What is the Roadmap to Pay Transparency for UK organisations?

Whilst the UK does not have pay transparency legislation and there is none on the horizon, many organisations embrace or want to embrace the principles of it. It is quite a journey – well over a year in most cases – and so Reward Heads have put together a roadmap based on our experiences of our own journey and our clients.

“We will talk about what we mean by pay transparency – we don’t mean putting the Exec team’s salaries on the canteen wall or the intranet (unless you want to!) and being clear on start and end points and some key steps.”

What do we mean by Pay Transparency?

Pay transparency involves organisations openly sharing pay details with current and prospective employees, aiming to promote pay equity. This transparency can manifest in various ways, such as disclosing salary ranges inside and outside the organisation, explaining how salaries are set and increased, or sharing individual salaries within an organisation.

Whilst talking about pay has historically been seen as taboo in many places, it is increasingly embraced, particularly in countries with legislation, like the European Union’s Pay Transparency Directive and U.S. state laws. Whether the UK is ready is up for debate?

This article outlines a structured roadmap for implementing pay transparency effectively. Below is a step-by-step guide on how to progress towards implementing pay transparency within your organisation.

?

Where Are We Now? Understanding Current Pay Arrangements

Before planning any journey, you need to know your start point. Hence before embarking on the journey to pay transparency, it’s crucial to assess the current state of pay structures and principles. Consider whether your leadership team would be comfortable disclosing current pay ranges if required. Leadership engagement is pivotal: buy-in from the top ensures a unified approach towards transparency.

Begin by reviewing existing pay practices:

• Reward Philosophy and Principles: Does your organisation have a clear reward philosophy and principles? Are they documented and communicated effectively?
• Pay Decisions and Policies: How are pay decisions made? Is there a documented pay policy and governance structure? Is that easily available to employees?
• Base Salary Determination: What factors influence base salary (skills, contribution, length of service, performance)?
• Use of Market Data: How is external market data utilised? Is benchmarking conducted regularly?
• Job Architecture: Is there a job architecture in place? Are jobs evaluated fairly against comparable roles?
• Communication: How transparent are current communications about pay within the organisation?

So now you know your start point. What about the destination?

Where Are We Trying to Get to and How: Creating a Pay Philosophy and Principles

A clear reward philosophy and set of principles are essential for guiding pay transparency efforts. This philosophy should reflect your organisation’s values and beliefs about rewarding employees. For instance, a philosophy might state:

"We aim to reward our people fairly, transparently, and competitively, supporting our commitment to fostering a culture of trust."

?

Defining Reward Principles

Reward principles should underpin your pay philosophy, ensuring consistency and fairness. Examples include:

• Transparency: "Our packages are simple to understand, and we share pay and benefits details at all levels."
• Equity: "Our pay structure is fair to all employees, regardless of background."
• Competitiveness: "Our compensation packages are benchmarked against relevant external markets and meet or exceed the market median."

?

Developing a Pay Policy

A comprehensive pay policy supports the pay philosophy and provides a framework for decision-making:

• Involved Parties: Define who is responsible for deciding pay (e.g. HR, line managers).
• Pay Principles: Establish principles for market positioning (e.g. median, in X sector or geography, total cash basis) and how pay ranges are set (e.g. 10% either side of median)
• Pay Approach: Decide on job families vs. market pricing, the frequency of pay range reviews, and the width of ranges.
• Pay Progression: Outline how pay will progress during employment, including annual reviews, promotions, and out-of-cycle increases.
• Governance: List roles responsible for total reward governance and define agenda items for regular meetings.
• Authority Levels: Specify who can approve pay changes and at what levels.

“Making this visible to all employees is a huge step on the transparency journey. Transparency of policy and process can be more important than the numbers themselves.”

?

Developing a Robust Levelling Framework

A levelling framework helps benchmark pay and ensure fairness and is a critical step. It involves determining the levels or grades for roles (not individuals) based on criteria like expertise, decision-making, and planning.

At Reward Heads we always recommend a bespoke framework which can tie back to a range of data sources. This tailored framework can align with organisational values and language and supports equity. It avoids overly complex proprietary frameworks that may not fit your organisational structure.

?

Benchmarking Roles

Benchmarking is essential for understanding how roles compare to the market. This process involves:

• Benchmarking Methodology: Select appropriate data sources / surveys and determine the benchmark point
• Location Dependencies: Account for regional differences that may affect salary expectation, if any
• Data Inclusion and Frequency: Define what data is included in benchmarking and how often it’s updated.

?

Ensure Job Descriptions Align

Job descriptions should accurately reflect role requirements and align with the levelling framework. Job descriptions should use consistent language and accurately describe role requirements, use inclusive, non-discriminatory language and align with job evaluation and benchmarking processes.

?

Creating Salary Ranges

To implement pay transparency, establish clear salary ranges. Develop ranges around benchmark levels with defined minima, midpoints, and maxima. Address situations where employees fall outside these ranges.

Differentiate between individuals in a role on pay within ranges using agreed and shared criteria.

?

Career Progression and Development Framework

Linking career progression to pay is vital for transparency. A framework should be developed which includes levelling, job families, and clearly defined career paths. As part of the framework, it should include all areas of competencies and progression (such as typical career paths), all of which then align with HR processes like recruitment and performance reviews. This is both about developing upwards and across, as referenced in the previous point on differentiation.

?

Effective Communication

Communicating pay structures and policies is the final but critical step. By using various methods, including internal communications, 1:1 meetings, and training for line managers, employees can really understand how pay structures work, this then limits any ambiguity amongst the workforce on how they are paid. By providing guides, explainer videos, and FAQs to address employee questions, helps to develop on understanding further. Regular review and updates to pay policies and communication strategies should be conducted to ensure they align with current practices and legislation. And keep communicating – to new team as well as existing.

Ongoing reviews are essential to maintain transparency: organisations need to conduct regular equal pay audits and address any anomalies.

Implementing pay transparency requires a structured approach, from understanding current pay arrangements to publishing and reviewing pay information. By following this roadmap, organisations can build a transparent pay structure that promotes equity, trust, and clarity, ultimately enhancing employee satisfaction and organisational integrity.

At Reward Heads , we have many years of experience across the team in this area and would love to support you in your journey. Please contact our CEO, Victoria Milford , on [email protected] or [email protected]