While the Equal Pay Act has been in place in the UK since 1970, the gender pay gap persists. Claims of gender pay disparity go well beyond just speculation – the data speaks for itself.
In fact, the UK experienced the largest annual fall in rankings in PWC’s Women in Work Index in 2023. The Office for National Statistics Annual Salary for Hours and Earnings published in November 2023 found that the average pay gap for men aged between 50 and 59 in full time work is 21% higher than for women of the same age.
Mirroring the global landscape, UK organisations are also still struggling with a wide ethnicity pay gap – among UK-born workers. Black employees earned 5.6% less than white employees, according to figures from the Office for National Statistics.
Lack of clarity disempowers
All too often, pay decisions within an organisation are managed in silo, with little to no transparency between employer and employee.
This lack of clarity across key stakeholder groups of how pay is determined not only impedes pay equity progress but disempowers employees themselves.
All too often they are left frustrated without any understanding of how their own pay is determined, and even more-so lack of clarity on skills and effort needed to earn higher wages.
Removing barriers
In Spring 2022, the UK Government launched a pay transparency pilot scheme to close the gender pay gap. Participating employers would include salary ranges on job adverts and not ask applicants to disclose their salary history. The goal was to remove the historic biases and systemic barriers standing in the way of fair pay among all individuals.
However, this scheme was dropped last year, a move which drew criticism from unions and equality campaigners. They said it represented another missed opportunity to make a step towards pay transparency legislation.
With just half (49.7%) of firms including salary details on all of their job ads, according to research by XpertHR, companies are missing out on the benefits that pay transparency can bring.
The first crucial step … is to conduct a thorough audit of the organisation’s current compensation practices
How and why should you implement pay transparency?
Wage discrepancy limits a business’s ability to attract and retain talent, undermines employee relations and diminishes its wider reputation. However, organisations with pay equity and transparency have a real competitive advantage by attracting and retaining top talent and building a collaborative, inclusive and high-performing culture.
Before making pay data available to employees and the public, the first crucial step for HR professionals and other decision makers is to conduct a thorough audit of the organisation’s current compensation practices.
A pay equity analysis can identify potential pay disparities based on gender, race or other demographic factors, allowing leaders to take corrective action.
Levels of transparency
Organisations should also define what level of transparency they aim to achieve. This could range from transparency about the salary bands for each position to more detailed information about how individual compensation decisions are made.
This may seem like an intimidating and complicated process, but there are specialist HR products that can streamline and automate the process by using the latest and most accurate market data.
The software can help businesses create and optimise their pay structures based on their reward strategy and business objectives. This allows leaders to measure, achieve and sustain long lasting fair pay by identifying pay gaps and modelling scenarios to remediate them.
A key component of pay transparency is establishing salary bands or ranges for different job roles
Next steps
Once any discrepancies have been identified, HR leaders can focus on developing a clear and consistent compensation philosophy that outlines how the organisation approaches pay decisions, including factors like market rates, individual performance and the company’s financial position.
A key component of pay transparency is establishing salary bands or ranges for different job roles, whether for a new hire or a current employee. By clearly defining the compensation structure, businesses can minimise the ambiguities and misconceptions around pay.
For employees, having insight into these ranges allows for more informed career planning, enhancing overall job satisfaction and engagement.
It’s also important to consider how transparency fits into the general pay philosophy. This includes factors influencing pay decisions and the level of transparency employees can expect regarding salary ranges and compensation criteria.
Getting the message out
There is a strong demand for transparency from employees – according to XpertHR and Executive Networks research, a total of 52% of HR and business leaders acknowledge that employee expectations drive the push for pay transparency.
Here are some key steps to communicating your pay equity goals across the organisation, to demonstrate your commitment to your employees and the wider market.
- Policies should be laid out for all stakeholders
And leaders must actively champion pay transparency’s benefits on the organisation’s culture, equity and employee trust. Pay equity should be treated as another formal business strategy, as it ultimately impacts the business overall.
- Employees should feel comfortable discussing compensation and career progression with line managers
Creating a culture of true transparency requires regular one-to-one and team conversations. HR can help ensure these conversations reach their goals by providing managers with data points such as salary ranges and performance pay criteria.
- Organisations should offer regular training programmes on fair pay practices for line managers and HR personnel
Both with regards to decision making and communication strategies.
A total of 52% of HR and business leaders acknowledge that employee expectations drive the push for pay transparenc
Transparency drives accountability
While pay equity and transparency will no longer be a legal requirement under UK law, it remains a business imperative and an opportunity to differentiate an employer from its competitors.
Data and analytics are central to understanding and addressing pay inequities and achieving greater pay parity and benchmarking tools are crucial in establishing a cohesive pay philosophy.
However, pay transparency remains a collaborative effort across the organisation, and leaders must set the tone by signalling its importance to the company and demonstrating a commitment to fairness, equity and openness.
