Is pay transparency really the silver bullet for pay equity we think it is?

By Zara Nanu MBE, CEO and founder of Gapsquare, part of XpertHR

 

In 2022, the UK launched a pay transparency pilot that aimed to close the gender pay gap by having participating employers publish salaries on all job adverts. However, recent data has shown pay transparency in the UK has dropped to a six-year low, suggesting there is still a long way to go in resolving the issue. 

While interest in the Government’s future proposals grows, highlighting all the contributing factors needed for fair pay is vital as pay transparency is just one piece of the pay inequity puzzle. Addressing pay inequity is not limited to just salary issues but needs to address the lack of effective pay analysis, the barriers to progression, and the influence of company culture. 

The role of pay transparency legislation

Government legislation on pay transparency is picking up pace on the global arena as a way to achieving pay equity,  with some indications of benefits of pay transparency becoming more clear; improved talent attraction, decreased employee turnover and a narrowing of the gender pay gap. 

Legislation can act as a catalyst for many organisations and the lack of current UK pay transparency legislation, as well as limited gender pay gap reporting legislation is not enabling businesses to go above and beyond the bare minimum. For organisations, going beyond the legislative requirements and acting upon the importance that employees place on pay transparency measures will positively impact talent retention and future recruitment. In a Glassdoor survey of 700 UK adults who are currently looking for work, 62 percent said that pay transparency was the most important factor of a job advert. Greater pay transparency attracts a more diverse talent pool which helps to narrow pay and talent gaps for certain demographics and for businesses, being proactive in transparency measures has a positive societal impact while also expanding the talent pool they can recruit from. 

A recent XpertHR and Executive Networks survey shows that employee expectations are key for pay transparency measures with 52 percent of HR and business leaders stating employee expectations as the real driving force for transparency initiatives ahead of legal requirements at 31 percent. But while business leaders recognise the importance of this pay equity and transparency, especially amongst their employees, there stills seems to little action on converting this to effective transparency initiatives.

Utilising the data 

An essential practice for businesses is conducting regular pay equity audits – including gender pay gap, equal pay, and opportunity gaps. For organisations to effectively tackle fair pay issues, data helps to provide a comprehensive view of their pay philosophy. But for many HR leaders, limited data access and antiquated analytical tools are hindering the process. 

35 percent of senior HR leaders in the UK and US lack pay data, according to XpertHR and Executive Networks. While it is promising that the majority of senior HR leaders surveyed conduct pay equity analyses quarterly or semi-annually (33 percent and 28 percent respectively), concerningly, 30 percent only carry out audits once a year which contributes to ingrained pay biases remaining within organisations. For businesses that are serious about tackling pay inequity, conducting analysis quarterly, or every other month is essential to staying up to date on fair pay. 

Pay equity data will serve as an indicator of underlying issues particularly around progression within an organisation. For example, the data can often indicate women or minority employees being regularly underrepresented in senior positions, this then allows organisations to implement strategies that can address any internal progression barriers for particular demographics.

The influence of company culture 

While data can indicate where organisations have gone wrong, effectively communicating these issues can prove problematic. The XpertHR and Executive Networks research shows that for senior HR and business leaders surveyed, 68 percent said managers have effective conversations with their teams, but on the flip side, for employees, the research shows that only 35 percent of managers have effective or very effective conversations with their teams. 

Creating an environment where there is clear communication on how pay equity is being handled internally raises awareness on the issue and helps to align various departments, thus allowing managers to have effective and frequent conversations around pay. 

Company culture regarding pay benefits is another important consideration. The ‘motherhood penalty’ is considered a significant contributor to the gender pay gap. This term outlines that women often ‘pay a price’ for growing their family while they are in the workforce, including being overlooked for promotions or being forced to leave the workforce altogether due to biases against working mothers and a lack of support. For example, UK childcare costs continue to rise, with the cost for 25 hours a week of childcare for a child under two increasing by 5.6% since 2022, which can force some working mothers to leave the workforce. Instead, offering a form of childcare support like subsidised support or a childcare voucher scheme can act as a key differentiator in a competitive market and contributes to narrowing the gender pay gap. 

Though leaders view pay equity as an important issue there is still much work to be done to tackle the systemic issues of pay inequity. Regardless of the lack of legislation, organisations could be leading the charge with pay initiatives that address flawed pay philosophies. Being honest in reporting the data with employees, takings steps to address internal barriers to progression and promoting benefits that can help to resolve inequities provides more scope for organisations to effectively implement pay transparency measures.