Latvian employers are on the brink of major problems related to the introduction of the European Union Directive on pay transparency, which will lead to significant changes in salary policies and likely tough negotiations with employees.
The main goal of the directive is to promote equal pay for equal work and eliminate the gender pay gap. This seemingly innocuous directive essentially means that companies will have to negotiate with employees about their pay policies and publicly explain them, which many may fear.
In an ideal scenario, these negotiations could lead to more open and trusting relationships between management and employees, while in a less ideal scenario, they could result in mutual attacks, ultimately leading to increased scrutiny of job postings and employee transfers between companies.
According to this directive, EU businesses will be required to exchange information about salaries and take action if the gender pay gap exceeds 5%. If a report shows that the pay gap exceeds 5% and cannot be justified by objective, gender-neutral criteria, companies will have to take action by conducting a joint salary assessment in collaboration with employee representatives.
The Ministry of Welfare is preparing rules on how businesses will need to report on compliance with this EU directive - the rules are expected to be developed by May 1, 2027. Employees are expected to speak more openly and loudly about salary issues, asking employers on what principles the company sets salaries and whether they are fair compared to the salaries of other employees - this was already pointed out last year by Anta Pranevica, a board member of the consulting company "Figure Baltic Advisory."
"Today, employers can analyze their compensation policies, understand the principles of salary determination, and think about what answers they will give to their employees," she added.
