It’s Not About Equal Pay, But About Explaining Why They Are Different

written by: Gordan Kožulj, Director of Business Consulting at Deloitte

With the adoption of Directive (EU) 2023/970 on pay transparency, European companies are facing a regulatory turning point. By June 2026, employers across the EU will be required to ensure equal pay for equal work or work of equal value through strict transparency mechanisms. At the heart of this transformation lies one crucial, yet often overlooked prerequisite: an objective assessment of job complexity.

Specifically, the Directive mandates employers to disclose pay structures, provide employees with information about pay grades, and begin reporting on pay differences between genders. These obligations cannot be effectively fulfilled without the prior establishment of a quality job complexity evaluation system. Only by objectively defining the relative value of the complexity of performing different jobs can companies ensure compliance, avoid penalties, and build a fair work environment.

Legal Imperative

The Directive explicitly requires that pay structures be based on objective, gender-neutral criteria such as competencies, levels of autonomy and responsibility, complexity of the work environment, etc. Employers must demonstrate that all pay differences are justified by these neutral factors, rather than by systemic biases. Furthermore, organizations with more than one hundred employees will be responsible for regularly reporting on pay differences, and in cases of unexplained pay differences, they will need to conduct a joint assessment of the reasons for such situations with employee representatives.

Without a clear methodology for evaluating job complexity, companies risk making inconsistent pay decisions. The European Court of Justice has repeatedly emphasized that mere transparency is not enough – employers must be able to demonstrate the comparability of jobs across different positions. Therefore, job complexity evaluation becomes not only a tool for the human resources department but also a necessity for regulatory compliance across the entire organization.

Key Evidence of Compliance

The Directive requires employers to group jobs into categories within which jobs of the same or similar complexity are performed, based on gender-neutral evaluation and classification systems. Without such a system, it is practically impossible to define these categories in a defensible manner. For example, when reporting on pay differences by job categories, employers must prove that the groupings are based on objective factors, not arbitrary titles.

Additionally, during joint pay assessments, employers must show how they evaluated jobs and why certain pay differences exist, and in the event of disputes, the burden of proof may shift to employers if their pay structures are not transparent. A quality job complexity evaluation system serves as key evidence of compliance with regulations. In other words, job complexity evaluation is the foundation upon which every obligation for pay transparency rests.

Practical Steps

To prepare for compliance with the Social Dialogue Directive, organizations need to start preparations today. There are several key steps they must take. The first is to conduct a review of job systematization and compensation policies, i.e., to assess whether current role definitions, evaluation methods, and pay structures and grades are aligned with the principles of gender-neutral evaluation. Then, they should implement or update a system for evaluating job complexity – applying a methodology that assesses job complexity against standardized factors such as competencies, responsibilities, work environment, etc.

The next step is to train the human resources team and management on the chosen methodology, as misuse or improper implementation of the job complexity evaluation system can deepen bias. Proper training ensures consistent application and better outcomes of the evaluation process.

It is important to include employee representatives in the evaluation of job complexity. Involving workers in this process builds credibility and aligns with the guidelines of the Social Dialogue Directive. Finally, it is essential to integrate job complexity evaluation into other HR processes, ensuring that the results of the evaluation are incorporated, among other things, into the upgrading of job systematization, into the reward system (pay grade structure and variable compensation), and into the employee performance management system as well as the employee recruitment and promotion strategy.

Support for Small and Medium Enterprises

Implementing a job evaluation system is not without obstacles. Resistance to change, especially in organizations with informal compensation and reward practices, is certain. Smaller companies may lack the resources to adopt the evaluation methodology. The Directive recognizes this by requiring member states to provide technical assistance and training for small and medium enterprises. Another challenge is ensuring that the evaluation criteria themselves are not biased. Historically, soft skills associated with roles dominated by women have been undervalued. The Directive explicitly warns against such distortions, emphasizing the need to address this when establishing a methodological framework for evaluation.

Competitive Advantage

The EU Directive on Pay Transparency marks the beginning of a new era of pay equality. However, transparency without substance means nothing. Organizations cannot simply publish pay ranges (pay grades) and pay differences between genders without answering the fundamental question: how do we decide that certain jobs deserve the same or different pay?

Job complexity evaluation provides that answer. It transforms legal obligations into actionable frameworks, compliance risks into opportunities for fairness, and regulatory pressure into strategic advantage. For organizations, the message is clear: those who invest early in job complexity evaluation will not only comply with the law but will also build a fairer, more transparent, and more competitive work environment.

One Example of Why Job Evaluation is Important

Deloitte’s Job Evaluation System (JES) emphasizes the central role of coherent job evaluation in modern compensation management. A structured methodology for evaluating job complexity provides companies with the following advantages:

Creates Consistency and Fairness: By quantifying and classifying job complexity based on transparent criteria, organizations reduce arbitrary decision-making.

Enables Regulatory Compliance: Clearly defined and described evaluation frameworks provide an analytical basis for demonstrating equal pay for work at jobs of equal complexity.

Facilitates Communication: Clear frameworks simplify and ease the explanation of pay structures to employees, thereby reducing distrust and potential disputes.

Enables Market Comparison: A standardized job complexity evaluation framework allows for more precise comparisons with external pay data.

Such a structured approach transforms abstract concepts like ‘work of equal value’ into measurable criteria that withstand legal and regulatory scrutiny.

Other Benefits of Evaluation: Capturing the Position of a Desirable Employer

Although regulatory compliance may be an immediate driver, the benefits of job evaluation extend far beyond avoiding penalties. Companies that invest in transparent evaluation systems position themselves as desirable employers in an increasingly competitive labor market. Some of the reasons for this include:

Strengthening Brand and Trust: Employees and candidates for open positions value fairness. Organizations that can explain pay decisions based on objective criteria strengthen employee trust and loyalty.

Employee Retention and Increased Engagement: Transparent pay structures reduce doubts about bias, which is a major cause of employee turnover and attrition.

Data-Driven HR Decisions: By consistently classifying jobs, organizations can better align pay strategies with job performance, skill development, and workforce planning.

Resilience to Lawsuits: The Directive empowers employees, unions, and equality bodies to challenge unfair pay practices. Documented processes for evaluating job complexity are key arguments for employers in potential disputes.