The EU Pay Transparency Directive came into effect in June 2023 and comes into force in 2026.
This means organisations with an operation in the EU have up to a year to ensure they have everything in place. The good intentions of the legislation are to ensure workers of all genders and backgrounds receive equal pay for work of equal value.
Although UK-only businesses are not directly within its scope, they will still be under pressure to be transparent on pay in order to stay competitive in the talent race. Communication is going to play a major role in getting that message across.
Why is strong communication so important?
Money is an emotive subject. Some people are happy for things to be shared, some less so. Where pay transparency has come into effect without the necessary frameworks, context and communications, it has created false expectations – even bitterness - and heaped pressure on managers.
Communicating pay transparency through pay cycle
1. Job evaluation and pay frameworking
Pay transparency starts long before the act of hiring or giving a promotion. To communicate effectively, you need to begin with clear and simple messaging around your job evaluation framework. This important exercise levels out and defines all the roles within your organisation - and the results do not need to be kept secret.
By sharing some, or all of, the findings and results in a way that employees can understand you can create clarity around their current roles and establish routes for career progression.
2. Pay auditing and reporting
Currently only companies of a certain size (250+) are required to publish their pay gap reports but any company moving towards Pay Transparency should be thinking very carefully about doing this, regardless of size.
It puts out a strong message internally and externally particularly when you can go beyond the headline numbers and explain why the picture is as it is, and what you are doing to change it.
3. Salary benchmarking and pay review
If pay data stays squirrelled away in finance and HR, the tendency is for staff to question whether they are being paid fairly, either internally or against the market. Where differences in pay do exist, managers and HR need to be able to communicate and justify them confidently and clearly, which is difficult to achieve without the right data.
We would always recommend carrying out a pay benchmarking analysis exercise using robust data to sense-check salaries against the market. Managers can then take these numbers into conversations around pay, or at pay review time, and even share them visually through user-friendly dashboards. These insights, combined with permissions and authority levels, allow HR and managers to select what employees see and share, increasing their understanding and creating a greater sense of openness and transparency.
This same market data can also bring far more context and credence to the conversation than the 'empty' salary numbers workers might have gleaned from Glassdoor or PayScale.
4. Training and CPD
Too often we see companies who think they are moving towards transparency simply because the people at the top think it is a good idea. In reality, it is only by educating our managers and making sure they are comfortable talking openly about pay and equity, that ideas and willingness are put into practice. This requires clear policies to be developed and shared to build confidence.
Consider distilling your HR-focused pay policy into versions that can be used by managers and employees so that they understand how pay works in your organisation.
5. Recruitment
According to a survey by Reed.co.uk, 78% of jobseekers are less likely to apply for a job that does not display a salary. There is nothing more frustrating than a job advert for a great role offering a ‘competitive salary’. This wording immediately puts us on edge and arouses suspicion that candidates might be treated differently. If we want to move towards pay transparency, in a way that Scandinavian countries are certainly doing already, we need to be providing a number or at the very least a pay range, alongside key information about skills, experience and knowledge.
