Last week was Equal Pay Day. This is the day when, because of the gender pay gap, women overall in the UK stop being paid compared to men, highlighting the continued inequities in pay. Gender Pay Regulations have begun to lift the lid by requiring organisations to publish the data, however, many companies still have further progress to make on the topic of pay transparency. Innecto spoke about pay transparency at the CIPD and REBA conferences this month as more and more companies begin to wake up to the need to focus their attention on this topic.

The trend towards Pay Transparency is gaining traction and landmark pieces of legislation, including the EU Pay Transparency Directive, will apply different kinds of pressure as they come into effect. On a more practical level, we are also seeing a new generation of workers more inclined to demand openness and fairness.

There is no question that people - and companies - worry about Pay Transparency. They worry about the resentment and difficulties it can cause for morale if wider pay information is shared. There is also a fear that greater transparency leads to paying everyone the same, which might lead to businesses paying inflated salaries or losing a competitive edge. Similar to a reticence around Equal Pay Audits, many companies are nervous because they're not sure what they're going to find, and whether they can have confidence in their existing structures enabling pay transparency.

Transparency Readiness

Increasingly, what we've started to talk about at Innecto is the transparency-readiness of organisations. When a company says We want to be transparent, we're asking, What does that mean? How far do you want to go on that journey, and how quickly?

Pay Transparency is not black and white. Instead, companies need to identify the current level of transparency and the appetite to increase this. The following five statements provide an initial assessment of the current and desired position on Pay Transparency.

1. We have a basic pay framework that outlines pay bands, which are published in job adverts, but our staff probably have limited knowledge of how their pay is determined and how they can progress.

2. We have a job evaluation system to determine roles of a similar level that is linked to a pay structure. Staff understand how their roles are evaluated and how pay is determined. We publish a statutory pay gap report.

3. We benchmark our salaries against external market data and carry out equal pay analysis which means we can confidently justify any differences in pay and take action to address any variance.

4. We communicate a clear career progression pathway to all our employees, and they understand how their pay is determined and how they can progress. Our pay structures allow flexibility and are underpinned by robust market data.

5. We educate our managers and employees about how pay is determined. Pay progression is transparent throughout the organisation and our people feel comfortable talking openly about pay and equity.

Innecto supports various clients in reducing the gap between the current and desired position on Pay Transparency. There are some key foundation stones that companies can look at to lay the groundwork in this area. Our framework of questions helps business leaders and HR professionals identify the areas for improvement.

Laying the foundations

1. Comfort level - As HR professionals, ask yourselves whether you and your company leaders have the confidence and comfort to go transparent. For the vast majority, the answer is 'no'.

2. Cultural shift - Educate your leadership about Pay Transparency and what it means. This is a shift in mindset and culture and senior leaders may need time to adjust.

3. Could you defend your current approach? Question how your pay decisions are being made, and whether you could mount a robust defence of your current approach if needed. Ask how confident you are in the way you assess roles and whether you could benefit from equal pay audits if you don't do them already.

4. Comparable work - Scrutinise the systems you have in place for job architecture and evaluation. 'Comparable work’ is a key phrase in regulations such as the EU Directive and you need a way to assess roles that are doing the same thing, carrying out similar work or performing work of an equal value. If these concepts are alien, most likely you need help to navigate through them.

5. Draw up an action plan – Whether talking about comparable work strategy, gender equality measures or other DEI initiatives, going through this process helps you identify your current position, measure your internal appetite for transparency and set out the next steps, articulating the narrative, journey and timelines to leaders, managers and perhaps employees.

It is very difficult to identify an approach to Pay Transparency which works for every company. In most cases, it comes down to context, and having governance and structures in place that enable you to flex and achieve the right kind of transparency for you around pay decisions. Where there is an information vacuum around pay fairness, gender equality or other DEI measures, we find that staff and potential candidates will infer meaning and make assumptions. On the flip side, choosing to spell everything out can create issues if you are not ready.

There is also a generational shift at play here and much of the client work we are doing in this area is aimed at lower-down organisations, towards the under-40s. Facing an uphill battle in the housing market, these workers are hungry for career and pay progression and will jump ship if they're not able to see an upward trajectory. Typically, this generation also uses online tools like Transparency Street and Glassdoor and will infer meaning from data, much of which falls in the same information vacuum. But these people loom large in your short-term and long-term future so be ready to open up and talk about transparency, and your aspiration to achieve it.

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