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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
Step 1 - 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:
So now you know your start point. What about the destination?
Step 2 - 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:
Developing a Pay Policy
A comprehensive pay policy supports the pay philosophy and provides a framework for decision-making:
“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.”
Step 3 - 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:
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 at rewardsolutions@rewardheads.co.uk.
Victoria Milford - CEO