A new government initiative to improve pay transparency

01 May 2022

Danny Done, managing director of Portfolio Payroll, discusses the new pilot scheme which aims to level up the employment opportunities available for women


On International Women’s Day this year (8 March 2022), the Government Equalities Office announced a new pilot scheme to improve pay transparency. This will help to tackle the issue of pay inequality. It’s hoped this will tie into the government’s wider ‘levelling up’ initiatives and improve employment opportunities for women.

 

A question of salaries

Participating employers will list salary details on job adverts and stop enquiring about salary history during the recruitment process. A Glassdoor survey found 68% of jobseekers thought salary was the most important factor of a job advert. Separate research highlighted four out of five jobseekers are less likely to apply for a role if the salary isn’t listed in the job advert. As such, employers who amend their recruitment strategy to consider this will optimise their success and attract more candidates.

58% of women felt they received a lower salary than they would have if they hadn’t been asked about their salary history as part of the recruitment process. If wages are influenced by what an individual earned in their previous employment, unfair gaps may be created. Instead, all employees should be given equal pay for equal work, regardless of what they previously earned. Removing the requirement to provide a salary history will also give women a firmer footing in pay negotiations. Removing negotiation completely and simply setting a fixed rate of pay for all can improve transparency, trust and employee satisfaction within organisations. Employers who pay their staff equally further minimise the risk of pay-related grievances and discrimination claims. Doing so also contributes to an improved company culture, supporting diversity and inclusion, which subsequently helps to boost retention and productivity.

At the same time, the government recognises that many employers lack a clear pay structure and may struggle to provide this information on job adverts. Part of the pilot, therefore, will be to develop a methodology for employers to provide pay information at the recruitment stage, rather than relying on pay history.

 

Other pay transparency methods

For organisations with 250 or more employees, publishing a gender pay gap report is a legal requirement. The report should show the mean and median gender pay gap figure for pay and bonuses, as well as the percentage of men and women who receive a bonus, and the percentage of men and women at each quartile of the pay scale. The report should be published on the company website and the information submitted through the gender pay gap service.

While employers don’t need to disclose the wages of individual employees, clear salary structures and pay progression schemes can improve transparency and equality. Some organisations introduce pay secrecy policies, and threaten disciplinary action, to avoid staff members discussing their remuneration and benefit packages. Although such actions are unlawful, businesses are still creating a culture in which salary discussions are strongly discouraged and frowned upon. Employees may, therefore, be concerned about sharing such details, despite organisations being limited in the action they can take against them for doing so. Such a culture can create high turnover and an inefficient workforce.

 

Diversity and inclusion considerations

Diversity and inclusion initiatives are imperative to ensure the fair and equal treatment of all staff members, and to close the gaps of employees from under-represented groups. Gender pay gap reporting can be a way of evaluating how many employees are from under-represented groups, to allow a business to take steps to increase this number.

However, businesses should also ensure they consider wider approaches to encouraging workplace inclusion. This could include introducing diversity and unconscious bias training for managers and communicating a clear zero-tolerance approach to any form of bullying, discrimination or harassment.

Traditional recruitment methods won’t be enough to support genuine diversity and inclusion within organisations. Instead, businesses should consider ways they can support individuals from under-represented groups, both internally and externally. Examples of positive action include:

  • adding statements to job adverts to encourage applications from under-represented groups

  • offering training to help certain groups get opportunities or progress at work

  • offering mentoring to groups with particular needs

  • hosting open days specifically for under-represented groups.

The pandemic prompted a shift in employees’ priorities and instigated ‘The Great Resignation’. Many are focusing on creating an effective work-life balance and expect their employment benefits packages to reflect this. As such, organisations which don’t offer flexible working arrangements, enhanced family-related pay and leave entitlements, pension contributions and social initiatives risk losing key workers. Pay and bonuses will always be a basic motivator for employees, but this is no longer sufficient at attracting and retaining staff on its own. Instead, reasonable remuneration packages must work in tandem with additional rewards programmes. 


 

Featured in the May 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.