The last HR taboo? Let's talk pay transparency & trust culture

Did you know that only around 16% of UK companies currently disclose individual pay ranges to employees? And in the recent study, only a handful had clear pay scales for applicants. 

A fair and equitable culture is crucial in helping to eliminate pay disparities and workforce inequality.  

In this article, we speak to Breathe’s own Head of People, Charlie O’Brien. Charlie shares her HR expertise to help SMEs navigate pay transparency & the impact on HR policy.  

 

Skip to:

• What is pay transparency?
• Why does salary transparency matter? 
• The evolution of equal pay & salary transparency
• Will the EU pay transparency directive apply in the UK?
• Is pay secrecy illegal in the UK?
• The key benefits of pay transparency for SMEs
• What are the biggest challenges around pay transparency?
• How to effectively implement a pay transparency policy 

 

What is pay transparency? 

Pay transparency means openly sharing pay information with your employees. This can cover compensation, pay structures, and additional benefits. 

 

Why does salary transparency matter? 

Salary transparency helps to build good relationships with employees and demonstrates fairness.  

The goal of being open around pay within your SME is to build a culture of trust and reassure employees that they’re being treated fairly.  

Charlie O’Brien, Breathe’s Head of People, shares her expertise around why pay transparency is so important. 

“The only way to build a high-trust culture is to work transparently - this includes pay transparency which can be done with clear compensation frameworks and a pay philosophy. Businesses need to ensure that they're paying their staff competitively and equitably.” 

And it’s not just your employees that will benefit, but future recruits too, Charlie notes.   

“If your employees and future talent know how their pay is calculated, what progression looks like financially and how they will be rewarded, you create a team of self-motivated individuals. Pay transparency is about clarity, so everyone can make an informed decision on whether the role and business is right for them.” 

 

 

The evolution of equal pay & salary transparency   

Equal pay has been part of UK law since 1970, bringing in fair pay regardless of gender -  although the gender pay gap is still a huge issue.

Most recent estimates suggest woman earn 16% less than male counterparts (globally, on average). And at the current rate of progress, it would take around 257 years to close the global gender pay gap. 

Gender pay gap reporting is now something that employers with 250 or more employees must report to the government.  

Interestingly, although small business aren’t required to do this, hundreds of SMEs have voluntarily submitted their gender pay gaps since this was introduced.  

As mentioned earlier, less than 20% of UK businesses are currently sharing pay ranges with employees. Historically, there seems to be a cultural silence around discussing pay, especially in the UK.  

But things are changing - the talent market is evolving, and employees can now find salary information via public sources such as LinkedIn and Glassdoor.  

 

Changing attitudes to discussing pay 

And there are clear generational differences around how employees think about pay secrecy. A US survey showed that millennials and Gen Z are nearly twice as likely to talk about pay with their colleagues than baby boomers are.  

By 2025, millennials (born between 1981-1996) will make up around 39% of the workforce – with this jumping to 70% by 2030. And with Gen Z (1997-2012) comprising 23% of the working population by 2025, we can see that attitudes around pay transparency are quickly evolving.   

Head of People at Breathe, Charlie O’Brien, shares her thoughts around why pay transparency is something we’re talking about more in recent years.  

“Pay information has been kept by HR teams and leaders for decades, but legislation is changing and started with gender pay gap reporting.  

As we look to the future, businesses of all sizes will need to do more. There are the legal requirements but alongside compliance, employees are now compensation analysts. We need to have clear processes in place, so when we're challenged, managers & leaders have what they need to respond, transparently.

The EU pay transparency directive is important legislation - and this could well become law in the UK in future. Businesses should prepare for this proactively as best they can, by thinking about pay transparency now."

Will the EU pay transparency directive apply in the UK?

The EU pay transparency directive came into effect in 2023 and means that employers must share salaries at the point of recruitment, comply with employee requests for pay information & publish gender pay gap reporting. 

This applies to EU member states, who have until 2026 to implement this into their own law.

It also applies to non-EU employers who employ people in the EU - meaning this could potentially become UK law in future. 

 

Is pay secrecy illegal in the UK? 

In the UK, if someone wanted to know whether they were being paid differently to a colleague on the grounds of discrimination, then a pay secrecy clause can’t be enforced by an employer under the Equality Act. But overall, pay secrecy clauses in themselves aren’t illegal.  

Breathe’s Head of People, Charlie O’Brien, shares advice around pay confidentiality.  

“If you have salary confidentiality clauses in your contract, they've likely been added because you had an issue with people talking and using this knowledge as negotiation.  

Pay transparency won't impact these clauses if you really don't want people to talk about their personal remuneration, but it does give the business clear compensation frameworks - so when it comes to reviews, you can minimise potential conflict.” 

 

The key benefits of pay transparency for SMEs 

You might be wondering if being transparent about salaries is right for your small business. Here are the main benefits of pay transparency: 

 

• Building a culture of trust 

If you can put your money where your mouth is (literally), then you’re making huge leaps towards building an honest, transparent culture – and building solid foundations of trust throughout your team.  

Charlie O’Brien, Head of People at Breathe, shares that she believes building a culture of trust to be the main benefit of pay transparency for small businesses. “If your employees trust that you're rewarding them correctly, then they will be motivated and committed.” 

• Attracting (and retaining) top talent 

Being brave enough as an employer to be truly open about salary sends a powerful message to new recruits that they’ll be paid fairly.  

It’s also positive reinforcement for existing employees that they’ll be treated equally when it comes to compensation.  

 

• Increases employee engagement 

Along with building trust, if employees have a clear understanding on how their pay is calculated – and crucially, if they believe this is a fair process, then they’re more likely to feel valued and engaged (as Charlie mentioned). This then has lots of positive repercussions, including morale, job satisfaction and productivity.  

 

 

What are the biggest challenges around pay transparency?  

We know that implementing a pay transparency policy doesn’t always come without its challenges, as a historically sensitive topic.  

We asked HR expert Charlie O’Brien to share her insight around what the main challenges are for HR – and how to navigate them: 

 

• Stakeholder buy-in & change management 

Charlie O’Brien says this is the biggest challenge for HR.  

“To get stakeholder buy-in, you need to involve leaders at the start of the journey and tie it into the business mission and objectives. This is a change management challenge.  

The big picture is not about the mechanics of pay, but rather how you think about your organisation’s guiding principles. It’s also about how your total remuneration offering interacts with your employee value proposition.” 

• Personal preference 

Not everyone wants to talk about pay – or have colleagues know what they’re paid. Being completely open with all this information could potentially cause issues, especially if people have worked for years within the accepted parameters of pay secrecy – such openness could feel a bit shocking, to some.  

With this in mind and with any major business decision, it’s important to explain the ‘why’ around it, as part of your people-first culture. 

 

• Friction within teams 

Following on from this, disclosing people’s pay could cause friction between employees – including anger and jealousy.  

If pay transparency is something your SME is considering, it’s important to have structures in place to limit the damage as much as possible, to avoid extra pressure on HR & a disruption of your culture. For example, why not survey your employees first and find out what their thoughts are around this topic as a litmus test? 

Or, rather than disclosing everyone’s salaries after never previously doing this, you could try listing salaries on new job adverts to help your SME move towards a culture of pay transparency.  

 

 

How to effectively implement a pay transparency policy 

So, if you’re on board with the theory but are unsure where to start in your small business, we’ve got you covered.  

Breathe’s Head of People, Charlie O’Brien, shares her advice for small businesses on how to implement a policy around pay transparency.  

 

• Planning is key – create a roadmap 

“Create a roadmap to achieving pay transparency and undertake incrementally. By breaking down the process into phases, employers can create a plan that makes sense for the organisation and gradually work towards full transparency,” notes Charlie O’Brien.  

 

• Create career frameworks 

Charlie advises HR teams to work with line managers to create career frameworks. 

“HR teams should work with managers to create career frameworks. This means that every role in their team has a clear career pathway that defines skills and qualifications needed to progress. This also supports managers with development conversations. We then build on this to create compensation frameworks.” 

 

• Educating line managers  

Charlie O’Brien notes the importance of training line managers on this topic.  

“Line managers need to understand where their current teams sit, to then be able to have effective and meaningful conversations. Training or toolkits can be provided to educate line managers on total remuneration, including non-financial benefits.” 

 

• Choose your approach  

Following on from creating your roadmap, it’s crucial to be considered in your approach. Whether this is sharing salary benchmarking data, advertising salaries on new job descriptions, or putting together a comprehensive detailed compensation plan and information, carefully consider what’s the right information to share within your SME – and how.  advertising salaries on new job descriptions, or putting together a comprehensive detailed compensation plan and information, carefully consider what’s the right information to share within your SME – and how.  

It’s also important to have clear structures in place around how pay is determined, if you don’t already or if these are historical frameworks.  

 

• Communicate

Communication is vital in this area. Explaining why you’re implementing this as part of your people-first culture and opening up the conversation around transparency. Providing clear guidance to line managers on how to talk about this change with their direct reports is crucial, too.

 

 

Building a culture of trust with pay transparency 

Keep in mind that everything you offer your team as an SME is included in the holistic sphere of pay transparency, advises Charlie O’Brien, Breathe’s Head of People. 

“Many people think that pay is purely basic salary but total remuneration, which includes financial and non-financial benefits, is what true pay transparency is about.” 

Build your high-performing culture of trust by moving towards true pay transparency.  

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