2022 Annual Report 23 30% Club France Investor Group Background Mercer presented their pay equity analysis methodology, aiming to meet the regulatory requirements of Anglo-Saxon investors but also those of the European Directive on Wage Transparency. Although the Directive has not yet passed, it has been reviewed by the Committees for Women’s Rights and Employment of the European Parliament, and they propose lowering the threshold for application to companies with more than 50 employees (instead of 250) and the gender pay gap at 2.5% (instead of 5%). Learnings & Insights The reasons for pay gaps are diverse. It is crucial to isolate the impact of different factors to adjust for the pay gap that is due to gender or other unjustifiable reasons. This can be understood as a differentiation between the explained and unexplained gender pay gap. Only an unexplained gender pay gap is unjustifiable and therefore a problem as an unexplained gap is usually much lower than the explained one since it excludes factors such as experience, role type, performance, location etc. In France, the raw gender pay gap is 20% of which 10% remains unexplained by objective and legitimate factors. Today, companies still tend to prefer an internal evaluation of pay gaps so they have more control over the outcome. This must be interpreted as a lack of willingness to target this issue with the needed seriousness. However, increasing coverage of the topic is helping – especially in the U.S. and the EU. Mercer proposes a methodology based on an assessment of the state of play then extrapolates how the representation of women, at each level of the firm, would evolve if the historical trend were to continue. Each additional curve provides an approximation of the future representation if the rates of recruitment, promotion, and departures & resignations, one by one, were made comparable to those of men. Mercer has developed this methodology not only to support companies in their gender pay equality trajectory but for investors that want to assess the impact of their investments and report on the key gender equality indicators under the United Nations SDG 5. Franck Juvin , Principal, Client Manager Ayce Nisancioglu , Senior Diversity, Equity and Inclusion Consultant Mercer on Gender Pay Gap “Raw” Pay Gap “Explained” Pay Gap “Unexplained” Pay Gap = + How average or median pay differs between women and men How pay differs because men and women are in different roles or have differing amounts of labour market experience etc. Residual pay gap that cannot be explained and may be due to pay inequities Tips for the 30% Club France IG: three key/ critical questions we should ask companies when engaging on gender pay gap to make sure that we adequately cover the issue: 1. Our research shows that formal pay equity processes drive gender diversity. Is pay equity a part of your organization’s philosophy or strategy? What are your organization’s primary objectives for analyzing pay equity (legal; internal or external pressures; ensuring fair pay; attract/retain best talent)? 2. Pay differences are permitted but must be based on legitimate and objective criteria unrelated to gender such as an individual’s competence and performance. Can your organization explain their pay gap that is more than 2.5% with legitimate and objective criteria not related to gender? 3. Today’s employees have increasingly high expectations around pay transparency. Reassuring employees that they are being treated fairly in comparison to their peers can have a positive effect on job satisfaction, employee engagement, and productivity. Is pay transparency part of your employee value proposition strategy that helps you attract and retain top talent?