Do Pay Transparency Regulations elsewhere in the world matter in the UK?

With the UKs current lack of action, the question must be asked as to whether any of the developments in other markets matter to UK employers. This question is particularly pertinent when considering the EU Pay Transparency Regulations which represent a generational shift in reward regulations and practices in a major market that has very close ties with the UK.

Why are Pay Transparency Regulations on the rise?

Pay Transparency Regulations are intended to address the clear gender pay equity issues which persist today. Gender Pay Gaps around the world are overwhelmingly in favour of men and, while they have been falling, progress has been slow and sporadic. Society today is less tolerant of many forms of inequality, and this extends to pay inequality which simply feels unfair and unjustified. Part of the issue is that Gender Pay Gap reporting has not had the desired impact. For example, in the UK an analysis of pay gap disclosures (over the first five years of reporting and focused on a consistent set of approximately 7,500 employers), shows that the pay gap has reduced by just 0.5% over five years. Transparency regulations are an attempt to accelerate the reduction of the Gender Pay Gap by helping to ensure the consistent application of a reward approach and remove any secrecy where potentially discriminating (intended or otherwise) practices can hide.

Do UK employers need to worry about what is going on elsewhere?

Employers in the UK are likely to be increasingly impacted for developments around the world. We are going to see a growing number of international organisations developing a global approach and response and extending their practices to the UK. This is particularly true of employers with people in the EU (even those headquartered in the UK) who are stating that they do not want to vary practice across Europe.

Blick Rothenberg has delivered a number of webinars and seminars on this topic in recent months and we asked those attending (usually senior HR or Reward professionals) the following question:

Do you believe that the EU regulations will have a significant impact on employers in the UK?

The results were amazingly consistent between different groups and with those being reported elsewhere.

Clearly the individuals and organisations attending our webinars are expecting change as EU employers extend their transparency practices to the UK and, as a result, are expecting a significant shift in UK practice as UK employers respond and adopt similar practices locally in an attempt to compete for talent in the marketplace.

Why would EU employers extend their pay transparency practices to the UK when they don’t have to?

In conversations with many dozens of EU employers over the last 18 months or so, they have repeatedly stated their intent to act consistently across the whole of Europe, including the UK. A number of reasons were given for this:

It’s the right thing to do

Many employers stated they were going to extend their transparency practices simply because it was the right thing to do and because it’s what their employees would want.

The international brand

Some employers have spent a significant amount of time and energy in recent years in building a consistent international brand. While they vary practices to a degree locally, they use a consistent philosophy and set of principles, and they want to continue this to avoid damaging the international perception of their brand.

Additional complexity

Operating different levels of transparency across Europe would create additional complexity that the business would need to manage. For example, how would you manage a situation where a leader has a team with people in the UK and the EU? You could not really expect that leader to be able to give more information to one part of his team than another?

International mobility

Different levels of transparency around the region would make employee mobility around the region challenging. The business would need to manage moves between high and low transparency markets and this would simply create another level of complexity and challenge.

Potential resentment and disengagement

Employers were also concerned that if they failed to deliver the same transparency across Europe, their UK employees could resent the fact that they were being treated differently which could lead to increased turnover levels and reduced performance amongst their UK employees.

What does this all mean for employers in the UK?

UK employers are not going to be directly covered by any pay transparency regulations for the near future, however ignoring developments in the EU and beyond would be a significant oversight.

It is becoming increasingly evident that the impact of the global move to pay transparency will be felt in the UK regardless of local requirements. UK employers are operating in a global marketplace where they will feel more than a ripple from these changes elsewhere. International employers will be deploying reward transparency practices across the UK, and this will give them a competitive advantage when competing for talent, unless UK employers respond. UK employers need to familiarise themselves with the EU regulations and plan their response. At this stage, they may not need to adopt the full scope of the EU requirements, but more transparency will clearly be required.

It should also be noted that it is currently unclear how long it will be before the UK develops its own pay transparency requirements. The UK has a General Election on 4 July 2024 and it is widely expected that there will be a change of government which would see the Labour party taking over from the Conservatives. The Labour party are obviously known to be strong advocates for workers’ rights, and they are said to have been looking into the EU regulations in recent months. As a result, it is widely expected that the UK will be adopting its own transparency practices in the next year or two. As a result, any developments made now, in response to the EU regulations and moves elsewhere, are likely to put an employer ahead of the curve in the UK and mean that they have less to do when the UK does go down this path.

Do you want to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Stuart Hyland using the form below.