The Lowdown on Pay Transparency in the UK
The EU’s recently approved pay transparency directive has been making a buzz in the world of HR and compensation — including here at Figures. But, while we’re all excited at the prospect of a fairer compensation landscape in Europe, we don’t want to neglect our neighbours across the Channel.
That’s why today’s blog post is dedicated to exploring the state of pay transparency in the UK. We’ll answer questions including:
- Are UK employers transparent about pay? Is this a new phenomenon?
- What does UK law say about pay transparency?
- Will the UK follow in the EU’s footsteps and introduce its own pay transparency legislation?
- Why should UK employers care about pay transparency, anyway?
Ready? Let’s jump in.
The current state of pay transparency in the UK
Before we start making predictions, it’s important to understand what the pay transparency landscape currently looks like in the UK. And a recent survey from insurance services group WTW uncovered some interesting stats:
- As of July 2023, 54% of companies surveyed disclose job levels to their employees.
- 43% communicate how individual base pay is determined and progresses.
- Only 16% of companies surveyed currently disclose individual pay ranges to their employees — but 54% plan to in the future.
- 44% already communicate a public pay equity commitment or plan to do so.
- 52% are planning to or considering sharing a pay transparency commitment.
These figures suggest that, while full pay transparency in the UK is certainly a long way off, the winds of change are a-blowin’. Companies are starting to realise the benefits that pay transparency can bring to their organisations (we’ll get to those in a moment), and adjusting their policies accordingly.
Salary transparency in job ads
Another interesting trend is salary transparency in job adverts, which will be mandatory under the EU directive. And, according to job search platform Adzuna, 51% of ads on their platform contained salary information as of April 2023.
A 2022 white paper from the same company put the UK as the most transparent country among 19 global markets, despite a slight lag in the last few years. The US, by comparison, was one of the worst countries on the list, with only India coming in as less transparent.
Here are some more findings about salary transparency in the UK:
- Ads for part-time jobs are more likely to include salary information than those for full-time jobs.
- There’s a North-South divide when it comes to pay transparency: Yorkshire and the Humber, West Midlands, East Midlands and the North West were the highest-scoring regions, while London was the worst.
- The most transparent industries include charity and voluntary, social work and manufacturing. IT, energy and retail are among the least transparent.
What does the law say?
The next obvious question to ask is, are there any laws governing pay transparency in the UK? And the short answer is, not really.
The closest thing we have is the Equality Act 2010, which bans employers from including pay secrecy clauses in their contracts. However, this only related to ‘relevant disclosures’ — i.e. employees discussing salaries in order to uncover discrimination based on a protected characteristic.
And, while this is definitely a good thing, it’s hard to say if it’s had a big impact on the culture of pay secrecy in the UK. Even without explicitly telling employees not to discuss their pay, many organisations discourage this through their culture and company norms.
But what about the gender pay gap reporting requirements the government introduced in 2017? It’s true that at first glance, these look pretty similar to the requirements set out in the EU directive.
However, while these measures are a good start, they only require employers to report on their gender pay gap — not do anything about it. This is in contrast to the directive, which requires any companies finding a pay gap of 5% or more to carry out a joint pay assessment and implement measures to close the gap.
Plus, the EU directive includes wider measures to promote pay transparency. For example, EU employers will have to provide salary information to job applicants, and employees will have the right to ask for certain information about their peers’ salaries.
The EU pay transparency directive: Will the UK follow suit?
As we’ve discussed, the UK doesn’t (really) have any specific legislation around pay transparency. But will this change once the EU directive comes into play?
There are some encouraging signs. For example, on International Women’s Day in 2022, the government launched a pilot scheme in which participating employers would be asked to include salary details in their job adverts and agree to stop asking candidates about their salary history.
It’s not yet clear whether this scheme will have any lasting impact on the UK’s approach to pay transparency — but it’s a good start.
However, to truly answer this question, we have to consider some of the biggest barriers to implementing salary transparency in the UK. For example:
- Cultural taboo: Most Brits are brought up to believe that asking someone about their salary is a big no-no. But there is evidence that this is changing: in a recent survey, 62% of UK employees said they would be willing to publicly share their salary if it led to greater equity.
- Employer concerns: Many employers are worried about the impact that pay transparency could have on employee morale, fearing that employees who learn they are paid less than their colleagues might become disengaged or even quit. In our view, the best solution here is to implement a robust salary band system that ensures everyone is paid fairly — not keep your salary info secret.
- Lack of government initiative: Despite some positive signs, it doesn’t seem like pay transparency is a major priority for either of the UK’s leading political parties. For instance, while the gender pay gap regulations were due to be reviewed in 2023, this doesn’t seem to have happened. However, given the growing appetite for pay transparency around the world, we believe that the UK government will have no choice but to address this more seriously over the next few years.
While we can’t say for sure whether the UK will follow the EU’s example with its own pay transparency legislation, what we do know is that UK employers should be concerned about pay transparency — whether or not it's required by law.
Why UK employers should care about pay transparency
Here’s the big question: if the law doesn’t (currently) require UK employers to be transparent about pay, why should they? Well, a few reasons — here are some of the main advantages of pay transparency for employers:
- Attracts top talent: Studies show that job ads that include salary information get twice as many clicks and 6x as many applications as those that don’t. Why? Because including this information shows candidates that you care about closing pay gaps and paying everyone fairly, and tells them a great deal about your honesty, transparency and culture as a whole.
- Improves engagement and productivity: Pay transparency encourages fair pay. And when Indeed surveyed employees who are paid fairly, they found that 81% are more productive, and 82% are more engaged and fulfilled by their work than those who aren’t. .
- Allows internal consistency and competitiveness: For companies operating in the UK and the EU, it makes sense to work from a single global model — which means building transparency into your UK operations. Plus, these days, the search for talent is global, not local. That means that even if you’re not required to be transparent, you might miss out on top talent from abroad if you’re not.
- Closes the gender pay gap: According to our research, there’s a strong correlation between pay transparency and reducing the gender pay gap. And not only is this the right thing to do, there’s a clear business case too: three out of four workers would consider looking for another job if they discovered their employer had a gender pay gap.
- Allows accurate salary benchmarking: When companies share what they’re paying their employees, other companies can use that data to figure out where they sit and ensure their salaries are competitive. In fact, this sharing-is-caring model is what our entire platform is built on at Figures!
At Figures, we strongly believe that pay transparency is the future — and we’re on a mission to help forward-thinking companies get there. We do this by helping you to build fair, robust compensation policies that you’d be proud to share with your employees.
Here’s just a taste of what Figures can do:
- Salary benchmarking: Access Europe’s leading real-time salary database to compare your salaries to your peers and ensure you’re competitive.
- Salary bands: Build a simple and effective solution that ensures everyone is paid fairly — and do it in way less time using our platform.
- Compensation review: Run smooth and seamless compensation reviews, every time.
Want to learn more? Book your free Figures demo to get started.