With the EU Pay Transparency Directive coming into effect in the coming years, most organisations are thinking about how and when they will provide more extensive information about pay to their employees.
While there are no regulations outlined for the UK yet, there have been indications from recent political party conferences that this could change in the near future.
Even without legislation, a global shift is happening, pay transparency is being driven by changing employee expectations, company values and culture, and ESG/DEI commitments to investors and customers.
Our survey found that organisations are already confident that their pay programs and job structures are set up in a way that delivers fair, equitable pay. The challenge for many organisations will be the cultural shift on how they talk about pay.
Just 10% communicate pay ranges currently, and less than 5% communicate the information employees will have the right to request in the EU.
So how do you deliver a better employee experience around pay communication?
Pay transparency: seven lessons
Develop a strong narrative
You need a strong narrative that expresses your approach to reward, the policies and processes that support equitable pay today and what you’re committing to do in future, such as embedding pay equity checks into your pay review, hiring and promotion policies.
Doing so gives leaders, rewards teams, managers, and employees clarity of how you deliver pay equity.
It also helps set expectations for when, as a company, you may be able to deliver more information on pay.
As well as ‘what’ you’re doing, it’s important to say why it matters to you as a company – whether it’s the right thing to do, a pillar of your ESG strategy or to demonstrate that you deliver fair, competitive pay as an attraction and retention tool.
The narrative should be reinforced in all conversations about pay with both prospective and current employees.
This can be through total reward statements, announcements on incentive plans, performance/pay reviews, and careers websites.
Should employees set their own pay?
Get managers and leaders ready to communicate
A key part of assessing how ready you are for pay transparency involves planning the communication required, which shouldn’t be underestimated.
Major investors are already asking business leaders about the directive and their plans to demonstrate that they deliver pay equity.
Organisations need to carefully consider the many different audiences and stakeholders who have responsibility for (or have an interest in) pay.
It is critical that leaders can talk about their organisation’s pathway to greater transparency, and that managers understand the organisation’s pay processes and can talk confidently about them.
They also need to be able to talk to employees about how they deliver fair, competitive and equitable pay and eventually, they will need to explain justifiable differences in pay between employees once individual information is available to employees.
Companies may also uncover differences in pay that need to be addressed through one-off pay increases.
Managers need to understand their role in allocating pay budgets and how to position these increases with colleagues (impacted or not).
The dangers of being too open about pay
Educate employees
Building trust and understanding on pay now will go a long way to help effectively communicate the reasons for any justifiable differences in pay in the future.
Employers should help employees understand the pay processes in place, how their pay is determined and how their contribution is defined.
For organisations with entities within the EU, we are seeing plans to ramp up education for employees in 2024, before introducing information like average pay levels or pay ranges from 2025.
Few organisations want legislation to drive their timescales – they want to be seen as leading on pay equity and transparency.
Will pay transparency solve the gender pay gap?
Leverage technology
Organisations need to consider how they will put individual pay data in the hands of employees.
To ensure this doesn’t become an administrative burden, this really needs to be a solution that is connected to payroll data which can be refreshed on a regular basis easily, where information is shared proactively with employees.
It also needs to be a solution which is fully customisable, to provide education about your pay philosophy, programmes and policies alongside the data.
Additionally, it should be able to provide different views to different stakeholders, so that managers can see the information of their reports and get advice around how to hold different conversations about pay.
Regardless of where your company lies on the pay transparency spectrum, it’s essential to start the work now, rather than wait.
Despite legislation, we’re seeing a step change in relation to expectations around pay transparency and companies that don’t act will be left behind.
Tom Wooldridge, director of employee experience at WTW
