Job Evaluation, Classification, And The Pay Transparency Directive: What You Need To Know

The Pay Transparency Directive will compel employers to ensure that pay decisions are made in an objective, consistent, and gender-neutral manner. For HR professionals, reward teams, and business leaders, a deep understanding of job evaluation - and complementary frameworks like job classification - is now essential. As many organisations may be navigating these requirements for the first time, building robust and transparent pay structures has never been more important.

This insight clarifies the concepts of job evaluation and job classification - explaining what they are, why they are increasingly important, how to implement them effectively, and the most widely used methods and alternatives. It also highlights key compliance obligations under the Pay Transparency Directive, providing practical guidance for organisations committed to fairness, defensible pay decisions, and alignment with leading practices.

The Pay Transparency Directive and job evaluation

The Pay Transparency Directive places new obligations on employers to ensure that pay practices are transparent, fair, and defensible. Under the Pay Transparency Directive, employers must:

• calculate, report and justify gaps by “category” i.e., those performing “equal value” work (discussed further below); and
• provide employees with information on the average pay of colleagues in their “category”.

Without a robust methodology for identifying equal value roles and the “categories” of employee, employers will not be able to comply with the swathe of new rights and obligations that the Pay Transparency Directive creates. Job evaluation is the gold standard needed to fulfil these obligations.

What is job evaluation?

Job evaluation is a systematic, evidence-based process for determining the relative value of roles within an organisation. Job evaluation focuses on the job itself: the duties, responsibilities, required skills, accountability, and organisational impact - rather than the individual performing it. By removing the person from the equation, job evaluation in the way described above ensures decisions are objective, consistent, and defensible, supporting internal equity, strategic pay structures, and, importantly, Pay Transparency Directive compliant.

 A robust job evaluation framework compares roles based on clearly defined criteria - such as knowledge, problem-solving, decision-making responsibility, and organisational impact - rather than individual performance.

Job evaluation and equal value

A key purpose of job evaluation is to identify and group jobs of “equal value” across an organisation, not just within a single function. This principle reflects the foundation of equal pay for work of equal value, which lies at the heart of the Pay Transparency Directive. 

By assessing roles against objective, gender-neutral factors, employers can ensure that roles with comparable knowledge, responsibility, and impact, even in different functions, are treated consistently in terms of pay and grading.

This approach addresses a common misconception (particularly among employers based outside the EU, where concepts like “equal value” are entirely new) that equal value only applies within a single function. The Pay Transparency Directive requires a cross-functional assessment: it's not just comparing apples with apples, but apples with oranges, pears, peaches, and mangoes. Crucially, and also an area where misunderstanding occurs, this concept of equal value should not be confused with market pay equivalence. For the purposes of the PTD, the “value” of a job isn't what it's paid. Two roles may attract very different salaries in the market, but what matters is analysing and scoring the requirements, responsibilities, and demands of the job itself, not what similar roles are paid externally.

Practical example of equal value

Consider a cross-functional scenario: a Senior Marketing Manager, a Sales Manager, and a Finance Manager each hold significant team leadership and budget accountability. They may all lead teams, manage budgets, and make significant operational decisions. While their work differs, a robust job evaluation process can show that their overall organisational contribution and level of responsibility are comparable. These roles can therefore be grouped into the same pay level (though not necessarily the same band within that level), ensuring fairness, equity and defensibility across functions. 

Using a ‘point-factor' job evaluation method (see below), their roles are assessed against factors such as knowledge/know-how, problem-solving, responsibility, and organisational impact. Despite differing day-to-day work, the job evaluation process may place all three roles in the same pay band, reflecting equal organisational value.

This demonstrates how job evaluation frameworks allow employers to group equal-value jobs across functions, maintain internal consistency, and produce a transparent, Pay Transparency Directive-ready audit trail. 

A step-by-step guide to conducting job evaluation

Implementing a job evaluation process in HR requires careful planning. Here's a recommended step-by-step approach:

1. Establish scope and governance

Decide which geographies, functions, and roles to include. Form an evaluation panel, a methodology of how the process is going to proceed (including timelines if possible), define roles, conflict of interest rules, and set moderation and appeals processes to maintain consistency.

 2. Define factors

Defining factors is a critical step in any job evaluation process, as these are the criteria against which roles are assessed and compared. The Pay Transparency Directive explicitly identifies four core factors that employers should use to establish gender-neutral pay categories:

1. Skills – the competencies and expertise required to perform the role effectively;
2. Effort  – the level of physical or mental exertion needed to carry out responsibilities;
3. Responsibility – the degree of accountability for outcomes, decision-making, or resources; and
4. Working conditions  – the environment, hazards, or constraints under which the work is performed.

These factors form the minimum floor for Pay Transparency Directive compliance, ensuring that pay comparisons are based on objective, job-related criteria rather than individual characteristics or historical precedent.

Many organisations also consider additional factors to improve accuracy and promote internal equity. These often include:

• Knowledge/know-how – depth and breadth of technical or professional expertise;
• Problem-solving – complexity and scope of challenges the role is expected to address;
• Impact – the influence of the role on business outcomes, strategy, or organisational performance;
• Communication – the level of interaction, negotiation, and stakeholder engagement required; and
• Decision-making authority – autonomy in setting priorities or allocating resources.

Importantly, the Pay Transparency Directive does not prohibit  the use of additional factors, provided that any supplementary criteria are objective, gender-neutral, and consistently applied across the organisation and that they are genuinely supplementary to (and not in place of) the four core factors described above. 

Employers preparing for the Pay Transparency Directive and who have an existing job evaluation framework should ensure that the factors they have used are broadly aligned with the Pay Transparency Directive requirements to maximise their compliance. Those approaching job evaluation for the first time may therefore want to combine the four Pay Transparency Directive factors with other factors relevant to their organisation and industry to capture the full scope, complexity, and value of different roles. 

When drafting factors, use plain-English definitions with level descriptors, avoid ambiguous or subjective language, and ensure the criteria are applicable across job families and functions. This approach enhances auditability, defensibility, and internal equity, while remaining compliant with the Pay Transparency Directive.

3. Choose a method

When implementing a job evaluation framework, employers have several methods to choose from, each with its own strengths, limitations and suitability for Pay Transparency Directive compliance. Selecting the right approach depends on factors such as organisational size, complexity of roles, available resources and the level or precision and auditability required. A range of methods, along with commentary on each, it outlined below.

• Point-factor and Hay/Guide Chart: Systematic, auditable and Pay Transparency Directive-suitable but require time and training.
• Market pricing: Quick but may perpetuate inequities if used alone.
• Hybrid:  Balances defensibility and market alignment but adds complexity.

4. Write standardised job descriptions

Focus on the role, not the individual. Include purpose, key responsibilities, decision rights, scope, and skills required. Remove personal identifiers and performance language to reduce bias.

5. Score and calibrate

Blind scoring can help reduce unconscious bias. Calibrate scores across functions and geographies to maintain consistency. Document any adjustments made during moderation.

6. Map to levels and pay ranges

Convert total scores into bands or grades. Define mapping logic, pay range architecture, and progression rules. Align with compensation philosophy and total rewards strategy.

7. Document everything

Maintain a complete audit trail: factor definitions, job descriptions, weightings, raw scores, moderation notes, mapping rules, and exceptions (together with justification for any such actions where necessary) but also bear in mind that any documentation may need to be disclosed at some point in the future.

 8. Set governance and review cycle

Define exception policies, appeals pathways, and periodic reviews to capture organisational changes, role evolution, and market trends. A disciplined review cycle ensures your framework remains robust and Pay Transparency Directive ready.

Job evaluation challenges and pitfalls

A robust job evaluation framework is essential for achieving pay equity and demonstrating compliance with the Pay Transparency Directive. Yet even the best-designed job evaluation process can falter if not implemented carefully. Common pitfalls include bias (both conscious and unconscious), inconsistent governance, and overreliance on market benchmarks, all of which can undermine the fairness and defensibility of pay outcomes.

In this section, we outline where job evaluation adds the most value, where it tends to go wrong, and how to ensure your approach remains transparent, consistent, and compliant.

Where job evaluation goes wrong

Even the most carefully planned job evaluation process can stumble without the right structure and discipline. One of the most frequent missteps is confusing the job with the person doing it. Evaluating based on performance, tenure, or personal style introduces subjectivity, undermining the purpose of a role-based framework.

Another challenge lies in poorly designed or  over/under-weighted factors. Overemphasising certain criteria - such as revenue generation or team size — can unintentionally diminish the perceived value of roles in HR, administration, or care-related functions, where contributions are less directly tied to financial outcomes. This can perpetuate gender bias and weaken compliance with equal pay job evaluation standards.

Relying too heavily on market pay data is another pitfall. While benchmarking helps maintain competitiveness, it often mirrors existing market inequalities. It can also lead an employer down the path of pay equivalence which, as indicated above, is not what is required under the Pay Transparency Directive. Without a strong internal framework, employers risk importing external inequities rather than correcting them. Similarly, ad hoc pay decisions or undocumented exceptions made under hiring pressure can erode transparency, making it harder to prove that pay outcomes are based on gender-neutral, objective factors.

Best practices for a defensible job evaluation framework

Avoiding these pitfalls requires structure, governance, and transparency. The most effective job evaluation methods are grounded in role-based, gender-neutral factors that are applied consistently across all job families. Employers should maintain a clear audit trail — including job descriptions, factor definitions, scoring rationales, and calibration records — to evidence fairness and compliance.

Adopting a total reward perspective is equally important, and something that the Pay Transparency Directive demands given the very broad definition of “pay”. This means evaluating not just base pay but also allowances, bonuses, and benefits will ensure that gender-neutrality extends across the full compensation package. Regular moderation and calibration sessions help maintain alignment across functions and geographies. 

Regular reviews help ensure the framework adapts in step with organisational change — a crucial aspect of its ongoing relevance. We have seen employers that have implemented a robust job evaluation some years ago but failed to make it a “living” thing. They have failed to accurately and precisely assign new roles that have arisen, causing potential equal pay and equal value issues.

Ultimately, successful job evaluation is as much about governance as methodology. Consistency, documentation, and transparency form the foundation of both Pay Transparency Directive compliance and genuine pay equity. When managed well, job evaluation reduces risk, enhances transparency, improves organisational integrity, and strengthens employee trust in how pay decisions are made.

How can less well-resourced employers fulfil the Pay Transparency Directive's requirements?

A full-scale job evaluation is the gold standard. This is the best way to ensure that equal value issues are rooted out, and there is complete transparency over how much each role is worth. 

But carrying out a large-scale evaluation can be a massive piece of work, requiring significant investment of both time and money. While this may be (but not always) within reach of larger organisations with well-resourced HR teams, this is a bigger challenge for those with less well-resourced HR teams across the EU. 

Limited resources, fewer employees, and less specialised HR expertise (or none at all) can make full point-factor job evaluations difficult. Without a dedicated HR team, designing gender-neutral criteria, maintaining audit trails, and ensuring consistent governance may feel overwhelming.

Despite these constraints, those less well-resourced businesses can still look to achieve Pay Transparency Directive compliance through pragmatic approaches. Job classification offers a faster, simpler method which is still approved by the Pay Transparency Directive: roles are grouped into broad, objectively defined levels, providing a clear and defensible structure. Targeted job evaluation can be applied selectively to pivotal roles where pay risk or market pressures are highest. Even basic documentation (standardised job descriptions, clear factor definitions, and placement rationales) creates a robust audit trail.

So, what is job classification? And how does it differ to job evaluation? 

What is job classification?

The key difference with a classification approach to a more traditional evaluation is that classification focuses on grouping roles into broad levels or categories, rather than assigning precise point scores to every factor. Instead of precisely scoring and measuring each element of skill, effort, responsibility, and working conditions in detail, classification applies clear, gender-neutral descriptors to define hierarchy and pay boundaries. Classification is a method that employers of all sizes/resources can deploy. But because it is quicker and simpler, it might be of particular help for those employers striving to meet the Pay Transparency Directive's requirement for objective, gender-neutral job categorisation without building a full analytical evaluation system.

In practice, for example, a smaller, less well-resourced organisation might start by defining a number of job levels across all departments (this might be using names such as entry, professional, senior, manager, and leader, or a numbering system) and setting transparent pay bands for each. As time and resources allow, and necessity requires, they can layer in more detailed evaluation for complex or high-risk roles, such as those where equal-value comparisons are most likely to arise. This hybrid approach balances compliance with practicality, enabling even micro-enterprises to demonstrate that pay outcomes stem from objective, consistent, and well-documented criteria.

Ultimately, the Pay Transparency Directive does not demand complexity, it demands clarity and consistency. Whether through simplified job classification or selective job evaluation, small employers can show that they have applied a structured, gender-neutral rationale to determine pay, meeting both the spirit and the letter of the Pay Transparency Directive. 

For smaller employers, a complex approach is often unnecessary. Just as a modest detached house requires only basic foundations - a solid concrete slab reinforced with a touch of rebar - HR structures can be similarly streamlined. A well-designed job classification framework, paired with selective evaluation of key roles, can offer sufficient support. Provided it is level, secure, and thoroughly documented - with clear, objective, and gender-neutral criteria, standardised role descriptions, and a consistent audit trail - this simpler foundation enables transparent and defensible pay decisions under the Pay Transparency Directive, without straining limited HR resources.

Pros and cons of job classification: an alternative (and often complementary approach) to job evaluation

As mentioned above, job classification is a method of grouping roles into levels or categories based on broad, objective descriptors rather than forensically assigning detailed scores to multiple factors. 

It is often seen as a simpler, faster alternative to full job evaluation, and in many cases, it can be entirely sufficient to meet Pay Transparency Directive requirements when applied consistently and accurately.

Key advantages of job classification

Job classification has a number of key advantages:

• Speed of implementation:  Because it relies on broad categories rather than detailed point-factor scoring, classification can be rolled out across an organisation more quickly than a full job evaluation programme. This is particularly valuable in large or fast-moving organisations where time and resources are constrained.

• Clarity and transparency: Classification frameworks are easier to explain to employees, managers, and external auditors. Using clearly defined job levels and career streams makes it immediately obvious why one role is placed above another, supporting pay transparency and internal equity.

• Pay Transparency Directive compliance: If the descriptors and criteria for each level are gender-neutral, objective, and consistently applied, job classification satisfies the core principles of the Pay Transparency Directive. In other words, you do not need to use point-factor scoring for every role to comply — a structured classification framework can be enough, provided it is well-documented and defensible.

Limitations and considerations to job classification

While it can be effective, and can be a sensible pragmatic choice for many (particularly smaller) employers, there are some limitations to a job classification:

• Granularity:  Classification sacrifices some precision compared with detailed job evaluation. It may not fully capture nuanced differences between roles that have complex or highly specialised responsibilities.

• Scalability for complex organisations: In organisations with very diverse functions or highly specialised roles, relying solely on classification may leave gaps in internal equity analysis or make audit trails less robust under Pay Transparency Directive scrutiny.

• Ad hoc comparisons:  While comparing two or a handful of roles on a case-by-case basis can resolve immediate disputes, this approach is not scalable.  It lacks the structure, consistency, and documentation required for broader pay transparency or gender equity audits.

Best of both worlds? Hybrid approaches combining evaluation and classification

Many organisations adopt a hybrid model that combines the speed and simplicity of job classification with the precision of selective job evaluation:

• Use classification for broad levelling: Assign most roles to clear levels or grades using objective descriptors. This establishes a foundational pay structure and ensures Pay Transparency Directive compliance across the organisation.
• Apply targeted job evaluation: For pivotal roles (such as senior leadership, high-turnover positions, or roles where market pay pressures are high and the challenges to justify differences may be greater) use a point-factor or Hay/Guide Chart evaluation. This adds precision, defensibility, and auditability where it matters most.

A case study

A (hypothetical) technology company with 150 employees implemented a four-level job classification  framework across engineering, product, sales, and corporate functions. Most roles, including junior software developers, marketing coordinators, HR generalists, and customer support specialists, were assigned levels using broad descriptors covering responsibilities, required skills, and decision-making authority. This provided clarity for employees and managers, ensured internal equity, and created a defensible structure aligned with Pay Transparency Directive requirements.

For pivotal roles where pay risk or market pressures were highest, the company applied targeted point-factor job evaluations. These included senior AI engineers, lead product managers, and senior sales executives, whose responsibilities and compensation levels were critical to business performance. Factors such as technical expertise, strategic decision-making, team leadership, and market impact were scored, creating an auditable rationale for pay placement. Governance included calibration sessions across departments, documentation of scoring rationales, and a simple appeals process. The result was a transparent, consistent, and Pay Transparency Directive-compliant pay framework that balanced efficiency with precision while minimising administrative burden for a smaller HR team.

What employers should do now

1. Review current job categorisation and levelling.
2. Define gender-neutral evaluation factors.
3. Write standardised job descriptions.
4. Document scoring or placement decisions.
5.  Calibrate across functions to ensure consistency.
6.  Choose the right method: classification for speed,  selective evaluation for defensibility.
7.  Establish governance and a structured review cycle.

Following this roadmap ensures your job evaluation or classification framework is robust, scalable, and Pay Transparency Directive-compliant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.