How grading or job evaluation systems can help to fulfill employees’ right on information under the new Pay Transparency Act. spoke to hkp/// group experts Carsten Schlichting and David Voggeser.
Mr Schlichting, Mr Voggeser, the new legislation on transparent compensation structures – or the Pay Transparency Act for short – aims to promote greater wage equality between male and female employees. What does this mean for businesses?
Carsten Schlichting: At the heart of the legislation lies the right of individual employees to request information regarding the average salary of colleagues of the opposite gender in comparable positions, and what the company's process and criteria are for setting compensation levels.
David Voggeser: Companies, as employers, are now obligated to provide this information.
How do employees make a request for information?
David Voggeser: Employees must request the information in writing. Further an employee has to name functions with comparable tasks to their own within the company.
Carsten Schlichting: The Act uses "comparable tasks" as basis for deciding with which colleagues they should compare themselves to. In the case of companies that have collective wage agreements, "comparable tasks" are identified by looking at pay grades; employees of the opposite gender, who are on the same pay grade as the person making the request, form the comparison group for that person.
What is the position with staff who are not paid under collective wage agreements, and in companies with no such agreements?
David Voggeser: Here, the process is more complex. The Act defines "comparable tasks" as tasks that are the same or equivalent. It is down to the employee to indicate which activities are comparable to their own.
Do you expect information requests to function smoothly?
Carsten Schlichting: Unfortunately, no. We expect to see some problems, particularly when it comes to deciding which tasks are comparable. Part of the reason for this is that the Act places the responsibility for identifying those tasks on the employee, but employees lack an overview of the different functions within the company and how they are valued.
David Voggeser: We expect to see many employees using criteria such as job titles or number of years with the company as the basis for deciding what is comparable. However, two employees, both of them with the job title "Development Engineer" say, may have very different jobs within the company and may not be comparable at all.
What happens if the tasks chosen by the employee are not comparable?
Carsten Schlichting: If the company considers the tasks, selected by the employee, not to be comparable, it has to back this up with arguments. Here, it has to use the criteria stipulated in the Act, such as type of task, level of training required and working conditions.
David Voggeser: Furthermore, the company has to identify which tasks are in fact the same or equivalent and can serve as the basis for the employee's right to information.
That sounds like a lot of work. How can companies ensure an efficient process?
David Voggeser: What makes the right to information potentially so time-consuming for companies is the need to individually check which tasks are comparable. If the company does not have a classification system in place, this will need to be checked almost every time someone requests information for every function or task. Depending on how many requests are made, this could place a considerable burden on the compensation department.
Carsten Schlichting: In our view, a classification system in which all the different tasks and activities within the company are evaluated is an indispensable tool for dealing with individual requests for information.
What do you mean by a "classification system"?
Carsten Schlichting: Specifically, a job evaluation or grading system.
How can such a system help with information requests?
Carsten Schlichting: Evaluating or grading jobs creates a framework. The different activities within the company are assigned different values based on set criteria, transparently and logically. Companies can then use the framework to determine quickly whether the tasks listed by employee in the information request are actually the same or equivalent, and back up their view with detailed arguments.
David Voggeser: Naturally, companies can also use the grading system to make their own compensation structures and systems transparent and to check them against their own evaluations. This helps avoid any suspicion of discrimination with regard to pay levels arising in the first place.
The Pay Transparency Act comes into force shortly. Isn't it a bit late for companies to be thinking about introducing a grading system?
David Voggeser: No. Information requests can only be made six months after the law comes into force. That gives companies time to prepare themselves.
Isn't evaluating all the jobs in a company a complicated, time-consuming and expensive endeavor?
Carsten Schlichting: We often hear that from companies – especially companies in Germany's traditional Mittelstand. A lot of HR executives in companies with headcounts of 1,000-10,000 ask themselves if they really even need a grading system at all.
And do they?
David Voggeser: Grading systems and the information they provide on jobs are a very helpful instrument for many HR processes, not just for dealing with information requests. For example, they can be used to design consistent compensation packages, identify "mission-critical" positions within the company, define career paths and draw up transparent regulations about job titles and rights to company cars.
Carsten Schlichting: hkp/// group has developed an approach for building a grading system that is simple, intuitive and accurate. We also train our clients' staff on how to use the system. Our goal is to enable our clients to use the system on their own as quickly as possible. That also means limited costs for the company.

Mr Schlichting, Mr Voggeser, thanks you very much!
* Photo by Fabien Bazanegue on Unsplash