Imagine going to your local Sainsbury’s and seeing ’competitive prices’ displayed everywhere, but having no idea what anything actually costs. Would you walk out without buying anything? That’s exactly what most candidates do when they see a job advertisement with ‘competitive salary’ displayed on it.

Pay is an emotive topic that makes many organisations nervous. It’s often the deciding factor when people choose a new role, and seeking higher pay elsewhere is frequently quoted as the main reason people leave. But what people ultimately want to know is that they’re being treated fairly.

Let me share a real conversation I once had with a CEO of a small organisation. When I asked how they decided base salaries, they explained that they asked employees to think about their living expenses and monthly costs as a starting point so that they could support them. While they were trying to approach reward from an ethical standpoint, this created massive inconsistencies - would someone living with their parents only be entitled to a fraction of the salary of someone with a family and mortgage? This kind of subjective approach to reward management, even when well-intentioned, undermines trust and creates equal pay risks.

The evidence

A Payscale survey found that employees who were paid below market rate had a job satisfaction score of 40%, but when leaders actually sat down with these employees and talked to them, explaining the reasons for lower pay, their job satisfaction rose to 82%. Even when people are being paid less than the market rate, they are much more satisfied when their organisation is transparent about pay, takes time to build trust and treats them like adults.

This shouldn’t come as a surprise. Two-thirds of employees who are paid at market rate believe they’re underpaid. In the absence of clear communication and transparency, people form their own perceptions about their pay and the pay of their colleagues.

Building trust through reward management

Transparency breeds trust. When it comes to reward, we build trust between colleagues by being transparent. And transparency doesn’t mean publishing everyone’s salaries. Discussing pay transparency in these binary terms devalues its wide-ranging benefits. Transparency is not the same as disclosure; transparency is about giving people context on how and why decisions are made.

So how do we give people context around pay and reward?

Clear Reward Principles - Your organisation needs defined reward principles that align with your values. These principles should explain why you manage pay the way you do, whether that’s matching market median rates or positioning yourself as a market leader. Without clear principles, reward decisions can seem arbitrary and unfair.

Consistent Framework - Having a structured approach through a career framework linked to pay ranges helps ensure fairness and consistency. This framework should clearly show how roles are evaluated and how pay progression works. It provides a foundation for making informed decisions about pay and helps explain these decisions to employees.

Regular Communication - Leaders need to have meaningful conversations about pay. This doesn’t mean once-yearly meetings where employees receive an arbitrary rating along a forced distribution curve. It means regular dialogue about how pay decisions are made and what employees need to do to progress.

Common pitfalls

Many organisations still fall into these traps:

• Making pay decisions based on gut feeling rather than data
• Asking candidates about their current salary, perpetuating pay inequities
• Using pay secrecy to avoid difficult conversations
• Forcing performance ratings into a normal distribution curve
• Offering lower salaries expecting negotiation, which disadvantages those less likely to negotiate, creating inequity and resentment later     

The way forward

Pay transparency is a journey that is different for each organisation depending on where they’re starting from and their organisational culture. It is a gradual process that needs careful consideration and clear communication to employees. We cannot suddenly move from a culture of secrecy to complete transparency.

Think of transparency on a scale. Organisations may want to position themselves at different points on that scale, but in today’s world, where salary information is readily available online, a total lack of transparency is no longer an option.

Practical Steps for HR Teams:

• Define your reward principles and strategy
• Develop a career framework that shows clear progression paths
• Create pay ranges based on robust market data
• Train managers to have effective pay conversations
• Regularly review your approach to ensure consistency

The business impact

Organisations that embrace transparent reward management often see:

• Higher employee retention
• Improved engagement
• Better recruitment outcomes
• Reduced equal pay risks
• Stronger organisational culture

Some organisations have tried to rebrand HR, renaming roles to alternatives such as ’people manager’ or ’head of people operations’, but we need more than just a new name. The theme of transparency is aimed at building a more human-centric approach. Many successful organisations have discovered that this human-centric approach makes good business sense.

In today’s world, where pay data is just a Google search away, organisations can no longer afford to be rigid or secretive in their approach to reward. The question isn’t whether to be transparent, but how to implement transparency in a way that works for your organisation and build trust with your employees. After all, if we can’t be fair and transparent about something as fundamental as pay, what hope do we have of building lasting trust with our people?