The UK has long viewed talking about salary in the workplace as taboo. However, as younger generations of workers emerge, their values of inclusivity, equality and transparency are challenging these views.
Pay secrecy has come under scrutiny by workers and the media for enabling pay disparity in the workplace. This criticism contributed to the enforcement of the Equality Act 2010. Under this Act, a provision places restrictions on pay secrecy clauses, making them unenforceable. This means that if employees do not abide by pay secrecy clauses within their employment contract, employers cannot pursue legal action against them.
Over the years, increased pressure for employers to be open about salary has resulted in legislation such as the New York City pay transparency law. This law will require employers to include a salary range in all job postings from 15th May 2022. It aims to help alleviate gender-based wage disparities.
Similarly, on International Women’s Day 2022, the UK government launched a pay transparency pilot scheme, to tackle the gender pay gap and break down barriers for women.
However, as attitudes and legislations across the globe are changing, organisations face pressure to adjust their pay policies for what may come. This leaves the question facing many businesses and HR teams…’How do I know the level of transparency best fit for my organisation?’
Where does the UK currently stand on salary transparency?
There are currently no laws in the UK that force businesses to share the salary details of their employees. However, there is a law that requires qualifying businesses to report their gender pay gap. The introduction of the pilot scheme suggests there may be a future legislation change.
Gender pay gap reporting
In April 2017, the Gender Pay Gap Information Regulations came into force, as part of the Equality Act 2010. Every year employers with more than 250 staff must publish their gender pay gap figures by 30th March the following year. This law was introduced to address the pay disparities between men and women by helping to identify and reduce gender pay gaps.
Pay transparency pilot scheme
On the 8th March 2022, the UK government announced that they will be launching a pay transparency scheme, set to last between six to 12 months. The voluntary scheme encourages organisations to sign up and display salaries in all of their job ads to help close the gender pay gap.
Ethnicity pay gap reporting
Proposals by the UK government to enforce ethnicity pay gap reporting were also put forward in 2021. This move was influenced by the mounting pressure on employers to tackle racial inequality in the workplace, highlighted by the Black Lives Matter movement. In 2020, large UK companies including ITV, Barclays, and RBS voluntarily began reporting their ethnicity pay gap.
So, how can organisations benefit from salary transparency?
Candidate attraction
On one end of the spectrum, disclosing the pay range or even the precise salary in job ads can attract more applications from the right candidates. By analysing Reed.co.uk data, we found that job ads that displayed a salary received 27%* more applicants than jobs ads that didn’t.
This suggests that more people are likely to apply for jobs that display a salary than those that do not.
Fairer negotiation, more diversity
Attracting and retaining a more diverse workforce is another huge benefit of salary transparency. In a recent survey**, we found that 54% of women feel uncomfortable talking about salary during the interview process. This means, displaying a precise salary – or at least a range, is essential in encouraging more people to apply for your roles.
Interestingly, 9 out of 10 people (90%) who negotiated the pay for their most recent job said they were able to increase their salary. However, men are 20% more comfortable discussing salary during the interview stage.
While men and women are equally adept at negotiating salary increases, the survey found that men were 14% more likely to secure an increase of £2,500 or more. These comparisons suggest a candidate’s starting pay is dependent on how comfortable they feel discussing salary with their potential employer.
Considering that over half of women (54%) do not feel comfortable discussing salary during interviews, they are already placed at a disadvantage when negotiating. However, by stating a salary in your job ad, you are providing them with a fairer chance.
Essentially, salary transparency on job ads can help your organisation achieve a more diverse workforce by levelling the playing field.
Employee motivation
While salary transparency proves to make an organisation more attractive to potential employees, there can be disadvantages. If unfair disparities appear in the pay data that is shared, there is a risk of employees looking elsewhere for work.
In fact, when we asked: ‘How would you react to finding out a colleague in a similar role was being paid more?’, 15% of people said they would look for a new role, and 5% said they would quit their job.
Furthermore, four out of 10 people (40%) told us that discovering this information would leave them feeling undervalued by their employer. Therefore it is critical to review your organisation’s salary data and work on a strategy for fairer pay before certain information is released.
On the flip side, pay transparency can increase the productivity of employees. One-third (33%) of 18 to 34-year-olds stated that career development is one of their top motivators. Therefore, having access to the salaries of more senior colleagues can motivate entry-level and junior employees to further develop their careers.
What can pay transparency look like?
You do not necessarily need to adopt an all or nothing approach toward pay transparency. The level of transparency you choose for your business can vary from limited, to partial or to full. Pay transparency can also be achieved through different factors, such as your job adverts, pay structure or workplace culture.
Here are some examples that show what each level of transparency can look like within different areas of your business:
Talking about salary in job adverts
No to limited transparency: You do not share any salary information on your job ads. Candidates will only be spoken to about the salary for the role, during the hiring process.
Partial transparency: You share, or are working towards sharing, the salary range on all job ads. The exact salary will be determined during the hiring process and is influenced by factors such as the experience of the candidate.
Full transparency: You share a precise salary on all your job ads. Candidates know the exact compensation on offer for a role before they have even applied.
Pay structure and progression
No to limited transparency: You do not have a formalised pay structure in place. Decisions surrounding what determines each employees’ salary or salary increase are at the discretion of their manager and employer.
Partial transparency: You have a data-based pay structure in place that is supported by market averages and performance measurements. The pay structure is communicated with new employees to show where their pay falls.
Full transparency: You have a data-based pay structure in place that is supported by market averages and performance measurements. You also have a pay policy that states employees must be shown wherein the pay structure their pay falls, how it is determined, and where it can go in terms of their career progression.
Talking about salary in the workplace
No to limited transparency: You typically only have conversations about salary during annual reviews or when initiated by employees.
Partial transparency: Your business ensures managers are trained to answer questions from employees surrounding their salary. Managers are also trained to initiate conversations about salary and performance with employees.
Full transparency: Talking about salary amongst colleagues is encouraged. Your business ensures managers are trained to answer questions from employees surrounding their salary. Managers are also trained to initiate conversations about salary and performance with employees.
The factors that help determine your choice
Now that you know how transparent different areas of your business are, how do you prepare for a more transparent future whilst deciding the best options for your business? Here are four questions you should ask yourself to help direct your level of salary transparency:
- What story do you want to tell?
Take a look at what competitors are doing and the standard approach towards salary transparency in your industry. Is your organisation looking to keep up with the market? Or do you want to have a first-mover advantage?
Understanding what story you want to tell through pay transparency will allow you to choose a level that best reflects this.
- What does your existing pay data look like?
Take a look at the data you currently keep track of. To achieve consistent and accurate records on what employees are paid, good record-keeping should be a priority.
Identify any weaknesses and develop a method for determining fairer pay. This will also help justify any differences that may arise.
- Which approach benefits your company culture?
It is a good idea to assess what level is reflective of your company culture. You can carry out an employee survey to find out exactly what salary data your employees want to know. This can help determine the best approach to take.
When changing pay transparency policies, be sure you hold meetings so that everyone is aware of what, when and how the information will be shared.
- What legal barriers are there?
Ensure you are aware of the exact information you can share, from a legal perspective.
Your obligations towards employees’ data privacy should take serious consideration and caution before disclosing their salary information to other employees.
What’s next…
Being transparent about pay can help your organisation build trust and strengthen the relationship with your employees. Ultimately this will enhance your brand and your business success. Transparency supports managers to have more constructive and concise career development conversations with their employees. This is crucial for retaining top talent.
The idea of talking about salary in the workplace is shifting. Potential laws surrounding salary transparency in the UK are being deliberated. If your organisation is not taking proactive steps to become more transparent about pay, you risk falling behind and having the agenda created for you via laws and regulations.
Having said this, there is no one size fits all when it comes to salary transparency. So, it is just as important to address other factors, such as what pay data do your employees want to know and what does your current pay data look like? This will ultimately support your business to find a level of transparency that works for you and your employees, to strike the right balance.
*Analysis of jobs adverts on Reed.co.uk during 2021.
** This online survey was conducted by Atomik Research and consisted of 2,008 adults in the UK (95% were employed and 5% were unemployed). This survey took place between the 4th – 11th of February 2022. Atomik Research is an independent creative market research agency that employs MRS-certified researchers and abides by the MRS code.
