Pay transparency: the route to pay equality?

In the UK there is a widely recognised social taboo around discussing pay, and recent research suggests female employees tend to have fewer salary conversations with their managers than male counterparts. This comes as the World Economic Forum warns that the economic gender pay gap will take another 268 years to close at current rates of progress. So, is greater transparency the answer to speeding up progress towards pay equality, and what might this mean for employers and well as employees? 

Public support for pay transparency is stronger than ever. A survey by Beqom revealed that nearly two-thirds of UK employees would be willing to share their salary details publicly if it led to better pay equity. Embracing pay transparency can also bring commercial advantages for employers. For example, job advertisements that include salary information tend to attract more candidates – prospective employees appreciate knowing an expected salary range, enabling them to make informed career decisions. 

However, pay transparency could also bring challenges: if employees perceive there to be unjustifiable pay discrepancies, the potential fall-out (including lower workplace morale and an increased employee turnover) is likely to be challenging for employers. Being open about pay could also lead to salary stagnation – companies may be reluctant to award a pay rise to one employee if others would then expect a similar rise. From a competition perspective, a rival organisation may find it easier to poach employees if readily presented with information about the salary it needs to beat. 

The sharing of salary information also risks being seen as disclosure of competitively sensitive information which could reduce competition between businesses vis-a-vis recruitment and retention. This area is attracting increased interest from competition authorities – and is explored further in our bulletin here.

The legal background in the UK 

In UK law, the Equality Act 2010 requires equal pay between two people doing broadly similar work (disregarding factors like experience and length of service). Additionally, employers are not allowed to prevent someone from disclosing their pay to others or from asking colleagues about their pay, where the purpose is to find out whether there’s any discriminatory implications.

The Gender Pay Gap Regulations require most employers with at least 250 employees to report gender pay and bonus gaps. While this goes some way towards identifying where pay gaps exist for large employers, the data is unlikely to assist an individual in identifying whether they have been subject to pay discrimination compared to their colleagues, and the Regulations don’t address pay discrepancies in small and medium companies.

The legal position elsewhere 

The EU is set to implement new rules going beyond those in the UK. The EU Pay Transparency Directive, to be adopted by member states by June 2026, requires all employers to provide pay information prior to employment and grant workers the right to request pay details, whilst preventing prospective employers from asking candidates about their pay history. Annual gender pay gap reporting requirements will be introduced for companies with over 250 employees and every three years for companies with over 150 (and eventually, over 100) employees. Joint pay assessments will take place in cases where a gender pay gap of at least 5% is identified. 

Perhaps most significantly, the Directive shifts the burden of proof in pay discrimination cases from the employee to the employer. 

In the US, pay transparency laws have also gained traction, but the rules are by no means consistent across all states. New York and Colorado, for example, now require employers to disclose salary ranges in job postings, whilst Californian workers are protected from retaliation for discussing wages. In 2018, Wisconsin and Michigan introduced legislation that prohibits employers from inquiring about the salary history of candidates. 

So, where next for pay transparency in the UK?

On International Women’s Day this year, a pay transparency pilot was launched where participating employers list salary details on job adverts and stop asking about salary history during recruitment. In May 2023, the government followed up with a letter of response stating that it recognises how greater transparency can have intangible benefits beyond specifically measurable characteristics. The pilot may now sit alongside the Inclusion at Work Panel (Panel), with the wider aim of tackling bias and ensuring fairness in the workplace. 

Looking beyond gender disparities, reporting on ethnicity and disability pay gaps, for example, is also not currently mandated by UK law – there is only government guidance on voluntary ethnicity pay gap reporting. The variations in gross earnings between ethnic groups in the UK remain wide, and the disability pay gap actually widened in 2022. That being said, a Labour draft bill (the Equal Pay (Information and Claims) Bill) is currently making its way through Parliament. If passed, it would give employees the ‘right to know’ the pay of a competitor and require certain employers to publish information about gender and ethnicity pay gaps.  

But the question persists: do these developments demonstrate a commitment to advancing transparency and equal pay rights? The issue did not seem to be on the agenda of either of the major political parties at their recent UK party conferences. Real progress in reducing the pay gap may only be possible when the transparency question is put higher on the agenda of lawmakers.