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For many candidates, two words in a job advert are often the source of frustration: “competitive salary”. Yet, employers often have very good reasons for not disclosing the salary up front. All this may be about to change, though, because new legislation is in process that will mean salary details must be transparent.
Where is the disconnect on salary expectations?
Candidates would probably tell you that their issue with ‘competitive salary is basically a matter of ambiguity. Competitive with what? The wider market? Similar employers? The candidate’s current salary?
Unfortunately, that frustration can mean they translate ‘competitive’ into meaning simply the lowest figure the employer believes someone will accept, but this is usually not the case. The employer may well simply want the flexibility to shape the role around the strongest candidate. A business may be willing to appoint someone with significant experience or equally willing to support a promising candidate who is ready to develop. Keeping the figure open can allow employers to respond to consider the individual’s skills, qualifications and potential, rather than forcing every applicant into a rigid salary band.
As a result of this disconnect, there is a sort of gap in understanding. A part of the mutual ground is missing and, on the face of it at least, closing that gap by everyone having clear salary expectations should be a good thing.
However, as always, things are not quite that simple and, although the proposals are not yet law, they could significantly change how vacancies are advertised, how salaries are set and how candidates approach negotiations.
What is the proposed change to salary information in job adverts?
The legislation is not yet in place, so it could change. However, it does seem likely that it will go ahead in some form, and the basics are going to remain. In a nutshell, the Government proposes that all employers should publish pay information in their job adverts. Where a role is not publicly advertised, the candidate would have to receive the information in writing before being interviewed.
However, some really rather important details remain undecided. The consultation period is currently underway, and it is still asking questions such as whether employers should provide a specific salary or perhaps a defined salary range with a benchmark or starting rate. Other areas under consideration are information about bonuses and other financial benefits, details of annual pay reviews or collective bargaining arrangements and so forth.
Until it is finalised, we simply won’t have the details.
Why is the Government considering ‘mandatory salary disclosure’?
The Government is doing this as part of a wider re-shuffle of the equality legislation. The motivation is partly the belief that greater transparency could encourage employers to assess the value of a job before recruiting. This could result in more consistent salaries in all circumstances and for all employees.
There is perhaps a train of thought that because employers know what they are prepared to pay, but candidates often enter the process without that information, there is a disconnect. Publishing it earlier could, in theory at least, help both sides establish whether their expectations are compatible before investing time in applications and interviews.
Our experience of finance roles and real-world practical experience is that salary transparency is already relatively common in the Lancashire/North West area. In fairness, though, it is far from standard practice, particularly in specialist, senior and skills-gap jobs where remuneration is more likely to be negotiable and/or dependent upon experience.
What could salary transparency mean for employers?
The most obvious change will be that it will become more difficult to begin recruitment if you only have a vague idea of what a role is worth.
Before advertising, employers should define/assess:
- What the responsibilities of the position genuinely are
- Where it sits within the organisation
- What comparable employees currently earn
- What the external market is paying
- How much flexibility exists for an exceptional candidate
In our recent article about attracting the strongest candidates, we suggested these as good practice anyway when it comes to appealing to the right applicants. Not only will they help ensure that recruitment is even and done in a structured way, but they may also reveal inconsistencies that have developed over time. All to the good if you want an effective recruitment plan.
Employers may have to compete more openly, which is a double-edged sword
The instant result for candidates will be that they will be unlikely to apply for job roles that are not suitable salary wise. Again, we are being theoretical here, but that should reduce the wasted application and recruitment time that can happen with a non-defined salary range.
That said, publishing salaries makes it easier for candidates to compare similar vacancies. Employers who are offering low to middle market pay may therefore find it harder to attract the more experienced or high achieving people. That doesn’t mean every employer must offer the highest salary. Other options such as flexible working, career development, pension contributions, bonuses, additional holiday and company culture could all still be used to influence a candidate’s decision.
However, employers may well also want to consider their brand and how they explain the complete value of the role. A simple statement like “We are a great place to work” is unlikely to compensate for an unexplained gap between the salary and the top market rate.
What could the change mean for candidates?
The most obvious effect, as we already mentioned, will be that candidates should be able to decide whether a role is financially viable before applying.
For passive applicants with less motivation to change, when an application requires a tailored CV, supporting statement, assessments and several interview stages, there is a lot of speculative work involved. Discovering at the end of that process that the salary is significantly below expectations is just going to discourage them, as well as being a waste of their, and the prospective employer’s, time.
It could create a more balanced salary conversation
Pay transparency gives candidates a clearer starting point for negotiation. It may also reduce the influence of previous earnings and it could perhaps remove the ‘It won’t be worth it’ deterrent when it comes to applications.
A published salary range potentially focuses the conversation more closely on the value of the position and the candidate’s suitability for it. That could well open up a new pool of underpaid and passive candidates.
The top of the range will not be automatic
However, a word of warning here. While this all sounds great, candidates should not assume that every applicant can demand the highest advertised figure.
A genuine range will normally reflect different levels of experience, technical ability and readiness to take on the full responsibilities of the role. Candidates will very much need to demonstrate where they belong within the salary range. This will be particularly important for finance roles where qualifications and experience are major influencers in salary range decisions.
The most productive question for candidates to ask right now may be “What experience and performance would place me at the upper end of my current position in terms of salary expectations?”.
Salary will still be only part of the package
The danger with transparency is it could result in a focus on the ‘money in the bank’ element, when a higher salary does not automatically make one opportunity better than another.
Good candidates will continue to value:
- Employer pension contributions
- Hybrid and flexible working
- Holiday entitlement
- Professional development
- Working hours and travel requirements
- Opportunities for progression
- Job security and organisational culture
A sensible candidate will still need to evaluate the complete opportunity, not just the money on the table.
How should employers prepare?
As we said earlier, the proposal is subject to consultation, and its exact form has yet to be decided. The government has also mentioned a period of adjustment as part of the process. That said, we are writing this is July and the consultation ends in October. So, this change may not be tomorrow, but it is in the relatively near future.
Our advice is to think about reviewing your current approach:
- Examine how salaries are decided and approved.
- Compare advertised salaries with those of existing employees.
- Establish salary bands for recurring roles.
- Benchmark difficult-to-fill positions against the relevant market.
- Decide how bonuses and benefits will be described.
- Train recruiting managers to explain where an offer sits within a range.
If you know where you stand with the above and you have a good recruitment partner who specialises, as we do here, in finance roles, then you can turn the transparency legislation to your advantage.
Those relying on individual negotiations, salary history or the phrase “competitive salary” may have more work to do, though.
A better recruitment conversation or yet more red tape?
Well, the answer to that is probably yes in both cases. Salary transparency will not remove every disagreement about pay, nor will it prevent candidates and employers from negotiating.
What it could do is move the most basic part of that conversation to the beginning of the process. As an ideal result of the change, candidates will know whether an opportunity is realistic, while employers can focus their time on people who understand and accept the broad terms.
For both sides, that could create a recruitment process that is clearer, faster and considerably less frustrating. It could also be less helpful if you are not ready and don’t have a recruitment partner to ensure you draw from the right candidate pool in the first place.