Salary transparency

Salary transparency is increasingly seen as a key factor in the drive for equal pay. On face value, it’s a simple concept; employers make it obvious what their workforce will be paid. However, the practice of salary transparency goes beyond simply stating a salary on all job adverts, for instance:

• internal salary transparency
• not basing an employee’s salary on what they were paid in a previous job
• the removal of pay gaps, for instance, between genders

All of these are relevant to the concept of salary transparency and factors that employers must consider if they wish to embrace this practice.

Is salary transparency enforceable in the UK?

No, there is no legal requirement for UK employers to adhere to salary transparency. This means that they don’t have to include a salary in their job adverts and descriptions or have a pay structure in place.

However, the Equality Act 2010 requires that businesses with more than 250 employees provide salary information in order to report on gender pay gaps. The Equality Act protects individuals from suffering discrimination, whether in the workplace or other walks of life. It guards against discrimination based on protected characteristics such as age, gender, disability, or religion. Employers may also contribute to ethnicity pay gap reporting, but this isn’t a mandatory requirement.

What is encouraging is the launch of a pay transparency pilot in March this year by the UK Minister for Women, Baroness Stedman-Scott. The pilot aims to close pay gaps and improve employment opportunities for women. Businesses participating in the pay transparency pilot agree to state a salary in every job advert they place and refrain from asking candidates about their salary history. This latter element means that employers won’t base a new employee’s salary on what they had been paid in their past employment. Instead, that employee will simply receive the stated salary for the job.

In return, the UK Government has promised to work with employers to develop a pay transparency best practice and procedures that all businesses can instigate.

What are the benefits of salary transparency?

Knowing what you’ll be paid before you apply for a job has to be a good thing but what is the full extent of the benefits of salary transparency?

the full extent of the benefits of salary transparency?

  For employers

The benefits of salary transparency for employers include:

• having a method to measure their competitiveness as an employer in their industry or sector – how effectively can they attract candidates in comparison to their competitors?
• targeting and attracting the right candidates and therefore reducing the time, effort, and expense involved in the processing of candidates who want a higher salary than is available for the vacancy
• increasing the number of job applications – research conducted by Atomik Research has shown that job adverts featuring a salary receive 27% more applications than adverts that do not state a salary.
• employees feel fairly treated because they know they are receiving the same pay as colleagues carrying out the same job, regardless of gender or age, hence increasing employee engagement, feelings of inclusivity, and staff retention

  For jobseekers and employees

The benefits of salary transparency for jobseekers and employees include:

• knowing that they will be paid a fair and competitive salary for the job because they can compare it with salaries paid by other companies for the same job
• knowing that they will be paid the stated salary and not have to negotiate a salary based on what they previously earned
• knowing that all employees in that job are paid the same, regardless of protected characteristics such as gender, marital status, or nationality
• a reduction in gender pay gaps – Canadian research concluded that salary transparency laws had reduced gender pay gaps by 20-40% in Canada.

What are the challenges of salary transparency for employers?

For employers who embrace salary transparency, the main challenges are likely to be:

• the workload involved in instigating salary transparency policies and procedures, such as an equal pay policy and the creation of a pay structure
• maintaining salary competitiveness against job market averages and equivalent organisations
• finding new ways to reward employees other than with a pay rise
• bringing the salaries of existing employees into line with the new salary system

Wrapping it up

With the UK pilot underway, the chances that salary transparency will become a legal requirement in this country are looking up. There’s no avoiding the fact that instigating this new best practice will provide a new workload for employers, but this challenge is more than outweighed by the benefits to candidate recruitment and staff retention.