Job Titles and Equal Pay: A Dangerous Shortcut
This week I am writing about something I see organizations struggle with as they work to comply with the EU pay transparency directive: the temptation to rely on job titles as the primary method to establish equal work.
And it looks like an easy shortcut: same title, same pay. But in practice, this approach creates more problems than it solves. Let me explain why job titles alone don’t help you establish pay transparency.
Why do organizations use job titles for pay comparison?
Job titles seem convenient: they are on the org chart and stored in the HR solution. They provide a quick, visible way to categorize roles. Many organizations assume that people with the same title must be doing substantially similar work.
I totally get the appeal. When you can use existing titles in your pay transparency effort, it requires minimal effort compared to running thorough job evaluations. It feels like a straightforward solution that HR teams can implement quickly across the organization. Plus, titles are already documented, everyone has accepted them, and you don’t require additional analysis or specialized expertise.
But while this approach seems simple, it might also create a problem with accuracy and fairness. Why?
Why are job titles unreliable for equal pay comparisons?
In most organizations I’ve worked with, titles are inflated and rarely consistently used between business lines. I’ve seen companies where a “Director” in one department might have three direct reports and limited decision-making authority, while a “Director” in another department manages thirty people and a multi-million euro budget.
Titles don’t reflect actual job content or responsibilities. They often stem from historical decisions, departmental conventions, or even negotiation tactics during hiring. They frequently fail to capture the complexity, responsibility level, or specialized skills required for the role.
Ask yourself: Does a “Senior Analyst” in finance have the same skills, education, and responsibilities as a “Senior Analyst” in marketing? The finance analyst might manage complex financial models and regulatory requirements, while the marketing analyst focuses on campaign performance and consumer insights. Different work, different skills, different market rates – but identical titles. And that means the same title does not indicate equal work or work of equal value.
What are the practical problems?
When you base equal work determinations on titles, you’re building your job architecture on a shaky foundation. You will likely encounter problems like:
• Inconsistent application: Employees with different titles performing substantially similar work might be placed in different job levels and pay bands. This creates potential for later discrimination claims.
• Difficulty explaining pay differences: When you need to justify why two people with the same title earn different pay and/or compensation, you’ll find yourself in a very difficult position. I always recommend that you can “explain why you pay what you pay” in objective terms.
• Organizational inflexibility: Teams might resist changing outdated titles because of concerns about pay implications, freezing your organization at a time when agility is crucial.
I recently worked with a tech company recently that discovered their “Software Engineer II” title spanned roles requiring vastly different skill sets – from basic feature implementation to complex system architecture. When employees learned about significant pay discrepancies through new transparency measures, the company couldn’t adequately explain the differences because they’d never documented the substantial variations in job content.
What should you do instead?
I’d recommend that you do not use titles at all, when you first evaluate jobs to establish equal work. Instead, describe roles in objective factors like:
- Required skills, knowledge, and competencies
- Scope of responsibility and decision-making authority
- Complexity of problems solved
- Impact on organizational objectives
- Required qualifications and experience
There are a number of job evaluation methodologies on the market. I recommend a point-factor approach. This method assigns points and a weight to each job characteristic. In this way, you ensure that jobs can be compared objectively, letting you properly define equal work. We also know that this is a method that stands up in court, should an employee file a formal complaint.
Keep in mind that the EU Directive specifically refers to “equal pay for equal work or work of equal value” – not “equal pay for equal titles.” The focus must be on the substance of the work performed, not the label attached to it.
How can you move away from title-based comparisons?
Start by conducting a thorough job analysis across your organization. First, decide what criteria are important to you: the directive does not prescribe what criteria you should use, and you have the freedom as an organization to determine what really matters. Document the actual responsibilities, skills, and requirements for each position. This doesn’t mean you need to abandon titles – they still serve important organizational and career development purposes – you just should not use them to establish equal work.
Implement a formal job evaluation system that assesses positions based on relevant factors for your organization. There are several established methodologies you can adapt, such as point-factor systems or market-based approaches.
Be transparent with employees about how roles are evaluated and how pay decisions are made. This helps build trust in the process and demonstrates your commitment to substantive rather than superficial compliance with the directive.
And perhaps most importantly: invest the time to do this properly. Yes, it is more work than simply grouping job roles by titles, but it creates a solid foundation for fair pay practices and reduces potential problems down the road.
What’s your experience with job evaluation systems? Drop me a comment below – I’d love to hear how you’re tackling these challenges in your organization!