Ensure you have a transparent approach to pay or risk disruption later on

As HR professionals, you’re probably familiar with the common issue of recruiting people on salaries that are higher than your internal pay ranges. It’s a huge cause of much of the inequity we see in organisations.

Lack of pay progression is a common reason for this.

If we are not progressing pay for our current employees, they begin to realise that they're going to get much higher salaries and better progression opportunities elsewhere.

Not only that, but we're losing high performers with good knowledge of our organisation.

These are the individuals making the best contributions who we've spent a lot of time and money on to mentor and train.

We shouldn't just accept this and continue to rely on investing in constant recruitment. Instead, we should reallocate some of this budget towards pay progression for our loyal employees.

Should the UK follow the EU and introduce a pay transparency directive?

By doing so, we can avoid the ongoing challenges and costs which will inevitably arise in the form of recruitment fees and replacement of talent.

Research from Oxford Economics found that the average cost of replacing a single employee is over £30,000, but there is a potential for even more major disruptions as a result of inequity.

Recruitment teams are not necessarily thinking about the long-term pay discrepancies created when they’re willing to offer whatever it takes to replace an employee quickly.

Their main concerns are the immediate challenges – such as bringing in someone new to fill a role.

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However, employees (particularly Gen Z) are increasingly talking about pay in the workplace.

If the organisation’s inequity results in a grievance from an employee, there is a risk of large fines and legal costs as we've seen recently in the media through the issues faced at Birmingham Council.

If you had to pay much higher salaries to fill a vacancy quickly or a candidate was good at negotiating, these are not justifiable reasons under the Equality Act of 2010.

Not to mention the negative impact this will have on the engagement and productivity of your existing employees who will feel undervalued and unfairly treated.

Remember, equal pay for equal work doesn’t mean everyone has to get paid the same amount. But if differences exist, you must be able to explain and justify them.

Pay transparency is all about being upfront and honest with employees, letting them in on the secrets of how and why pay decisions are made. It helps build positive relationships with employees and demonstrates fairness in the pay process.

Show us the money! Is the UK falling behind on pay transparency?

The level of transparency can vary between organisations, but the overall goal is to build a culture of trust and reassure employees that they are being treated equitably.

With trust comes loyalty. And more often than not, the cost-free approach of communicating and treating employees like adults is going to help you retain more team members than keeping everything the way it is and dealing with it later.

Rameez Kaleem is founder and managing director at 3R Strategy and author of A Case of the Mondays