The requirements of the EU's payroll directive, which will enter into force nationally by June 2026 at the latest, will bring significant changes to the daily lives of businesses. Although the deadlines may seem far away, our experts say it would have been a good idea to start preparing now.

What does the pay equity directive mean?

The directive sets requirements for recruitment practices, internal pay practices and reporting obligations when certain staffing levels are exceeded. Employers will be required to disclose the salary or wage rate payable for the job in job advertisements or otherwise before the interview, which will bring changes, especially to the Finnish recruitment culture where salary has traditionally been discussed only at the end of the recruitment process. In addition, access to salary information for employees will be improved: every employee will have the right to know how their salary is set and how it compares with other salaries in similar jobs. A clear and transparent pay system will improve organisational climate and employee engagement.

The directive does not mean that everyone's wages will be made public. Instead, employers have an obligation to ensure that pay is set fairly and based on objective, gender-neutral criteria such as job requirements, qualifications and level of responsibility.

How to prepare for the Wages and Salaries Directive?

1. Start by taking stock of the current situation

The first step is to find out whether your organisation's pay system is sufficiently transparent and fair. Evaluate your pay policy in relation to the market. Is everyone aware of the general principles and practices of how employers assess employees' skills and performance? Conduct a comprehensive pay survey and check for unjustified pay differentials. So-called "pay gap". So-called "contractual wages" are not justified at present and will not be in the future. Evaluate the job requirements and take into account any TES provisions. A pay survey as part of a gender equality plan will help identify the need for change and provide a good basis for developing a pay system.

2. Update your recruitment practices

Updating recruitment processes is an important part of the preparation. Preferably, start announcing starting salaries or salary ranges already in job advertisements. This not only meets the requirements of the Directive, but also helps to create a transparent employer image. It is also a good idea to ensure that job titles and salary criteria are gender-neutral.

3. Draw up role descriptions and salary criteria

The assessment of job requirements is at the heart of the directive. Start by drawing up role descriptions for each position. Clearly describe what is required for different roles and define the pay criteria for determining pay for the same or equivalent work. A breakdown of salaries by job title is not sufficient. Objective and transparent criteria, such as performance, skills or experience, reduce misunderstandings and increase trust in the workplace. Every employee has the right to know what factors determine their pay and how they can influence it. As such, the Directive does not prevent different pay for people in the same position.

4. Eliminating unjustified pay gaps

If a pay gap of at least 5% between women and men is found for those doing the same or equivalent work and no justification is found, the pay gap must be closed within 6 months or a pay slip must be drawn up.

an action plan to remedy the situation. In our experience, there is often a justifiable reason for pay differentials that can withstand the light of day, but the problem is that the criteria for determining pay are not transparent within the organisation. As such, it is perfectly acceptable to pay, for example, a self-motivated and productive employee a better salary than another unproductive employee doing the same job. It would be unfair if the employer were obliged to pay these employees the same wage and their stretch, performance and flexibility could not be reflected in their pay at all.

5. Prepare for salary reporting

The Directive imposes reporting obligations, especially on larger organisations. Companies with 100 or more employees will have to report regularly on pay differentials and the reasons for them. It is therefore worth starting early to update data collection systems and review practices. This will ensure that all the necessary information is available and easy to report.

6. Briefing front-line staff for salary discussions

Front-line staff are required to be more familiar with the functioning of the pay system and to be able to justify pay differentials in a transparent and fair way. Pay discussions will certainly also increase as workers' rights to information about their own and others' pay improve. To support these discussions, front-line workers need sparring and accurate information.

Summary: NOW is the time to act

The Pay Transparency Directive offers an opportunity to make an organisation's pay systems and culture more transparent. Although there is still some time before the national entry into force of the obligations imposed by the Directive, meeting these obligations requires careful preparation and often a lot of raw Excel work. A well-planned and timely change process will ensure that your organisation is ready to meet the new requirements and also to reap the full benefits of payroll transparency.

If you need help preparing or want more information on the implications of the Directive, we are here to help you. Book an appointment for a free initial assessment by contacting our experts!

VALO Partners Law Firm provides comprehensive, proactive risk management and acts as a partner in challenging situations such as change negotiations, termination of employment, collective bargaining, outsourcing, employment litigation and data protection issues. 

For more information about our services, click here.

- Alexa Kavasto, employment lawyer

At my first summer job at a Veikkaus kiosk, I was so bored that I kept buying Ace cards, which I scribbled away during the working day. The meaningless work was terribly exhausting. I think I ended up losing money from that summer job. I now realise that I must have suffered from the so-called bore-out phenomenon, which has recently emerged as a problem as significant as work fatigue. Bore out is the lesser-known equivalent of burn out, where prolonged stress is caused by the monotony of work. The symptoms are similar to burnout: apathy, cynicism, hopelessness and depression. Whereas burn-out is caused by an excessive workload, bore-out is caused by a lack of job content. Bore out can undermine work performance, work motivation and general well-being just as much as overwork.

The job of frontline staff involves managing employee motivation. Boredom is not just an individual problem, it can have a significant impact on the functioning of the whole organisation and the well-being of employees. When employees experience boredom, their work motivation decreases, which is reflected in the company's performance. 

The Occupational Safety Act requires taking personal characteristics into account

Boredom is personal and the law on safety at work requires employers to take into account the personal characteristics of the worker. The employer must take into account the work, working conditions, other working environment and personal conditions of the employee. Each employee has his or her own experience of which factors contribute to job satisfaction and which factors are perceived by the employee as motivational obstacles.

What can the employer do?

In our culture, it is much trendier to be busy and overworked than underworked and idle. As a result, it can be difficult for an employee to speak up in the workplace about the bore-out phenomenon. However, employers have a responsibility under the Occupational Safety and Health Act to also prevent bore-out by providing sufficient challenge and meaningful work for employees.

To prevent boredom, the employer needs to know the employee and the content of the work the employee is doing. Proactive measures, such as regular discussion and interaction, can help promote work performance and prevent boredom.

The 2022 amendment to the Collective Bargaining Act introduced the obligation of continuous dialogue, which requires employers to share information with staff on their prospects and financial situation in advance. As a lawyer, I have considered that a similar model could be introduced to combat burn-out and bore-out. Every employee has the right to feedback on the work they do. Without feedback, there can be no development. Employees should therefore be regularly consulted on how they feel about their work and be offered opportunities for training and professional development. This can motivate employees if they feel they are developing their skills and see new opportunities in their work. 

Employers should also ensure that employees have clear goals to work towards. Motivation is greatly enhanced if all employees understand what is being done in the workplace, what the work is needed to meet and what each employee's role is in the whole. By helping employees to see how their work relates to the wider organisational goals, they can feel that their work is meaningful.

VALO Partners advisory services

VALO Partners Law Firm provides comprehensive, proactive risk management and partners in challenging situations such as change negotiations, termination of employment, collective bargaining, outsourcing, employment litigation and data protection issues. Contact our experts!

For more information about our services, click here.

- Alexa Kavasto, employment lawyer

A job interview is not only about assessing the candidate, but also about creating an employer brand, where the candidate builds an image of the interviewer and the organisation. With tips from a lawyer specialising in employment law and a founding partner of VALO Partners, you can ensure that your recruitment process doesn't end in misunderstandings or a courtroom.

In this article, Alexa Kavasto of VALO Partners Law Firm gives practical tips on how to deal with underperformance.

Underperformance by an employee is a difficult issue, not only for the employee, but potentially for the whole work community. When an employee does not reach his or her full potential, it can affect the work atmosphere, the company's financial performance and customer satisfaction. For the frontline worker, the situation can be difficult because raising the issue can feel uncomfortable and the tools to address underperformance may not be in the manager's own toolbox.

During the probationary period, Matti has mostly been a bit of a work in progress. His motivation has been lacking, he doesn't get along with his colleagues and his work hasn't been done to a sufficient standard. The employer has therefore decided to terminate Matti's employment because of this. The probationary period is coming to an end, but Matti took sick leave in the last few minutes. He is not answering his phone or his messages, and the notice of the end of his probationary period has not been received.

Here's one example of a tricky probationary break situation our clients have encountered recently. In this blog, we have put together a concise information pack on the issues surrounding probationary leave that all employers should understand.