Towards pay transparency: The impacts of EU pay transparency directive on organizational dynamics - Interview study on the impact of pay transparency

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master_Kuusisto_Katariina_2024.pdf (881.01 KB)

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School of Business | Master's thesis
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Date

2024

Department

Johtamisen laitos

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Mcode

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mib

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en

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89 + 4

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Abstract

Pay transparency has become a key topic of discussion in the media and in the workplace, with the EU Pay Transparency Directive coming into force in summer 2026. However, there is a lot of uncertainty surrounding the directive, as talking about pay is still seen as taboo and pay policies are not very transparent in organisations. This uncertainty is reflected both in the way organisations prepare for the directive's entry into force and in the way employees react to it. The purpose of this study is to deepen understanding of the consequences of increased pay transparency in organisations in an environment of uncertainty. The research focuses on how the increase in pay transparency affects organisational dynamics, focusing on employee behaviour and internal dynamics of the team. The research method used was a qualitative interview study, in which four employees and four supervisors (N= 8) were interviewed about their views and experiences of pay transparency and the EU Pay Transparency Directive. The data was collected through thematic interviews in March and April 2024 and then transcribed. The findings were analysed using a data-driven content analysis and mirrored to the theoretical framework of the study. The interviews revealed that the increase in pay transparency evokes a wide range of emotions and reactions in employees, the most common being interest, uncertainty, envy and a sense of entitlement. In general, increased transparency was seen as a positive thing that in the long term could increase trust and fairness in the workplace. However, it was considered to bring about disagreements and conflicts within teams, as well as dismissals within the organization. Age, personality, gender and nationality are factors that are likely to influence reactions and attitudes to pay transparency. It was also found that there is still limited knowledge of the pay transparency directive, which can lead to misunderstandings, suspicions and mistrust at both organizational and team level. This study aims to complement the existing literature by exploring how pay transparency affects relationships within the organization, satisfaction with the organizational environment and individual behaviour. In addition, the research provides a foundation for future studies, opening up possibilities for new questions and research strategies.

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Thesis advisor

Katila, Saija

Keywords

pay transparency, EU pay transparency directive, uncertainty management theory, employee behaviour, organizational dynamics

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https://urn.fi/URN:NBN:fi:aalto-202408185494

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[gradu] Kauppakorkeakoulu / BIZ