Is pay transparency in Britain closer to becoming a reality?

The aim of the “Great Salary Reset” campaign, launched by Liberty Hive, is intended to open the debate around salary transparency and help to create a more equal and inclusive workplace. 

This year, a number of U.S states, including New York, California and Washington, introduced pay transparency laws, which requires companies to include pay ranges on all job advertisements.

Advocates say having the law will help close the gender pay gap, improve productivity, create closer knit teams, and decrease staff turnover.

The EU is debating legal frameworks on pay transparency. Eleven EU countries - Spain, France, Italy, Austria, Belgium, Denmark, Germany, Portugal, Finland and Sweden - have adopted legal frameworks on pay transparency. Norway has had pay transparency since 2001.

The UK has fallen behind on pay transparency in comparison with its European counterparts. In fact, British employers can direct employees to not disclose their salary, a practise known as ‘pay secrecy’. However, this has become progressively rare.

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Calls to remove the “taboo” subject of salary have increased since the pandemic.

In March 2022, the UK government launched a pilot programme in which participating employers will publish salaries on all job advertisements, a move which the former minister for women Baroness Stedman-Scott says could have a significant impact in closing salary gaps and tackling pay inequality.

Liberty Hive, a tech-led talent business, has called for a new law making questions on a candidate’s salary history illegal, and also making it a legal requirement to list salary details on job adverts.  

Their research, compiled from their platform data, showed that when salaries are displayed, the response time from candidates was over 50% quicker.

A post that displayed a salary received around 67% more applications than one that didn’t.

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Jobs posted without any indication of compensation made the matching process 45% less effective, as it resulted in a greater variation in experience of applicants.

62% of candidates believed they should not be asked about their current or past salary in an interview and this figure increases to 73% amongst Asian workers and 75% for Black workers.

57% of women and 54% of men felt less positive about a potential employer when they were asked the salary history question.

According to founders Kate Merritt and Laura Braithwaite, failing to list salaries on job adverts and asking a candidate’s salary history are two processes that uphold inequality and slow the pace of change, especially for those who’ve been historically underpaid, mainly women and those from underrepresented groups.

“Our data shows it makes sense for the media industry to adopt salary transparency.  It will help companies recruit the best talent more quickly and successfully, whilst improving pay equality.  As younger generations seek to join trusted organisations, we believe equal pay will be increasingly important.

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“Every role we post will have a salary range guide, we won’t ask our candidates the salary history question and we will work with our agency partners to share best inclusive recruitment practice.

“This year we hope to raise awareness of this in the media industry and help companies demonstrate their commitment to inclusive recruitment, through a salary reset.”

Rudi Symons, Global Director of Inclusion and Diversity, AstraZeneca said pay transparency addresses the deeper barriers to justice and equity, the effect of which is powerful: “trust and psychological safety increases and inclusion becomes a reality”. 

Critics say that having pay transparency leads to salary compression, when new, perhaps less-experienced employees earn close to what current more established employees make.

Anecdotal evidence from New York, where salary transparency has been in place as law since the beginning of November, shows that employees’ immediate supervisors have the often “time-consuming and draining” task of providing justification to disgruntled employees for visible pay differentials.

Research from Harvard Business School said that supervisors, who may not have had any say in adopting the company-wide policies, take steps to reduce differences in compensation within the same job level, in other words, compress salaries.

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For example, the study cited making the government of California’s city managers’ pay transparent in 2010, average compensation dropped by about 7% in 2012. 

Firms, in particular small businesses with limited resources, might worry they will lose their best talent to competitors without transparency, but don’t often don’t  have the budget to make adjustments to their payroll, particularly in the current climate.

A CIPD survey carried out in the summer of 2022 found that almost equal proportions of employers chose to disclose (48%) and not disclose (47%) pay information in job adverts, although there are large differences in these figures by sector. For example, within the private sector, smaller firms are a bit more likely (39%) to advertise pay than larger companies (34%). The finance sector is less likely to publish pay information with just 25% doing so, and the transport sector most likely to publish salary information, with 47% doing so.

Keely Rushmore, Keystone Law employment partner said: “Employers tend to fear losing a competitive edge or creating internal resentment if salary details are publicly available. But there are signs that this is changing. For example, ‘pay secrecy’ clauses in employment contracts are becoming increasingly rare.”

“Publishing salaries in job adverts has many verified benefits, including attracting more (and higher quality) candidates, encouraging diversity and creating an impression of the employer as an organisation that is transparent and fair. 

She added: “Although market forces may be dictating a change of approach, this will be a slow process. Introducing legislation would inevitably speed up that change and help to ‘normalise’ pay discussions. However, many employers already feel bogged down by employment legislation and would view this as an unwelcome and unnecessary added layer of red tape.”

Simon Wingate, Managing Director of Reed Recruitment, said in a candidate-driven market during a cost-of- living crisis, it’s "never been more important to show people what you’re willing to pay them".

"They say when America sneezes, the world catches a cold. However, in this case, it’s probably too early to say whether the UK will follow the same legislative route as the US.

"It can feel daunting for employers to publish what feels like confidential information for the world to see. However, it’s worth thinking about the long-term advantages of being transparent with salaries on job ads which should outweigh any initial nervousness.

"Not only will you generate more applications, but you’ll also likely improve relevancy and save time in the process. You’ll also be able to attract from a wider talent pool and avoid any negative impact to your employer brand. Businesses need to be more open to salary transparency or risk losing out on the best candidates."