HR, We Have a Problem - How the EU Pay Transparency Directive is forcing a new approach to pay equity

[00:00:00] Seeing why, because people are still biased. And that shouldn't be totally surprising either, because we're wired to be biased, you know? Yeah, it's human nature, let's be honest. Yes, yes. Scary, not scary. If it's familiar, it's not scary. Yeah.

[00:00:21] So, we have a familiarity bias and we tend to hire people that look like us and seem like us, because it's more comfortable for us. And it's a problem, because the people who are not like us have nothing to do with the fact that we happen to be the decision maker.

[00:00:44] But, humans come in the variety pack and, you know, that's part of our magic. Welcome to the HR Huddle Podcast, presented by Sapient Insights Group, the ultimate resource for all things HR. It's time to get in the huddle.

[00:01:13] Hello, everyone. Welcome back to the HR Huddle. I'm your host, Terri Zipper, CEO and managing partner at Sapient Insights Group. And I'm back for another exciting episode of HR We Have a Problem. This is the show where we break down the big and most relevant HR issues of the day. We help you make sense of what they mean for you. And we talk about what you might do about them. So, we've got an interesting show today. Joining me today is Heather Bussing.

[00:01:43] Heather is an employee attorney. She's an author, a writer, a law professor. She's been around HR technology for a long time. Welcome, Heather. It's great to have you. I'm delighted to be here. It's always fun to talk about pay equity. Well, you cover a lot of ground when it comes to employment law and a lot is changing, especially on that front.

[00:02:08] You know, federal, state, local laws, global challenges, new EU directives. I mean, it's hard to keep up, right? Oh, yes. You know, that the I do a daily newsletter on the latest in employment law. It's how we do.com. And I have learned so much and I am so much more aware and can connect dots because I do it every single day.

[00:02:38] And it's been, it's been an extraordinary education. It is hard to keep up. Yeah. Well, and I mean, compliance is, is really table stakes. And what we've learned about organizations that are seen as strategic, especially from an HR perspective, is that they've got their compliance house in order.

[00:03:00] So I thought we'd talk about what's coming in the next couple of years, what impact new legislation might have on businesses and maybe what some people, what some solutions might be. Okay. Does that sound like a good plan to you? It's always a good plan. All right, then let's get into the huddle. So talk a little bit about your background first.

[00:03:22] I know I didn't do it much justice, just kind of the high level bullet points, but, you know, talk about your background, you know, get some of the work that you're doing. And also at the same time, what drew you into HR tech? Right. Those two things aren't necessarily the same. Just going into employment law doesn't draw you to HR tech. So I'm curious what drew you there. Oh, it's a, it's a good story. So, so about 20 years ago, I fell in love with this guy named John Sumser.

[00:03:53] And he was sort of a leading voice in HR technology and, you know, sold the first banner ad on the internet, you know, that, so he, he loves technology and he loves HR and he has been thinking hard about this stuff.

[00:04:13] And so we started talking about issues and I would talk about the legal stuff and he would laugh at me because, you know, it's like, that's not how it works. And, and so as our relationship developed, he was on the road a lot. And if I wanted to spend much time with him, I started traveling with him when I could.

[00:04:37] And, but I was just, you know, I didn't want to be the, the spouse or the sidekick. So I took my camera and started taking pictures. And the conferences started hiring me to come and take pictures. And by going to the sessions and being around it, I learned an incredible amount and living with an expert.

[00:05:02] And so I started blogging at recruiting blogs about employment law and HR tech. And that developed and continued into the HR examiner, which is, which was started by John about 10 years ago. And so I, I went from lawyer to photographer to HR technology employment lawyer. That is an interesting story. I did not know that story.

[00:05:30] And I'm guessing a lot of our audience knows who John is. Yeah. If they follow the space, right? Yeah. Yeah. And, and if you, you know, go to conferences where he's at, he's hard to miss because he's this great big, tall, boomy guy with a ponytail. Yeah. Yeah. Indeed. Yes. He is the epitome of HR tech, right? Like as far back as I can remember. Right. That's, that's a great story.

[00:05:59] Well, you also do, do some social media law and internet law. How does that play into the picture or, or does it? Well, I got really interested in, in social media and internet law as the internet grew and became more of our work. And as I started doing more blogging, I started working with technology companies and their content marketing people. And so I started learning about that.

[00:06:28] And so I put together a course at the law school where I taught until a couple of years ago on, it started out as social media law because I wanted, I wanted the students to understand sort of what principles exist that you can apply to this. And what we don't really understand and what will be developed.

[00:06:52] And in a nutshell, our whole legal system is based on people, places, and things. It's, it's all about protecting people from harm. And basically, you know, the two big rules are don't hurt other people and don't take each other's stuff. Yeah. That's, that is the foundation of all legal systems and most religions. Yeah. It's going to the golden rule, right? Yeah. Yeah.

[00:07:22] And we've sort of gotten away from that, but, but at its core, that's, that's the deal. And, but it's all based on our analog world. And as we started to go digital, questions came up like who owns your name and likeness on social media? And what extent can people copy that? Because we're not dealing with a book where there are limited physical copies.

[00:07:52] We're dealing with unlimited possibilities for copying and changing and transforming and all those things. And there's tremendous possibility. And also, how does, how do we need to shift our thinking about this and what makes sense? And our instincts as people is always to just apply the old way to the new way. And try and make it work. If it works. Yeah. Yeah.

[00:08:22] Let's overlay what we know, instead of thinking about something, something new. Like this is new. But we shifted dimensions and we still haven't totally shifted our thinking. Yeah. Well, we could probably do a whole episode on that. I would love to dive into that topic, but that is not our topic for today. I, so many organizations now, no matter how the size or, you know, they have employees outside of their traditional borders. Right.

[00:08:51] I mean, this has been happening for years, but I think, you know, over the last four or five years, it's become even bigger with people saying, look, I'm just going to work remotely and I want to live in Germany. Because that's where I'm from. Yeah. So, whether it's states or countries, there are rules that need to, you know, organizations need to understand.

[00:09:14] Organizations that are big and small, like it's great if you have a big company and you've got, you know, plenty of lawyers that can worry about things, but there's a lot of small companies too that are impacted. And I know there's a big change coming. Actually, it's already there, right? They just have until, you know, the next couple of years to deal with it is this EU pay transparency directive. So what is it and how do you see it changing the legislative landscape? Right. Yeah.

[00:09:43] So, so it, the pay transparency directive builds on EU discrimination laws. So it's just another piece of don't discriminate against people in pay because of a protected class. But the EU pay transparency directive is focused on gender pay differences, because that's the most profound.

[00:10:09] And it's the biggest public policy issue, because if you are paying women less their entire careers and they live longer, then you get into real public policy issues with pensions or retirement and health care. And, and, and all sorts of things.

[00:10:30] And, and women through no fault of their own are, are penalized and can't make the resources and, and do what they need to do to account for this. And so it's, it's a real issue everywhere. And it's becoming more pronounced just based on the boomers retiring.

[00:10:52] And so, so we're at a demographic moment where it's like, oh, oh no, what have we done? This is, this is, this is now a big expensive problem for governments and taxpayers. So that's, you know, that's the real, the real issue. And, and the EU directive talks about that. And they have about the same pay equity problems that we do on average.

[00:11:22] Women make about 87 cents on the dollar in, in the EU. And very much like us, when you start adding intersectional factors like race and other protected classes, the problem gets worse. So, yeah. So that's, that's the problem.

[00:11:41] And the interesting thing about it is that they are using data and technology to actually solve the problem with the law. And that's what's new and exciting to me because. What if I told you that your boss skydives, Tim in marketing is a magician, and Sam in accounting does sums in his head while standing on his hands.

[00:12:07] Seeing sides of the people you work with but never see, sides that inform and inspire their work and that can inspire yours is what the talent show is all about. Email me, Tom Alexander, host of the talent show at talent show at backbone inc.com and show us what you got. I look forward to seeing you on the talent show.

[00:13:00] Laws usually are focused on when it's too late and something has already happened and you just try to manage the pieces and move some money around to resolve it. Right. Laws very rarely prevent or solve problems, especially employment laws. They just provide a remedy. And the remedy is a penalty of some sort.

[00:13:27] And with employment laws, it's also attorneys fees because we want to incent those remedial actions. But rarely do we get a law where. Someone thought it through and said, how do we how do we stop this problem from happening in the beginning? Right. Yeah. That'd be cool. That'd be nice. Right. I mean, how do we how do we make it? We.

[00:13:56] How do we make it a tool versus an obstacle? Right. It's standing in our way. But, you know, it is something that makes sense. Right. It's something that we should be thinking about and dealing with. But it also, as you said, I mean, data becomes a critical issue here. Like we have to know, are they really doing equal work? I mean. Yeah. So let me just give a rundown of what it's required and then we can get into the fun parts.

[00:14:25] But but there's two pieces. There's pay transparency. So candidates get to know before the interview what it pays and they get to know some of the information about what justifies the pay. Employees get to know what are the objective criteria that make up my pay? What do I what are the criteria for getting a raise? What are the objective criteria for getting a promotion?

[00:14:52] And so that all has to be thought through. And then there's the reporting. So the transparency stuff applies to all EU employees. So if you have any employees that the transparency applies to you. The reporting applies to employers with 100 or more employees, at least 100. Yeah.

[00:15:19] So and they will be reporting their pay gaps. So so in the US, a few states like California, Massachusetts, Illinois require employers to report paid data in the EEO one job categories. There's 10 of them. They're very general. It doesn't tell you a lot, but it tells you something along with demographics on gender and race.

[00:15:49] So that would tell regulators if if it showed a big problem, it might say, OK, we have to go look at this. But it's it's still very primitive. And what the EU is going to do is have employers do a pay equity analysis and then report the results of their pay equity audits.

[00:16:17] So that's a big shift from what are we paying.

[00:16:21] And it it requires employers to actually think through their jobs, look at their work in terms of skills, effort and responsibility and analyze their pay and do that multivariate regression analysis to to see if if women and people of color are generally paid less. And then if you have a pay, they're going to be paying less.

[00:16:50] And then if you have a pay gap of more than 5%, the employer has to work with employee employee representatives to investigate it, figure out what's going on and fix it. And nobody's ever had a fix it law. You know, the laws, if the EEOC comes in or the state civil rights agency comes in, they will they will look and say, hey, fix it.

[00:17:18] But that's again, after it's already happened, after it's too late. And these laws are requiring employers to look at their data, monitor what's happening and fix it. That is a big change. Yeah. Yeah. Yeah. And it makes sense, right? You don't have to be as an employee, the one to bring suit. I mean, it's true. How many people actually do that? It's very difficult.

[00:17:49] Putting the burden of enforcement on employees is fundamentally unfair. Yeah. Because of the power and resource differences. Yeah. And even with an attorney's fees clause, it, you know, the litigation doesn't really fix anything. Right. It doesn't.

[00:18:07] And so so I'm delighted to see governments looking at data and going, hey, what can we do with this to actually solve problems and not just move money around after it's too late? Yeah. Have you worked with any organizations that have kind of brought you in and said, how do we just like deal with this? Right. How do we, you know, get ahead of the law?

[00:18:35] Well, because granted, you know, that, that same law is only going to apply to us based companies if they have employees in the EU, right? Right. I mean, there are states here that are doing more and more, but it's definitely not the same level here in the U.S., at least not at this point. Yeah. Well, you know, it's so funny. It's so funny.

[00:19:01] Every time I give a talk at a conference, somebody will come up to me afterwards and go, you're a lawyer. How do you get out of this? Yeah. How do I beat it versus? Yeah. How do I beat this? Solve the problem. Yeah. And my answer is always, you know, compliance eliminates risk. What if you actually tried to solve the problem?

[00:19:27] What if you worked on providing a discrimination and harassment-free workplace? Because that's what don't discriminate means. You know, you're over here doing the risk analysis of whether or not you're going to get sued and what that might cost. And you're saying, okay, well, I don't have to do anything if this risk analysis says that the risk is small. That's not what we're doing here, folks.

[00:19:57] Right? Yeah. Don't discriminate. Don't discriminate. Because it's good business. Yeah. It's good business. You increase the diversity of your innovation. You increase the potential for a larger client base. You know, including everyone in a world of declining population seems like really good, smart things to do.

[00:20:27] Yeah. It's always felt like just so obvious. It's like, well, why, you know, why are we calling it that? Why aren't you just doing it? Like, why does this have to be a thing? Right. Right. And, you know, we're seeing why. Because people are still biased. And that shouldn't be totally surprising either because we're wired to be biased. You know?

[00:20:56] It's human nature. Let's be honest. Yes. Scary, not scary. If it's familiar, it's not scary. Yeah. So we have a familiarity bias and we tend to hire people that look like us and seem like us because it's more comfortable for us. And it's a problem because the people who are not like us have nothing to do with the fact that we happen to be the decision maker.

[00:21:28] But humans come in the variety pack and, you know, that's part of our magic. So. That's a good way to put it. I haven't heard that one. The variety pack. Yeah. Yeah. And they're all my favorite. Quite the variety, right? Exactly. Exactly. I think of a spice rack, you know? Like, it's all my favorite. Yep. Yep. Except nutmeg. Well, yeah, there's that. But that's okay.

[00:21:59] What do we need? What do organizations need to do to start preparing? I mean, how, you know, given that this is different than what we've seen in the past, right? It's not just you doing your risk analysis and running the reports and turning them over. It's, you know, it's solving the problem before it becomes a bigger problem. Right.

[00:22:22] You know, what advice are you giving people right now to, you know, what are some things that I should be doing to get ready? So, it's really the, you know, whether you're in the EU and are going to have these additional reporting requirements or whether you're in the US, the law is the same. People who do similar work need to be paid the same. It's easy.

[00:23:17] It's easy. Yeah. These are the job descriptions that are based on skills, effort, and responsibility, which are objective criteria. And so, that's where the work is. It's carving out the time and the resources to get your job descriptions in a shape where you can compare work.

[00:23:41] And so, the way you do that is you have to have similar terms for similar things, and you have to tie those together. And so that when you, so that you can make the same or different analysis. And it's going to be graded, and it's going to be unclear, and there's going to be variations.

[00:24:03] But, but it's not that hard anymore because there are a lot of people doing a lot of great work on skills and on understanding how to analyze these issues. And then you just push a button and you get the information you need. Yeah. Skills is a hot topic right now. And this is one of the reasons, right? We've got to, we've got to get to the bottom of that. And a lot of people are redoing their job architecture.

[00:24:34] I mean, they just don't have, it's gotten unwieldy, right? It is something that, that requires maintenance. Right. And, and just like skills, you can't put that in place and just let it sit for 10 years. Right, right. No, you know, it's just like you have to replace the roof every so often. Well, we're at an inflection point where we need to reframe the way we do our job descriptions so that they're useful.

[00:25:03] And, and we don't have them all over the place. And, and there are many flavors of job descriptions too, depending on what, what problem you're trying to solve. Yeah. Are we looking at a workers comp situation where someone's coming back from work, we need to know how much they lift, you know, that's, that's going to be not that important in a pay equity analysis. But, because it's going to be one of many, many factors.

[00:25:32] And, and so you need people who understand this. And, and it's harder because executives tend to be fairly far away from the work itself. So the people making the decisions about how we're going to do this and what tools we need are often don't really understand what the work is like. Yeah.

[00:25:54] And so, so, you know, that's, that's another problem where I see employers going, oh, well, you know, let's, and, and the, really the truth is that the sales guys for the HR tech companies don't know what the work is like either. Especially at their clients organization. Yeah. Yeah.

[00:26:14] So, so we all need to get more familiar with how we, how we think about this and, and how we apply the tools and how we use them. But, but then it's, it's just math. Yeah. Who in the organization do you see taking the lead on this? I mean, obviously HR for obvious reasons and people in comp for other obvious reasons.

[00:26:40] But do you see other people in the HR function really focused on this problem and, you know, working with the rest of HR to try to solve it? No. But, but, but, you know, this is finance gets dragged in, right? Because this is money and people and pay and pay is always the biggest line item.

[00:27:05] So you can get executives attention with this stuff because it really has to do with money. But, but they bulk at, at the time and effort it takes to get it right. No. Because it seems like extra, you know. Yeah, it does, right? Especially when you have 10,000 employees and you're trying to solve backwards, right? Right.

[00:27:32] But once you get a plan and, and solve for it, it should make it a whole lot easier going forward, right? And maybe that's what this, you know, EU pay transparency directive will end up doing is kind of forcing people into that, you know, having the plan versus having your, you're, you're relying on your risk analysis. I mean, risk analysis is great for a lot of things, but there's some things that just need to be solved for.

[00:28:02] Yes, exactly. Exactly. And, and we, you know, we don't have an excuse anymore to not look at our data. It's there. The law requires us, you know, to not only make decisions based on what we know, but what we reasonably should know. And if you don't, if you don't have sort of basic people, analytics and demographic data that you're tracking, you're, it won't save you.

[00:28:32] Yeah. So. And the data is getting better. I mean, still data is still a challenge, right? It's still only as good as the, you know, the, the time you take in the investment you make into how you're going to manage that data. Exactly.

[00:28:48] But given the importance of that now with everything we're trying to, you know, how we're trying to really drive businesses forward and AI and gen AI, some of the things that we think we can do with, you know, having clean data is going to be critical.

[00:29:07] So that, you know, and, and for the same reasons we're talking about right here from a legal perspective, you know, you could spend months trying to sort that out if you get audited. Right. Right. So, you know, why not think about how you, how you correct those problems and, you know, operate on the right side of the law? Well, yeah. Yeah. I mean, it's cheaper. It's easier. It's better for business. It's better for your employees.

[00:29:37] But sometimes you have to stop and do some work. And this is, you know, we're going to see those times increasing as, as the data reveals more and more information about what's going on because we just, we can't, we can't hide. No. And, and the model for forever was, if you don't know, then you can't discriminate.

[00:30:05] So try not to know anything that you cannot know as much as possible. And that, and that was the risk model, you know, we don't want to know, but it hasn't worked out so well. And now we do know. Yeah. We do. So, so we have to, so we have to manage for that. Yeah.

[00:30:31] What about, I'm thinking about small businesses because this is going to impact, you know, smaller businesses than it has in the past. Right. And, you know, it's, it's one thing when you have a large business and you have people in department, you know, your, your departments are divided up in ways that you've got people focused on every different problem. Versus a small business where, you know, you're, you're wearing 10 hats.

[00:30:58] You're lucky if you even have an HR person, you know, what, I don't know who's thinking about the problem in some of those organizations other than their, their legal team. Right. If they have one of those. I mean, I've worked with some small companies recently who didn't, their legal team was outsourced. So they only went to them when they had a problem. It's not like they were helping them, you know, sort of decide what their, how they operate on a day-to-day basis.

[00:31:24] So, um, I, this is, this is going to be sort of a surprising answer, but small businesses don't have pay equity problems because they don't have people doing the same job. Yeah. Yeah. Everybody does multiple jobs and that shifts from day to day.

[00:31:43] And, and so, you know, they, they have, they are the ultimate hipster pay people, you know, where it is custom bespoke, artisan, small batch. That's a really good point. Where does it go wrong? Where does it all go wrong? Right. It's like, once you reach, there's sort of a point you, you reach at which you start to have, you know, multiple people doing the same job. Right.

[00:32:10] So it becomes a, you know, it, it, it changes over time. Right. And some of these small businesses will never become big businesses. That's not their goal. That's not their plan. Which is, which is why a lot of the pay equity reporting things start at a hundred plus. Yeah. Because it's just not an issue. Yeah. Discrimination can be, but that tends to be in hiring, not hiring versus what you pay once you hire someone. Right.

[00:32:40] Yeah. Yeah. I would see that as potentially being a different challenge in small businesses for sure. Yeah. We've, we've seen some quick changes over the last three or four years. You know, what are, what other things are you seeing some other big things on the horizon that are going to impact employment law and organizations? Things. I mean, there's things happening around immigration policy right now. Right. Yes.

[00:33:09] But we, we've known that was coming. We've known that was coming since at least the election. And, and the reality is that the Biden administration was also very restrictive on immigration as well as a political matter. And I think it's going to backfire because the U.S. native population is, is not growing.

[00:33:36] And we, our economy is based on a pyramid where we need population coming up to support the retiring folks. So. Yeah. I know that. The baby boomers all getting ready to retire. Exactly. Well, that, and most of them, most of them have. Yeah. Many of them have already. Many of them have. Yeah. Yeah. I'm sort of on the cusp of, of the boomers and Gen X.

[00:34:06] So, but. Yeah. Yeah. Yeah. So, so we have real business needs that are related to immigration, but we've got a lot of political stuff around it because, but because. I think we have to sort it out. I mean, it's confusing and there, you know, people look at it and say, well, look, why, why aren't we putting our own people to work? Right. And why do we have so many people that are homeless and on the streets?

[00:34:34] They're the problems are almost not. Equatable, but they're problems that need to be thought about. Yeah. And. I mean. Fundamentally. Rugged individualism does not scale. And when you leave everyone to their own devices and you have many obstacles and barriers for many people to make it just basic needs.

[00:35:04] This is what happens. Yeah. It's an interesting, interesting topic. I don't know that I want to get. Try to figure it out. It seems complicated. It is. And there's so many moving parts. Right. I mean, it's just. Exactly. Exactly. It's not. Nothing is ever as simple as it seems. I've. Over the course of my career, I've tried to jump into too many problems thinking, oh, why can't we just knock this out? And you get in there and you're like.

[00:35:34] Okay. Right. Right. You need some more time. Yeah. Well, because because change management is hard. It is. Culture is hard. And those are the things that are necessary to make these kinds of changes. But but we're not ready. Yeah. Well, we're still we're still evolving. Yes. Yes. So, Heather, this has been really fun.

[00:36:03] What's is there one thing you might lead the audience with today to kind of help them start to put some of this, particularly the pay transparency thing in perspective? Because, you know, if you are working on this problem, you have until sometime in 2026 to have a solution for it. Right. Well, the transparency stuff kicks in in June 26.

[00:36:28] And the reporting doesn't start until 2027 for the 2026 year. Okay. So you have a little more time, but not a lot. I mean. Yeah. No, no. And and really, whether you are affected by the EU law or you're in the US, pay transparency, it will be coming.

[00:36:53] And and so it's good to understand why people make what they make and have a an objective strategy and criteria around that. And and so we have to move away from sort of that ad hoc decisions and trying to sort it out with wage compression and the the guy that's been here 10 years that knows how to

[00:37:21] do everything, who's now making five cents more than the new guy that just came, you know. So so retention is going to be really important. And and recruiting is going to be really important. And so we're going to see these pay things work out because because business will require it.

[00:37:44] And so just get ahead of it now and start working on on your pay equity. And and I believe that if you do that work, that will help you move into the skills thinking about work and hiring and new career paths will open up. And, you know, there's there's a lot of of change that's possible.

[00:38:12] But but the important thing is to think about your business, what's good for your organization? What problems are on the ground there? What are your priorities? But compliance is always a good strategy. Yeah, I like that because there there's a thread, right, that runs through everything you do. And frankly, HR needs to stop trying to solve everything on their own.

[00:38:39] You know, look outside of your team to build a coalition to help you think about some of these problems. Right. Talk to your your in-house counsel, an employment attorney. Bring some other people in recruiting and in talent management and even outside of that in general management into the fold to talk about better ways to solve for some of these issues.

[00:39:08] Because a lot of times I think we in HR just feel like the weight is on us to solve the problem because we're the people people. Yes, exactly. Exactly. Exactly. Exactly. And we think that if we will get all the problems solved, then everything will be great and we can finally relax and be happy. Yeah. And I can tell you that never, ever works. Yeah. So pick what you're going to work on today. Yeah, I love it.

[00:39:38] Well, this has been this has been fun. I really appreciate you joining me today. Where can people find you? You mentioned your newsletter. Can you mention that again? I'd love for people to check that out. Salary.com. I post a link to the newsletter on LinkedIn. So you can find me on LinkedIn at Heather Bussing. All right. And I'm also on Blue Sky where I post some of my photography and make bad puns with friends. But I'll have to check that out.

[00:40:08] You're welcome to join in. Yeah, I'll definitely have to check that out. Well, this has been great. Just want to note, be sure to listen to Stacey and Cliff next week while they spill the tea on HR tech. Nice. I want to thank everybody. I want to thank our producer, Kelly Kelly at Brand Method Media Group. I want to thank our marketing team, Cindy and Summer, who do a great job of getting this out there to our audiences. And thank you for tuning in.

[00:40:35] Again, that's all the time we have for this week's episode of HR We Have a Problem. If you enjoyed the episode, you can subscribe to it on your favorite podcast app or leave us a review if you have a minute. You can also drop us a line or schedule a chat on the website. We'd love to hear from you and hear about what topics you want us to talk about. We will be back in two weeks with another episode of HR We Have a Problem. Thanks, everybody.

[00:41:01] Thanks, everybody.