As the spotlight continues to be cast upon the pay practices of large, and smaller, employers across the UK, some organisations may be struggling with a surge of internal discussions regarding salary payments.
The amount an individual is paid is highly influential across many areas; from being used to judge the measure of an organisation’s value in a particular employee, to increasing the engagement of well-remunerated staff.
What is encouraging salary discussions?
Salary and monetary benefits have traditionally been regarded as confidential and sensitive information, only disclosed to close friends or line managers during pay reviews.
This traditional view has been blown out of the water by the introduction of gender pay gap reporting which requires large employers with 250 or more employees to calculate, and publish, gender pay gap statistics. With these statistics available on an organisation’s own website and a government-provided website, the reporting regime has caused widespread awareness and discussions on the salaries paid within these organisations. As well as resulting in media hype and numerous headlines, a published report may have led to an employee speaking to their manager or raising concerns over the equality and legality of their pay compared to others.
Other transparency features surrounding internal pay practices are likely to continue contributing towards increased conversation on this matter. Mandatory ethnicity pay gap reporting is currently being considered by the Government, while the first CEO pay ratio reports will be published from January 2020, which will reveal the pay for Chief Executives in proportion to that of the wider workforce.
Why the issue?
Employers often don’t feel comfortable with employees discussing salaries because they believe this can cause issues for them.
When an employee is dissatisfied with their own salary that is a matter which can usually be resolved through a discussion with their line manager. In circumstances where the dissatisfied employee starts talking to their colleague about pay, and the colleague subsequently becomes unhappy with their pay terms, the number of disgruntled employees can grow exponentially. Formal grievances can be lodged and, before a manager knows it, every member of their team can start questioning why they are paid what they are paid. This becomes unmanageable, and may result in employees leaving or bringing employment tribunal claims.
Salary discussions: a hindrance in the workplace?
As mentioned above, employees who actively discuss their salary can result in a higher number of informal complaints, or formal grievances being lodged. More administrative and management time is then taken up with resolving these matters. It may also lead to higher turnover and lower retention rates as staff who are fed up with their payment terms look to go elsewhere.
Everyday discussions may also lead to concerns over equality where there are none; the main consideration being allegations of unequal pay. Although workers are entitled to equal pay for equal work regardless of their gender, employers can pay higher salaries where they have a material factor defence, ie there is an objective and material reason for doing so, such as geographical weighting or market forces. Where an employee discloses their pay rate to another, it is easy to reach a conclusion that equal pay is not being provided because the material factor defence or reasoning is unlikely to be disclosed or, perhaps, understood.
It has also been noted that discussing salaries during employment practices such as interviews or on promotion applications can lead to inequality persisting. This is because previous salaries are often relied upon to determine the level of salary which will be offered to a new starter. Where the previous salary was detrimentally impacted by inequality, discrimination or bias, this detrimental impact can continue in the new role; thereby failing to prevent this issue occurring in the workplace.
Salary discussions: a help in the workplace?
It can be helpful to encourage employees to speak about their salaries in an appropriate forum. This is because it helps managers understand the employee’s stance on their pay, ie whether they believe they should be paid more, and also provides the opportunity to reassure and create understanding of why particular salary rates are in place. This discussion can be used to help the employee understand what they can do to achieve a salary increase, although this may be more suitable in a performance appraisal process or an alternative internal procedure.
Where an employee feels encouraged to raise pay matters with their line manager, an open dialogue is created which could help identify any issues at an earlier stage than if discussions were discouraged. This prevents the employee becoming dissatisfied and unengaged with the business over their pay concerns, as these can be dealt with before they become ingrained. A formal salary review process can be introduced so each employee can discuss their pay terms formally on a periodic basis. This prevents the risk that they are being left to fester on the same salary for a lengthy period of time when their roles or responsibilities may have increased.
Positive and constructive discussions around salaries can be aided through transparent salary frameworks or criteria. Using these within an organisation helps avoid concerns initially as every employee is aware of the reasons why their salary is set at a particular level and it will also help later discussions by reducing any wide-ranging claims that an employee should receive a pay rise. Instead, they will need to structure a pay rise request in terms of the applicable framework, and confirm that they have met the next stage of salary or fall within certain criteria before becoming eligible for pay increases. It will also provide transparency and a clear path for an employee to follow to develop their remuneration within the business.
Can employers restrict discussions?
In the UK, there is no legal provision preventing employers from prohibiting salary discussions in work. The main method of doing this is to include a confidentiality clause within each employee’s contract of employment that includes discussing pay as a matter to be kept confidential. It is unlikely, however, that this clause will effectively prevent all pay discussions, especially as restricting an employee’s freedom to speak outside of their employment is unlawful.
It is important, however, that employers understand that this confidentiality clause does not apply to any salary discussions that are for the purpose of determining whether pay inequality and unlawful discrimination is taking place. For example, where a female employee is asking salary questions to a male colleague to determine if their rights to equal pay under the Equality Act 2010 are being breached, the confidentiality clause will not apply and any sanctions imposed on the employee are likely to be classed as victimisation.
To encourage the positive handling of pay concerns, employers can include a provision with an employment contract or the Employee Handbook which encourages employees to raise any salary matters with their line manager at the earliest convenience. This confirms that their concerns will be discussed positively and constructively if they are raised. A formal salary review process can also be introduced to provide a formal discussion opportunity where employees have salary concerns or wish to discuss a pay increase.