobs somewhere else, and they often work from contractual pay rather than payroll data. 

Comp benchmarking platforms. These tell you what the market pays for similar jobs, which helps when setting pay ranges. But the Directive asks whether your own jobs are of equal value to each other based on skills, effort, responsibility and working conditions. That is an internal pay equity question, and market data alone can't answer it.

Pay equity analytics tools. These are built specifically to find and explain pay gaps, and many have strong statistical tools. They generally assume you already have a sound job architecture. They are typically built for large enterprises, with workforces big enough to suit complex analysis like multivariate regression.

End-to-end Directive tools. These are built specifically around the Directive and aim to cover all three stages. They vary a lot in depth, so it is worth testing each stage in the demo. Check how they evaluate jobs, how they handle pay data and support reporting. The other important question is whether you can run it yourself. Many smaller companies don't have a dedicated Rewards team, so the analysis needs to be easy to understand and act on without one. A tool that covers everything but needs an expert to interpret it will leave you stuck. 

Here is how they compare against the three stages.

The ideal situation is to have a tool that does all three stages well.

Bringing it together

Take the table above into your next demo and ask the questions. If a tool only covers one column, you will need something else for the other two. That is not always a problem, but it is worth knowing before you sign.

SkillsTrust is an end-to-end platform built for EU companies of 100 to 2,000 employees that don't have a dedicated Rewards team. If that sounds like you, we would be happy to show you how it works.