Half of UK employers are addressing or planning to address pay transparency within the next one to two years, research from Mercer has revealed.
There is a growing focus on this area of pay policy despite the lack of specific UK legislation, the consultancy said, referencing the results from its survey with more than 100 organisations.
Fifteen percent of UK employers said they plan to address pay transparency in the coming years, but it is not critical/urgent, while 26 percent said they are observing the trends on the market and will be reacting as needed. Only 3 percent reported that they had no plans to address it, while 6 percent said it was hard to say or they didn’t know.
The results, published in Mercer’s report ‘Pay transparency: are UK employers ready’, also show that 81 percent of employers are developing a global pay approach, confirming that the shift towards pay transparency is being partly driven by the worldwide focus on it.
Communication trends
Pay ranges are often the most visible way employers share information. Mercer said its research shows a growing trend in the market towards communicating these ranges.
Nearly two thirds (59 percent) of organisations are either communicating or
planning to communicate pay ranges internally. Currently, only 13 percent are sharing these ranges externally in job postings, 48 percent said they intend to share them externally in the future.
More than half (52 percent) of respondents said complying with regulations was a key motivator for embracing greater pay transparency. More than three-fifths (61 percent) are focused on aligning pay policies with talent and reward strategies, and 60 percent on aligning with company values and diversity, equality and inclusion commitments.
The data shows that employers are embracing greater transparency around remuneration as a way to strategically boost their workforce, culture, employer brand and reputation.
Close to half of employers (46 percent) said they wanted to improve employee satisfaction
with pay and/or perceptions around fair pay. Mercer said that this emphasis is part of a broader trend toward responsible business practices, which are often linked to environmental, social and governance (ESG) goals.
“Equal pay plays a key role here, especially with requirements in the EU corporate sustainability reporting directive for businesses to report pay gaps and ratios.
Employers in the financial services and fast-moving consumer goods (FMCG) sectors are leading the trend for greater pay transparency, while in contrast, the oil and gas and professional services sectors are lagging behind.
However, the report said: “Unprepared companies risk being left behind or communicating without a solid foundation of equity.”
The EU pay transparency directive might not be directly applicable in Britain, but Mercer said: “As the UK moves closer to adopting transparency measures, whether through market forces or future legislation, organisations must be prepared to act.”
It said: “Fair pay is about more than compliance; it’s about staying competitive in the global marketplace.”
Pay transparency hurdles
The report sets out the three key challenges employers face as getting leadership buy-in, collecting accurate pay data, and navigating the concerns of legal and compliance teams.
Mercer said HR teams need to make a compelling case by emphasising compliance benefits and competitive advantages, as well as positioning it as essential for attracting and retaining the best people. HR should also highlight the business case for investment, as many leaders have yet to allocate budget for these initiatives, the consultancy’s report said..
Starting the collection of pay data early will be crucial, especially for employers with complex pay structures, as the UK is likely to introduce pay transparency legislation, Mercer said.
“Organisations that resist transparency may face growing pressure from employee and candidate expectations, risking the loss of top talent.”
The report includes a five step plan to help employers prepare for a move to greater pay transparency.
