Pay transparency and process digitisation HR: EU Directive 2023/970 as a lever for organisational transformation

In the course of the workshop 'HR solutions and tools to respond to the EU pay transparency directive'promoted by the HR Innovation Observatory of the Politecnico di Milano, we proposed a clear reading: the EU Directive 2023/970 is not a mere regulatory compliance. It is a powerful catalyst for organisational transformation. For this reason, our intervention started from the Directive in its Community formulation, and not from the preliminary national proposal. The reason is simple: the European source defines a structured, coherent legal framework that can already be fully integrated into corporate organisational systems. Working on this basis means building solid models that can also be defended in case law, and not merely chasing after partial interpretations.

Which corporate function is really involved?

On a first reading, the directive appears to be a Payroll matter. On a second analysis, it appears more consistent with Compensation & Benefits. But an in-depth reading leads to a different conclusion: the function really involved is theOrganisation.

The Directive deals with:

• Work design
• Structuring of positions
• Classification Systems
• Change management
• Organisational culture

The principle of 'work of equal value = equal pay' forces companies to make a cultural leap: from generic role descriptions to the structured design of the organisational positions.

It is no longer enough to answer the question:

"What does this person do?"

Objective and measurable answers must be given to:

"What is the organisational value of this position?"

Professional vs. organisational position: the correct level of analysis

One of the central issues addressed in the workshop concerns the distinction between:

• Professional figure → useful for external equity analysis
• Organisational position → indispensable for internal equity analysis

The professional figure is a broad and comparative category. It is not sufficiently granular to analyse internal differences or to support robust statistical models. The organisational position, on the other hand, represents the correct level of analysis because it allows us to:

• Identifying objective and gender neutral characteristics
• Applying linear regression models
• Using the Oaxaca-Blinder decomposition model
• Constructing defensible statistical analyses

If we are serious about applying the EU Directive 970/2023we must shift the analytical centre of gravity to the position.

The role of HCMs: evolving the concept of 'position'

I HCM systems already allow for the management of organisational positions. However, in order to respond in a structured way to the directive, the model needs to be evolved.

In our approach, each position is defined through four dimensions, consistent with European criteria:

1. Role purposes - strategic contribution to corporate objectives
2. Autonomy and responsibility - decision-making level and impact on results
3. Required skills - knowledge, skills, experience
4. Working conditions - operational context and environmental complexity

Each attribute is assigned a score. The sum determines the organisational weight of the position. This makes it possible to transform a qualitative concept into a quantitative variable, the basis for advanced statistical analysis.

From census to clustering: building the internal labour market

Once the positions have been defined, clustering algorithms (e.g. K-means) can be applied to identify homogeneous groups of organisational complexity.

The result is the construction of a internal labour market by clusterwithin which it is possible:

• Analysing pay distributions
• Check internal consistency
• Identifying possible distortions
• Applying regression models to identify unjustified gaps

On each cluster, it becomes possible to determine the correct wage positioning and isolate any differences not explained by the objective variables.

The Oaxaca-Blinder model: isolating the real gap

The Oaxaca-Blinder model allows the pay gap between groups (e.g. men and women) to be decomposed into:

• Part explained by observable characteristics (experience, skills, responsibility)
• Part not explained (potential area of discriminatory risk)

Variables considered include:

Level 1 - Basic

• Job grade/cluster
• Headquarters
• FTE
• Type of contract

Level 2 - Skills and performance

• Seniority
• Performance over the last 3 years
• Skills detected
• Qualifications

Level 3 - Strategic Responsibilities

• Managed Budget
• Resource management
• Managing fragile resources

To these are added dummy variables with a multiplier effect (certifications, delegations, management career vs. individual contributor, substitutability rate).

This approach allows Compensation Managers to move from a defensive to a proactive and data-driven logic.

Compliance Dashboards and Bias Management

The Directive requires specific indicators and regular reporting. But the real value is not in the report: it is in the continuous monitoring.

Through dedicated dashboards it is possible:

• Monitoring regulatory KPIs in real time
• Highlight pay gender gaps above the 5% threshold
• Analysing bias in remuneration policies
• Identifying inequalities in career opportunities
• Supporting the preparation of non-financial statements

Compliance must not be an annual event. It must become a structural process.

Towards natively compliant systems

The real transformation occurs when:

• La organisational design is structured
• La measurement is objective and statistical
• La compliance is integrated into processes

It is not a question of adding a control layer afterwards. It is about designing HR systems that are natively compliant. And that is exactly what the Organisational Positions Module of Alveria:

• Access to the position's cluster
• Automatic highlighting of the pay gender gap
• Calculation of Deviation on Total Compensation
• Reporting anomalies above the regulatory threshold

EU Directive 2023/970 is not just a regulatory deadline.

It is an opportunity to:

• Strengthening the credibility of the remuneration system
• Making organisational value management objective
• Integrating advanced analytics into processes HR
• Driving structural cultural change

If you wish to learn more about how the Organisational Positions Module can support your company in building a natively compliant system, please contact us for a dedicated in-depth session.

Request a customised demo of the module Organisational Positions