Nigel Cassidy: Pay transparency is said to be fairer for all. But is there reason to worry about what might happen if everyone knows what everybody else gets paid? I'm Nigel Cassidy and this is the CIPD podcast.
Well, thanks to pay transparency, we know that Gary Lineker earns a little bit more than an entire choir that the BBC had planned to axe but has been saved for now in the face of a furore. Now, I don't know if Match of the Day calms your soul more than 20 singers performing Brahms German Requiem, but what we can be sure of is that going public on salaries is a big deal for any organisations, as it is for jobseekers and existing workers who discover what others are getting. I was surprised to see almost two thirds of UK employees who'd just surveyed said they'd be happy to share their own salary details if it meant better pay equity; and that was generation Zedders especially. Now, that's interesting because I thought we British hate talking about what we're paid or money generally. So, how do you decide how far to go with pay transparency? How'd you manage the likely fallout when your staff get salary envy or quit for a better paid post with your rival? With me, to unravel all that and more, an HR director with experience in senior roles in financial services, and for major retailers, found on LinkedIn, says she's objective, impartial, supportive and fun, well we'll take that; that's Karen Jackson, HR Director at Reed. Hello.
Karen Jackson: Hi.
NC: Gemma Bullivant is an executive coach and reward consultant with hands on experience as a board level HR director, she says, "Without a clear strategy, pay and benefits decisions will be inconsistent and ad hoc". And we don't want that, do we Gemma? Hello.
Gemma Bullivant: Hello.
NC: And from the home team, who better than the advisor who directs the CIPD's own research on performance and rewards; it's Charles cotton. Hi.
Charles Cotton: Hi.
NC: So, Charles, first things first, what do we mean by pay transparency? I mean, is there a definition?
CC: It rather depends on what you mean by pay and what you mean by transparency. So, in part, it's going to depend on what the org... I suppose people, managers, and the organisation defines as pay; so, for example, does it include employer pension contributions, bonuses, or benefits in kind. But this definition is also going to be influenced by what others define as pay; so, for example, internally, you have employees, you're going to have unions, the Remuneration Committee etc, each with their own understanding of pay. And then externally, you're going to have stakeholders with their own definitions or understandings of pay; so, for example, the EHRC has their own definition of pay for when it comes to gender pay gap reporting, the HMRC has quite a wide definition of pay, when it comes to tax purposes, the Low Pay Commission has its own definition of pay, for when it comes to minimum wage purposes.
And then you've got the other bodies, say for instance, in rugby union, the body that looks at the English Premiership, and they have their own definition for salary cap purposes. And then it kind of depends on what you mean by transparency. So, you can have transparency of outcomes, i.e., who gets what, or you can have transparency around processes, i.e., how pay award decisions are being made?, by whom, by, you know, when and why. And you also can have transparency of context, so what do people getting the same or similar jobs, with the same employer, get? Or what do these same jobs get with other employers? Or what do employees doing different jobs, within the same organisation, get?
And then there's the issue about who you should be transparent, you know, transparent with. I mean, is it going to be employees, potential employees, the media, unions? As well as what level, so for instance one extreme, you could have individual levels, where each person knows each other's pay, or you can have aggregate level, so each person knows how their pay compares to their pay grade or how it compares like, against their gender. Or you can have a mixture, so some individuals, so for instance in large organisations, you may list everybody's pay who's... you know, who's a board member, but the rest of the workforce, that kind of pay formation is kept at an aggregate level. But hopefully answering all these questions will help create a strategy about how you talk about pay within and outside the organisation.
NC: I guess there wouldn't be a simple answer to that and...
CC: No, it's rather like Hitchhiker's Guide to the Galaxy, isn't it, you know, life, the universe and everything.
NC: Karen Jackson, there's also the question of where the transparency is blown, if you like, if you can say that an advertisement, or if a candidate is asked what they are paid. Now, everybody knows all UK employers with 250 or more staff have to publish gender pay gap, just past the deadline in the last few days. I know there was government pilot last year, employers were required to list salary information in their job ads and stop asking candidates what they're paid. I mean, is this... are those two changes where we might go with pay transparency?
KJ: I think it's down to very much what Charles said, it is dependent on what each individual organisation wants to do and how transparent they want to be, because it means different things for different companies. I mean, I think there are absolute clear benefits when it comes to talent attraction; research from reed.co.uk found that four in five jobseekers, so about 78%, are less likely to apply for a job without a salary on it. So, I'm interpreting that as keeping salaries secret is therefore likely to leave candidates skipping past your job adverts. And actually, building on that, almost half felt that actually keeping the salary a secret would negatively impact on their perception of that company. So, being open and honest about salaries you're advertising definitely leads to attracting more talent.
NC: Do you actually tell your clients to definitely put the pay on or, if they don't want to, do you have leave it off?
KJ: We advise to, but ultimately it comes down to that client's preference and depending on their particular pay strategy, from a transparency perspective, because there's so many different ends of the spectrum, to having complete transparency, where everybody's pay is public, or having really defined pay policies, and everything that falls in between that. You know, we know, in a HR perspective, the role title of HRBP can be paid anything from 25,000 to over 150,000. And, you know, that isn't helpful, if a salary is not declared within that advert, for example's sake, because I may choose to not apply for an advert if it's below a certain level. And that's, you know, a personal frustration of mine. So, we do apply... we do say to our clients, "Absolutely this will guarantee you the most applications, if you're clear and transparent on the pay, or the pay range that's applicable to this particular vacancy".
NC: Now, Karen Jackson's made the case, Gemma Bullivant, for transparency, but there are all kinds of reasons why organisations, why employers worry about this, and certainly pay transparency has the real potential, when it comes in, to upset people, hasn’t it, to damage morale, pits worker against worker? I mean, why should anybody perform at their highest level if they know somebody that they might think doesn't pull their weight is getting paid more than them?
GB: Yeah, absolutely. And I think it boils down in some ways to a lack of comfort in being able to talk about pay clearly and transparently. And that's informed by either not having a clear and transparent methodology, where you perhaps are carrying legacy inequities that you'd really rather hope nobody under... you know, ever notices, through to not even knowing whether you've got those inequities. And I often work with clients who haven't really got round to analysing their data in that way, and really understanding where their employees lie within the pay spectrum.
NC: But I mean, it could take it could take.... I mean, not just weeks, it could take years to sort your pay out, to bring people up to a level or to not give somebody else a pay rise, to put it bluntly, it actually could take a long time to get your house in order, in order for pay transparency to do its work.
GB: Absolutely. And that's sometimes a reason why employers don't even start because it seems like such a long, long task, a long... You know, a difficult and lengthy process. But the flipside to that, of course, is that, if you don't start, you're never going to get there. And sometimes there's a reluctance that, if we start on this process of understanding it, that somehow there's a budget imperative that we have to correct everything within the first year, and often a phased approach to gradually bringing a more structured balanced approach to pay is where companies end up. But if you don't start, you're not going to get there.
NC: And Charles Cotton, are you going to have to start? Is this coming? We know that several states in the US, the EU does this, some Scandinavian countries have always had pay transparency. What, if anything, is pushing organisations into becoming more transparent?
CC: Well, as has been mentioned, it's obviously the business, I suppose opportunities, in that you can set yourself out in the labour market and find it easier to attract talent. Also, pay transparency helps in communicating, you know, what the organisation is trying to achieve and what it wants its employees to achieve, and how it's going to reward and recognise them for efforts. And if you are not being transparent about that, then obviously it's going to have an impact. But yes, there are also external pressures. Organisations have moved along, publishing data by gender in the UK, some organisations are going a step further now and looking at ethnicity. But there are also external pressures as well. Organisations that have operations in the US are saying, well, because of pay transparency there, we're going to have to start thinking about how that affects on the UK, but also about our global operations more widely as well, you know, how's that going to have an influence there? And similar, as you mentioned, the EU is also forcing organisations to consider how far they go in terms of transparency.
NC: Certainly, the sort of, core effect is to help with inequality. But we did quite an interesting little poll, just not a very scientific one, but... at CIPD, we asked people would pay transparency make inequality a thing of the past; 20% said yes, 5% said no, 70% said it's more complicated. So, Karen Jackson, this does sort of slightly cast some doubt on whether moving to pay transparency even achieves narrowing those pay gaps for the disadvantaged, certainly in the first instance.
KJ: I agree, I agree with the 70, that 70%; I think it can help because it can help to expose pay inequality, but it can't help in isolation, it's got to go hand in hand with lots of other elements. And also, when we talk pay transparency, again, it's how long or how wide, or how clear does that organisation want to be, from a transparency perspective. It won't be the fix, in isolation, for pay inequality. It will go a long way, or it will go as far as that pay transparency enables it to do. What really needs to happen is that business need to tackle the more underlying issues which cause pay inequality. There was a joint report between CIPD and Reed on the inclusion at work, and that found that nearly half of the employers had no inclusion or diversity strategy or plan in place. So, without tackling this, we really can't start to tackle pay inequality.
It's got to go hand in hand with so many other elements, you know, in terms of how you might manage performance, role evaluation, job profiles, career pathways, you know, all of those types of things have got to go hand in hand with that pay transparency journey.
And also, we've got to enable our managers to be more comfortable having candid conversations about pay because I agree with your introduction, Nigel, you know, there are still some people who are not happy having those conversations, either about their own pay or about people in their teams' pay.
NC: Gemma Bullivant, does that chime with your experience?
GB: Absolutely. And I think that there's a real temptation to almost look at this in quite a binary way; we're either a very transparent... you know, on the extreme end of the scale, or we're not transparent at all. And of course, what we know and what Charles was talking about at the start was, there are shades of grey, there are shades of grey in terms of levels of transparency, how we're transparent. And I think for organisations where this is a very alien concept, to begin just with baby steps on transparency, to start to articulate to employees how pay is set, how you go about, kind of, determining what pay each role is awarded, how things... how the process works, is a step towards transparency without necessarily going all out and saying this is what everyone's salary is. And you just figure out where on that continuum it feels like the right place to be in here and now, and where on that continuum you are aiming to be towards albeit, you know, factoring in what else is going on in the sort of, the wider landscape.
NC: Well, quite so, because Charles Cotton, there are quite a few examples aren't there, of organisations that have paid quite a high price for pay transparency? I mean, it is a charter to rival organisations, to poach talent they want, once they know the salaries they need to beat, so it can be quite inflationary.
CC: Not necessarily. I mean, people want to know why they're being paid, what they're being paid, and how that... you know, and how their efforts are going to be recognised by the organisation. So, being transparent about that is important. Now, organisations often are concerned about their staff being poached, but pay isn't the only decision that people think about when they are thinking of moving jobs. So, it may not...
NC: Well, I'm sort of including rewards and conditions along with pay. Though I suppose, as you say, it's a bit misleading that we just use the word pay.
CC: Yeah, yeah, so I mean you've got to think about not only those contexts but, you know, why people are thinking of moving as well. So yes, it's a factor, but it's not the only factor in people's decisions to leave or join organisations. And also, if you kind of move from one organisation that is very transparent about pay or, you know, and benefits, to an organisation that has, kind of, poached you, but then isn't prepared to be similarly transparent, and then you may have issues later down the line, you may feel that you're... you know, you're not being rewarded and recognised. You may wonder why... well, what are other people in this organisation getting paid.
NC: Now, Karen Jackson, I noticed a few interesting findings people might like to look at, from Harvard Business School, that have been published quite recently. And one finding which surprised me was that, in their experience, and this may be in the US I would imagine, that pay transparency might actually cut pay because organisations dare not give one person a pay rise if... because it's public and they have to give it to everybody else. So, is this a... actually a... possibly a sneaky way of holding pay back? Though of course that’s difficult, in inflationary times.
KJ: I think that's incredibly difficult in inflationary times. But also, for me, I think there's... I'm not sure how that would translate across the pond over into the UK. For me, I see it very much about understanding a view of how we establish what that job's worth is, whether that's benchmarking externally, whether that's benchmarking internally, but I don't see that as being a negative pay cut. I don't think I've ever experienced that situation actually, from a pay transparency perspective. I mean, for us, and sort of building on what Gemma said a moment ago, we have a range of pay transparency, sort of, guidelines that we use within Reed, and it comes down to, where we have our volume roles, we have really clear parameters of this is the salary range, if you're performing at a certain level.
And then, where we have one [off] type roles, we are less clear, but what we will say is this is how, at inception of that role, we will benchmark. So also, it's about saying you don't have to have a one size fits all pay transparency approach within your organisation; you can have a multiple of different approaches that might suit that particular population that you're looking at.
NC: Gemma Bullivant, can you kind of take that on for us and just tell us a bit more? You've already talked a little bit about this, but how you work with organisations to start sorting out how they approach this, how they talk to people, and indeed, how you should be doing those calculations as to kind of what people are worth.
GB: Yes, well, there's a number of starting points. Sometimes I start with, "What is your aspiration?" you know, but that's usually informed by, "What's your challenge?" Because when I'm called, usually there's a challenge. So, there's a challenge either in terms of attraction and retention, or there's a challenge in terms of wanting to know how much to pay people, regardless of some of the other pain points. But most often, you have to start with understanding your job architecture, your roles. It doesn't have to be a really detailed job evaluation exercise, but you do have to have some idea of how the organisation structure has evolved to the point that it's at now, and therefore what are the criteria that you might apply to describing the different levels of roles. Once you've done that, you can then start to look at how you might benchmark externally and the approach that you might take to that. And then you can start to, sort of, think about how you might determine the transparency approach or the way... let's use a different way of describing this, which is, "How are you going to start explaining this to employees?" Because that's a version of transparency. How can a manager or an HR leader sit down with that individual and just be able to articulate what's... how their pay is derived, what their pay progression might look like in that role, as they acquire more skills, perform at a better level or seek for promotion?
If you can't explain something to an individual in those terms, regardless of your approach to transparency, kind of, systemically in the business, then you're going to come unstuck. So, you do need to have some of those basic principles, really kind of, you know, well thought through, to be able to then help with that explanation.
NC: But, Charles Cotton, isn't the problem that we're quite wedded to the idea that you get a percentage every year, obviously with inflation, you know, as I mentioned before, there are certain imperatives there, but maybe people are not, sort of, up with the idea of a kind of assessment of the nature of your job, your own potential, and how much the job you're doing is worth relative to what's been going on in the world?
CC: Well, I think the issue is obviously pay does cover many aspects, as you say, quite rightly point out, you know, it's the value of the job to the organisation, it represents the cost of living, the going rate, employee performance, achievements, potential, etc., and each of those elements will vary over time and there'll be, you know, one year the cost of living will be less of an issue than other times, similar you know, the going rate. So, it's a kind of a balance; so each time an organisation looks at how much to increase pay, it has to kind of consider all those elements as well, as well as how much money the organisation has to pay. And that's why it's important, as was mentioned earlier, about having a reward, you know, philosophy, strategy, and a narrative, to be able to explain to employees, "This is why we are paying you what we're paying you. This is what needs to happen, both in terms of what you need to achieve, or what the organisation needs to achieve, in terms to increase pay", as well as, you know, how things may bear out in the future. So I think also, what's important is, if you are going to be more transparent, you've got to... HR teams need to think about, well who are you going... you know, who... you need to decide, you know, who tells, who's going to tell what to whom, when, why, and how, and how much support HR professionals are going to provide to those people, either explaining it, or those... to those people on the receiving end, so they understand what's being communicated to them.
NC: And Karen Jackson, I was struck by something I saw on one of Reed's online pages about all this; how you respond on pay transparency, you said, may depend on what story your organisation wants to tell.
KJ: And that's absolutely right, Nigel. It's about bringing to life what it feels like to work for that organisation. And that isn't just about culture and how you feel; that's about where you contextually sit within that organisation. And for majority of people, they will measure that on a number of things, and one of that is pay. So that absolutely, that compelling story, absolutely will drive attraction to people, to your organisation.
NC: Well, a large pay packet might.
KJ: Well, of course a large pay packet will, 100%. And I don't think pay strategy is about large pay packets; it's about being able to provide the context of why your pay is the way that it is, and how that fits with the organisation that that person might be interested in joining.
So that's why that compelling story is incredibly important, especially in today's recruitment market where, you know, we are quite candidate poor still in today's recruitment market. So being very compelling and having that level of transparency could put you one step ahead of that competitor who's also trying to recruit that same person.
NC: And Karen is talking about work context there. Gemma, can you talk a bit more about the impact to transparency as it's introduced into the current way we work? You know, we've got this hybrid working, we thought perhaps some of it might end, but everybody seems very keen on it not ending, very happy to work from home, employers have got more relaxed about that. We've got an increasingly globalised workforce. I wondered what extent local market rates might die out, you know, if we've got more perfect information, you know, I don't know, an HR manager getting 35,000 a year in the provinces might find a London counterpart was getting 50,000, might we expect those two rates to kind of get a bit closer over time? Is that actually happening?
GB: I think it is, and I'm starting to see that with clients that I work with, where the question starts to be posed around being able to hire outside of the local area because there is less of a requirement to come into a particular office or to commute on a very regular basis.
So, one longer train journey, once or twice a fortnight is very different to a four or five day a week daily commute. And that's starting to put some pressure on to certainly my clients that are in in the north, that are starting to compete with salaries elsewhere, that are typically higher. I think the other challenge, from a hybrid perspective, is I've got some clients who used to compete really well on flexibility and used to actually tell that story as a way of... not to pull salaries down below where they should be, but to almost tell the story of why they don't inflate the salaries or try to match other competitors, but they offer flexibility, they offer options on where and how you want to work.
And that has very much equalised, which actually means that some of these clients that I'm working with are really struggling to compete on that point and are starting to have to think about their pay a little differently, because the market has shifted from that perspective. So, there's a couple of different tensions there going on that are really starting to impact the question of pay.
NC: Charles Cotton, do you want to add anything about this impact of how we work now? Because you tweet a lot about rewards and things.
CC: Yes, I mean, I think earlier on, when hybrid working kind of took off during the pandemic, there was perhaps a fear that organisations were going to introduce almost a kind of... a two-tier approach to pay, so those people that they recruited in lower cost areas, they would be offered lower wage rates, because their cost of living was lower. But because of the tight labour market, that hasn't come to pass, so organisations seem to be paying people the same rate, irrespective of where they're based, leading to pressures that Gemma has just been talking about. However, going forward, if there is a kind of, I suppose, if the labour market becomes more... becomes less tight, then perhaps you may start to see organisations reviewing those decisions to see whether there is merit in having different salary levels depending on where people are working. But there are also issues around that as well, so for instance equal pay concerns could be something that kind of restricts that development.
NC: And I mentioned at the beginning that, when people were polled about their willingness to be open about their own salary, it seemed to be the Generation Zedders who were all for transparency. I just wonder whether, Gemma or Karen, have you noticed that kind of different attitude in the rising generation of workers? Is that changing things?
GB: Well, I think the earlier generations, and I count myself sort of within that, were actually used to it being perfectly fine to be asked not to talk about your pay and, you know, when that legislation changed and people were actually, you know, that became unlawful, that then shifted a culture away from employers sort of wanting that, kind of, that secrecy, to actually not being allowed to insist on that secrecy. And I think as we move through the generations, that veering towards transparency is happening, and it's going to get... there's going to be more and more of a need for transparency or a demand for transparency, from employees.
NC: Because I mean, Karen, there's this sort of paradox, isn't there; many feel, still, as we've heard, they do have a right to their own pay privacy, yet they simultaneously want to see what everybody's offering before they get involved in a job interview.
KJ: It absolutely is a conflict there that is playing out. I think, at the point of application, you don't understand that business. And like I said earlier, that enables you to understand the context of where the role sits. I think, pay transparency at a personal level, outside of generations, also has, you know, a real mixture of impact. For example, it can really drive a whole imposter syndrome side as well. "Am I really worth that salary that I'm being paid?" And that has a whole ripple effect. And that's not a generational thing, you know, that could be somebody new going into a new role, that could be somebody who's been in a role for ages, you know, so it's also conscious that yes, there's lots of positives that come with full pay transparency, but let's balance it with there's some clear negatives. And that negative is not just at an organisational level; it's at an individual level as well. And there will be some people, regardless of generation, that are uncomfortable with their personal pay being shared, because people may question their worth within their organisation, and we've got to be really conscious of that.
NC: OK, that seems a great final thought from you. So, Charles Cotton, what would you add just as a sort of final tip, if you like, to organisations, or individuals in HR who are really worried about what to do about this?
CC: Well, I think not only do you have to, kind of, think about what you mean by pay and what you mean by transparency, and who's going to tell what to whom and what support they need; another is actually having the data in place to be transparent in the first place. So, you've got to persuade or make the business case to your organisation that they invest in the HR technology that allows the organisation to, kind of, collect the relevant pay data, to kind of analyse it and then communicate it in the right format to the right people, and at the right time.
And also, being able to check whether the data you have is correct, because if you are analysing incorrect pay data, then the transparency process is, you know... what is the point?
So yes, you need to make the case saying well, we want to check the data, we want to have the technology that is going to allow us to do that, as well as then start thinking about things like legacy issues, crafting your narrative. And of course, another issue is around data protection, if you are going to be transparent about pay salaries, thinking about what implications there are there.
So, when often you talk about pay, you often talk about reward or HR teams, but it's important to also think about the implications for other parts of the organisation; so, think about, you know, let's involve the legal team, let's involve the IT team, let's involve our colleagues in marketing and public affairs. So, when we, kind of, launch our transparency initiative, we've got the right people in the room to help us talk about that.
NC: A lot to take in there, but I know there's a lot of resources, both from Charles and others on the CIPD website. And Gemma Bullivant, final thought from you, from your experience maybe on all these tricky pay and reward issues.
GB: I think my advice would be to assume that this is coming, and it's coming reasonably quickly, because the imperative is happening, as you mentioned at the start, from other geographies, and we know that it's the right thing to do, we know that it's quite a key lever in helping with things like gender pay gap. So, as Charles said, make the case and get started on sorting the house out, understanding where your outliers are, understanding how you go about sizing roles, figuring out where in the organisation you might need to put more attention. So, as Karen mentioned earlier, there might be sections of the business that it's quite straightforward, sections that need a little more of an individualised approach, and get that process underway so that, as you mentioned, it can take some time to get to a point where you want it to be but make the start so that you can actually gradually, you know, get closer to where you want it to be.
NC: Brilliant. Well, what an excellent discussion. Thank you very much indeed. That was Gemma Bullivant. We heard too from Karen Jackson, HR Director at Reed, and CIPD's Charles Cotton. I think you've all performed well above expectations for your paygrades.
Lots of ideas. Transparency on salary has definitely reached a tipping point. Next month, ooh, something different, artificial intelligence, AI, how do you prepare for its inevitable impact on your organisation? Until then, from me, it is the real and not AI generated Nigel Cassidy, and from all of us here at the CIPD, it's goodbye.
