Building transparent reward frameworks

Building transparent pay and reward frameworks 

Robert Shore: Hello, everyone, and thank you for joining us today. My name is Robert Shore, and I’m the HR Insights Editor at Brightmine, formerly known as XpertHR. Welcome to our webinar, Building Transparent Pay and Reward Frameworks. 

Pay transparency is accelerating across Europe, driven by new EU legislation and growing expectations for openness. The question is whether your organisation is getting ahead of the curve and using transparency to strengthen fairness, trust and engagement. That is the question we intend to help you answer today and, indeed, every day. 

To tell you a little about Brightmine and the tools we offer, the Brightmine HR and Compliance Center enables you to confidently navigate complex employee issues, stay ahead of constantly evolving employment laws, such as the Employment Rights Bill 2025, and build your HR practices. Compensation Planning is a self-serve tool that provides employer-reported reward data, market-aligned benchmarking and grading structure creation. Pay Equity Analytics simplifies gender pay gap reporting for both the UK and Ireland, making it easier to meet legal requirements and uncover the root causes of disparities. 

Agenda 

Today, we will begin with a quick overview of EU developments in pay transparency. Sheila Attwood will then analyse the latest Brightmine research on salary visibility in job ads, explaining why pay disclosure matters and how employers are evolving their internal practices. Jennie Jakubowski will show how robust pay and reward frameworks create the structure needed for consistent, defensible and equitable pay decisions. We will then close with a Q&A to help translate insight into impact. 

Speakers 

Sheila Attwood is Senior Content Manager, Data and HR Insights at Brightmine and leads the team responsible for data and market insights content, including employer practice surveys, webinars, podcasts and reward content. She is an expert on company pay awards and is regularly called on by broadcast and print media to comment on pay rates. 

Jennie Jakubowski is Data Operations Manager at Brightmine, with more than 25 years of experience in reward data and analytics. She leads core data operations and oversees bespoke reporting, including executive pay benchmarking, job matching and the development of grading structures. 

I’m the HR Insights Editor, and I look after On Your Radar and our Employment Rights Bill 2025 hub, which is a useful resource for staying on top of UK legislative changes. I started as an international editor at Brightmine, where I kept a close eye on EU directives and legislative changes across other jurisdictions, so I’ll be returning to that area today. 

You can submit questions for our speakers using the Q&A button on your screens. We will try to address as many as possible, along with questions submitted in advance. We will also share a link to a recording of the session and slides afterwards. If there are any technical difficulties during the transmission, we will do our best to resolve them as quickly as possible, so please stay with us. 

EU Pay Transparency Directive – key measures 

Robert Shore: I’ll begin with a brief introduction to the EU Pay Transparency Directive. The UK is no longer an EU member state, but it should quickly become apparent why some acquaintance with the directive’s principal elements will be useful all the same, whether organisations need to comply directly or not. 

The directive requires organisations to implement a coherent set of measures across recruitment, pay setting, staff communications, data reporting and corrective action. In significant part, it aims to reset the balance of power between employee and employer. 

The directive sets out several obligations and rights. Employers will need to report a variety of information relating to the gender pay gap, including overall median gender pay gaps, gender pay gaps in variable pay, the proportion of female and male workers receiving variable pay, distribution across quartile pay bands and the gender pay gap by category of workers. 

Following consultation with employee representatives, management must confirm the accuracy of the information, and the report must be made publicly available. This reporting requirement will initially apply to employers with 250 or more employees but will gradually extend to employers with 100 or more employees. 

The directive is about much more than pay gap reporting. It introduces a broader range of pay transparency measures, puts much more emphasis on the role of employee representatives and makes employers more accountable for their pay structures. 

If pay reporting reveals a gender pay gap of at least 5%, and the employer cannot justify the gap based on objective, gender-neutral factors, the employer will need to carry out a pay assessment in association with employee representatives. This assessment will need to analyse workforce composition, pay levels, variable components by gender and category, the reasons for differences and past remedial actions. It will also have to set out measures to remove unjustified gaps. 

There is a strong element of pre-employment transparency. When filling vacancies, employers will have to provide information about the initial pay level or its range in the job advertisement or before interview. Employers are not permitted to ask job applicants about their pay history, and job titles and vacancy notices must be gender-neutral. 

Employers will also have to make available the criteria they use to determine pay levels and progression. Workers will have the right to request information on their own pay level and average pay levels for the category of workers performing the same work or work of equal value. Employers will have an obligation to inform workers annually of this right and explain how to exercise it. 

EU member states are also under an obligation to put measures in place to prohibit contractual terms that aim to restrict workers from revealing information about their pay. 

An important area of focus is enforcement. The directive significantly increases exposure to litigation and sanctions. Workers who suffer gender-based pay discrimination have a right to full compensation with no fixed upper limit, including back pay, related bonuses, payments in kind, compensation for lost opportunities and interest. 

The burden of proof is another important matter. Where an employer fails to comply with pay transparency requirements, it will be for the employer to prove that there was no discrimination. Workers are also protected from adverse treatment when they exercise their rights, such as asking for pay information. Member states will have to formulate effective penalties, including fines, with enhanced penalties for repeat offences. 

EU member states have until June 2026 to transpose the directive’s provisions into national law. Relevant employers will be required to submit gender pay gap information in 2027. Employers with at least 250 employees will be required to report gender pay gap information every year, while employers with 150 to 249 employees will be required to report every three years. 

For employers with 100 or more employees, the reporting obligation will take effect five years after the directive is transposed into national legislation, and then every three years after that. That will not take effect for a while, but it is on the horizon. 

The directive sets minimum levels only, and individual member states can set more ambitious targets. In some cases, they already do. In some states, for example, smaller organisations already have to publish pay gap information. 

In essence, EU directives are legislative acts that set out the aims for each country, but it is up to each member state to decide how to achieve those aims. The directive ensures a degree of consistency across the EU but allows different approaches as the measures are transposed into national law. 

The UK is no longer an EU member state, so there is no requirement to implement the directive directly. However, a UK company with employees based in EU member states will be affected and needs to consider its position. Multinational employers may wish to adopt the same approach for all employees across the region or align to EU standards. 

More generally, the legislation signals a shift in the balance of power between employer and employee and a decisive, enforceable move towards pay transparency during the hiring process and afterwards, with much greater organisational accountability. 

We receive many questions about how different states are implementing the directive’s measures. This is an ongoing process. The best way to keep up to date is through our EU Pay Transparency Directive implementation table, which is updated regularly and tracks implementation as member states adopt national legislation to meet the directive’s requirements. 

We also recorded a podcast at the end of last year, speaking to lawyers in Portugal and the Netherlands to look in detail at how the directive was being turned into national law. You can hear that on Spotify, Apple Podcasts and other platforms, as well as through our website. That is the Brightmine podcast. 

What is pay transparency? 

Sheila Attwood: Thank you, Robert, and hello, everybody. I’m going to continue the discussion on pay transparency and pick up on elements of the EU directive from a UK employer perspective. I’m not going to talk about gender pay gap reporting in this session, but if you look at the handouts, you will see a link to join our session in a few weeks where we will cover gender pay gap reporting and the gender pay gap action plans we know are coming in the UK. 

I’ll keep my session fairly short because it leads nicely into Jennie’s section on where pay and grading structures come in on pay transparency, particularly around job levels, progression and pay. 

Salaries in job adverts are often the first phase for organisations thinking about pay transparency. That is where we hear it talked about most. The public sector and not-for-profit sector are leading the way here, according to recent Brightmine research. Manufacturing and production organisations have further to go in being more widely open with salaries in their job adverts. 

Benefits of transparency in job adverts 

Most of us know the theory around why sharing salary information benefits both organisations and candidates, but several practical details matter if employers want those benefits to be realised. First, the salary or range in a job advert must be realistic and should not be too wide. A very broad range does not provide the detailed information needed to create the intended benefits. 

The hiring offer must also fall within the range given. Employers need checks in place to make sure that happens, especially where there is a lot of negotiation or manager discretion over what the final rate will be. 

Employers also need to be careful about which figure they give people in job adverts. Reward packages contain more than basic salary, so organisations need to be clear about what the figure refers to. If total compensation includes the value of pension contributions or stock options, for example, it may inflate the figure and give candidates a false impression of the base salary on offer. 

Employers should be prepared to answer questions about the information they provide. If a range has been included in a job advert, the hiring team needs to be able to answer questions at interview about where the starting salary will sit within that range. 

One issue employers may have is that if they advertise a new role with a salary or salary band, existing employees will be able to see it. The EU directive requires this information either in the job posting or before the interview. Many member states have retained that wording in draft legislation. 

In the US, there are examples of this information being made available at slightly different points in the recruitment cycle. That could be a starting point for employers not affected by the EU directive while they put the structures in place to share information at the start of recruitment or in job adverts. 

Overcoming nervousness 

Many US states require a pay range and sometimes a wider description of benefits and compensation in the job posting. There is no federal law on this in the US; these requirements are introduced by states and localities. Some require information during the recruitment process before salary negotiations begin. Others require it before an offer of salary goes to a successful candidate, after interview or before a job offer is made. 

Organisation size also matters in some states. Some requirements apply to all employers or those with at least one employee in the state. Others apply to larger establishments, such as those with 15, 25 or 30 employees. These are still low thresholds compared with some gender pay gap reporting thresholds. 

Ultimately, providing salary information during recruitment may be a stepping stone to going further. The other prerequisite is having a robust pay and grading structure in place, which Jennie will discuss shortly. 

Beyond salaries in job adverts 

After those first steps, pay transparency may become commonplace in other areas of the organisation. Outside salaries in job adverts, pay transparency initiatives are not widely used. When we asked about this in our research, we specifically wanted to know about the sharing of information with employees. 

Around 40% of employers are open about the criteria used to determine a pay rise or the payment of a bonus, and only about a third share details of how employees can progress through a grading structure. Those figures represent a missed opportunity. Providing this information does not give anything away; it helps employees understand how decisions are reached. 

If your organisation does not share this kind of information, a useful starting point is to ask why. It may be because it has not been done in the past, because there are no robust processes in place or because there is not enough information to share. The need for transparency and the desire from employees and candidates will only increase, so understanding the rationale is important, whether within the HR and reward team or more widely with senior leadership. 

The EU directive includes a right for employees to ask for information about their individual pay and average pay levels, broken down by sex. That may be another flashpoint for employers that have made ad hoc decisions on pay in the past and have not sought to rectify unexplained differences. 

Several EU member states have indicated that employees will be reminded annually of this right. Poland proposes doing so by 31 March each year. Some draft legislation also gives employers a set period of months to respond. In the US, some states are introducing legislation for existing employees, allowing them to ask for details of salary levels and requiring salary bands to be available for internal moves as well as external job postings. 

Building transparency in pay award decisions 

I’ll finish by looking at decision-making and the connection between pay transparency and employee engagement. I’m currently running a survey on likely pay award levels this year, including questions about managing employee expectations when it comes to pay rises. The survey is still open, and I will share a link in the chat when I hand over to Jennie. If you take part, I will send you a full copy of our findings. 

Managing expectations around pay is always difficult, because employees are unlikely to say that the pay award they receive exceeds their expectations. However, employers can take steps to ensure that a pay award is at least accepted. The examples on the slide show what organisations are doing to manage expectations, and I have pulled out those that speak to transparency. 

There is one caveat. I have also asked about gender equality and reward, and so far only one-third of organisations say they are using transparent pay-setting processes. I hope that as more responses come in, perhaps from an audience of like-minded individuals, that figure may increase, but it is still quite low. 

Link to pay grading 

We also asked whether organisations have evaluated their job grades and job roles to ensure fairness. Rather than tell you what I am seeing, I’ll ask you that question now through the poll: in light of the focus on pay transparency, is your organisation reviewing its pay frameworks to ensure fairness? 

Poll question 

The options are: yes, we have done that or it is in progress; we are now thinking about it; no, we are not doing anything and have nothing planned; or our organisation does not have a pay framework. If you are in that final category, you are in the right place, because Jennie’s session will be especially helpful. 

We have had quite a few results coming in. It is encouraging to see that almost 60% of you say this has been done or is in progress. About a quarter say you are now thinking about it. I will hand over to Jennie, who will hopefully help those of you in that second group get started. 

Pay grading frameworks and pay transparency 

Jennie Jakubowski: Thanks, Sheila. That is really interesting. In this section, we are going to consider how pay transparency may affect not only those setting up new pay grading frameworks but also existing systems. 

Even if not required in the UK by law for employers with no EU-based employees or only a small number, there are advantages to creating new frameworks or reviewing existing pay frameworks through the lens of pay transparency. Pressure is likely to increase for UK employers to match global best practice, and transparency may become a key differentiator in the market. 

Candidates are likely to increasingly expect, or even demand, that salary ranges and details of career and pay progression are visible from the start. Employers able to meet these expectations will stand out and improve their ability to attract and retain key talent. A degree of transparency becomes a competitive necessity, not just a nice-to-have. 

Employers are likely to face reduced tolerance for opaque decisions around pay. Those with no structured pay and grading framework may find reliance on spot salaries, ad hoc negotiations or out-of-cycle increases increasingly hard to justify from an equity perspective. With no governing structure, how can they be sure — and convince others — that pay decisions were reached fairly and equitably? 

Employers are likely to face a push for grade-based pay ranges with equal access to ranges for those performing equal work, rather than individual pay logic. Where there are pay differentials, they will need to be clearly explained and justified. While not required by UK law, the directive requires employers to use objective, gender-neutral criteria to determine pay and progression. Pay grading frameworks provide the structure needed to meet that requirement in a defensible and auditable way. 

Grade allocation and job architecture 

The starting point when establishing or reviewing a pay grading structure has to be job architecture, and more specifically, the allocation of employees into job grades or bands. It is critical that grade allocation is done in a fair and equitable way, with grades allocated through clearly defined criteria. Ideally, these criteria identify the scope, impact and complexity of each role, rather than simply what people do or what they are called. 

Using a verified third-party system of job levels or an external job evaluation system can help, particularly in ensuring internal bias is not built into the grading system. Pay transparency will expose weak grading systems where grades are poorly defined, inconsistently applied or not tied to objective criteria. 

For example, it will become obvious quickly where employees doing similar work have been assigned to different grades. We encounter this when supporting employers submitting pay data for use in our Compensation Planning solution. It is not uncommon to see organisations where two employees in similar roles differ in pay by significant margins, sometimes because one simply negotiated harder at recruitment. Transparency exposes these situations immediately, and robust frameworks help prevent them. 

Once job architecture is in place, the next step is to determine how pay aligns to each level. This is where market data, internal relativities and career pathways come together. 

When setting pay ranges, there are three key considerations: the width of the range, the market position you want to target and how progression will work within that band or range. For range width, employers might consider narrower bands at early career stages, where roles may be more clearly defined. Narrow ranges can provide clarity, but they can also limit potential for growth. 

At higher job levels, ranges may be broader to allow for more differentiated responsibilities. Broader ranges offer more flexibility, but they require strong governance to avoid perceptions of unfairness. Ultimately, range width depends on what works best for the organisation. 

Another factor is overlap between grades. Too much overlap can make grades meaningless, for example if someone at the top of one grade can earn significantly more than someone approaching the midpoint of the grade above. Too little overlap can mean people need promotions to achieve meaningful pay movement. 

Employers also need to consider their market position or anchor point. Some align ranges around the market median, while others choose a position above or below median depending on pay strategy. Affordability also plays a part. An employer may want to pay at the upper quartile, but it may not be practical or affordable to do so. 

Anchoring the structure in up-to-date market pay data is very important. If ranges do not keep pace with the market, organisations quickly become uncompetitive, particularly for in-demand skills. That can increase turnover and put the entire framework under pressure. Managers may start bypassing the rules to ensure successful recruitment or retention, which erodes internal equity and undermines transparency. 

Progression rules must be clear. Whether progression is driven by skills, competence, contribution or performance, the organisation needs a consistent logic for how individuals move through the range. Progression criteria are what make the range both fair and explainable. 

Internal relativity and wage compression 

Once pay ranges are set, the next challenge is making sure they make sense relative to one another. This is where issues such as internal relativity and wage compression start to emerge, especially at the lower end of the structure. 

A key driver has been the increase in the national minimum wage and the slow erosion of some grade differentials, particularly at lower levels. We see cases where supervisory staff earn little more, sometimes only a few hundred pounds a year more, than the staff they manage. In a transparent environment, this becomes unsustainable and creates a barrier to internal progression, because supervisory roles become less attractive. 

National minimum wage has changed significantly over the past 20 years. In 2005, it first topped £5 an hour. By 2015, it had increased by almost a third over the previous decade. By 2025, it had increased by more than 80% compared with the 2015 rate. 

The impact on pay differentials is stark. Looking at median basic salaries from the Compensation Planning database across this period, differentials between job levels in 2015 were around 20% to 28% for staff at the relevant levels. By 2025, differentials at more senior levels had broadly been maintained, but at lower levels the impact was clear. Differentials for the most junior staff had almost completely eroded, from just over 20% in 2015 to just 1.8% last year. 

The impact is not limited to grades directly affected by national minimum wage. Adjacent grades also feel the effect. At the grades above, differentials fell from just over 25% in 2015 to just over 11% last year. 

This creates a problem for some employers and may require structural redesign of some pay grading frameworks. With greater transparency, these differentials are much more likely to be called into question. 

Internal relativity and wage compression 

One option is to move towards broader or simplified bands. Instead of going long, employers can go wide: fewer grades, but wider ranges. This must be supported by clear criteria for movement within bands to maintain fairness and equality. 

Governance and skills-based frameworks 

How people progress within bands fundamentally determines how equitable the system is. Governance of pay grading frameworks is likely to become even more critical, with frameworks becoming more rule-bound as governance tightens. 

Examples of poor governance include inconsistent spot awards and discretionary allowances offered by individual managers applying different standards. Good governance might involve approval workflows for awards and standard decision-making templates. With greater transparency comes easier detection of pay gaps based on protected characteristics, which then become harder to explain. That can lead to equal pay claims and associated legal and reputational risk. To avoid that, employers must be able to objectively explain their grading criteria. 

One increasingly popular option is to adopt or adapt an existing pay grading framework into a skills-based model. This rewards skills growth and capabilities rather than tenure. In essence, employers set skills milestones that support progression within the band and allow lateral pathways rather than only vertical progression. 

In this model, grades determine the job’s market alignment, while tiers drive pay within the grade itself and determine where within the range an individual sits. Employers define key competencies. Entry-level staff may occupy point one, those who have attained core skills sit at point two, advanced skills at point three and experts at point four. Skills growth determines movement within the range, while movement between grades requires a change in job scope or size. 

In this scenario, high performers can still earn more, but for transparent and clearly justifiable reasons. The arrangement supports fair decisions around pay while enabling career growth and reducing pay compression by differentiating skill value. 

Non-cash rewards and total package 

Moving beyond base pay to other incentives, there are clear advantages to aligning pay grading frameworks with total reward strategies, not only for transparency. Where budgets limit pay growth, some employers are integrating non-cash benefits and wellbeing initiatives with their pay frameworks by aligning grade levels or bands with different benefits packages. 

For example, company car provision is far more common at director level, so an employer might make that benefit available only to the grade occupied by directors. Season ticket loans for public transport are more commonly offered to all staff, so the remaining grades might have eligibility for that benefit. By aligning the total package with the pay grading structure, employers can ensure progression remains meaningful and packages remain attractive even when budgets are stretched. 

Communication is one of the most important parts of any pay grading framework. Even the best-designed structure will fail if employees do not understand how pay works, how decisions are made or what they personally need to do to progress. 

Transparency is not just about publishing pay ranges. It means making the governing principles clear, so staff understand how their pay is determined, the logic behind the pay ranges and what skills or contributions will move them forward. When communication is clear, perceptions of fairness improve and speculation decreases. Staff no longer have to guess or fill in gaps. 

Employers may want to consider a layered approach: published frameworks, ranges and progression rules at the organisational level; manager-led conversations at team level; and individual conversations for role clarity and career development. 

Manager training is important. Managers are often the first line of communication on pay, but they can also be the first line of risk. Even unintended inconsistencies in how managers approach pay discussions can create inequalities, and transparency will expose these immediately. 

Examples include managers delivering messages inconsistently, trying to soften messages, overusing jargon or misunderstanding key terminology. For instance, do managers understand and can they explain what a market median is? Lack of understanding often creates confusion rather than clarity. Structured manager training, possibly including FAQs and toolkits, can help managers have better pay conversations and improve overall outcomes. 

Ultimately, the organisations that handle pay transparency best are not just publishing pay ranges. They are building the underlying structures that make those ranges credible and defensible. Pay grading frameworks are not just compliance tools; they become tools for building ongoing trust and engagement. 

Q&A 

Robert Shore: We have a few questions about the Pay Transparency Directive, which I will try to tackle shortly. First, a question submitted in advance for Sheila: we are looking to redesign our discretionary bonus structure to be more fit for purpose. We are not sure what the changes will be yet. What is the best way to transparently communicate change to a bonus structure to maintain motivation and engagement? 

Sheila Attwood: The fact that you are asking that question and want to be transparent is a good sign. The more understanding employees have, the more likely they are to be on board with and respect changes. If you are looking to bring schemes together, align them with each other or replace a previous scheme that is no longer fit for purpose, give employees that detail. 

Share as much as you are willing or able to share about how you have reached decisions on the changes. Where possible, also explain the likely impact on individuals. A change to a bonus structure may lead to similar outcomes, but if those outcomes are better aligned with the business today, employees need to understand that. 

Employees expect businesses to innovate, move away from outdated practices and move forward. If the bonus scheme changes are part of that same process, frame them in that way. That should help employees understand why changes are being made when they happen. 

Robert Shore: Thank you, Sheila. A question for Jennie: can you help define work of equal value? Does this mean grade only, or grade and job family level? 

Jennie Jakubowski: Work of equal value has a specific meaning in equal pay law. It does not refer to job family or function. It applies whenever two roles, even if they involve completely different types of work, place similar demands on the employee. 

Equal value is determined at the level of the job, in terms of its weight or grade, not at job family level. Two roles can belong to entirely different functions and do entirely different things but still be of equal value if the demands are equivalent. 

The first-instance employment tribunal ruling against Next highlighted this issue. In that case, store assistants and warehouse operatives were found to be performing work of equal value, even though they belonged to different functions and historically had different market rates. 

The tribunal rejected arguments that market forces justified the pay difference. Once the roles were found to be of equal value, paying the predominantly female store staff less than the predominantly male warehouse staff could not be defended. The decision was a first-instance decision, so it does not set legal precedent and may be subject to appeal, but it highlights why we emphasise using a single consistent pay range for roles at the same grade, rather than differentiating by job family, function or type of work. 

Allowing separate functional pay ranges risks embedding historical inequalities, such as paying male-dominated functions more than female-dominated ones for work that has been assessed as being of equal value. 

Robert Shore: Thank you, Jennie. We received some questions about the Pay Transparency Directive. The key point is that the directive mandates certain minimum standards, but many countries go beyond them. For responsibilities relating to workforces in those territories, organisations will need to look at our tracker to see exactly what is being decided. 

At this stage, the directive applies to employers with 100 employees or more in a relevant jurisdiction, but some countries already have lower thresholds. France, for example, has a pay gap reporting requirement for organisations with 50 employees. Employers therefore need to look at the rules in each territory. 

Closing remarks 

Robert Shore: I think that is probably all we have time for, although we do have another webinar coming up soon. Sheila, do you want to say a little more about that? 

Sheila Attwood: Yes, thank you, Robert. In early March, we have a session looking at gender pay gap reporting and, more importantly, gender pay gap action plans. There was also a question submitted ahead of this session asking whether there are any future legislative plans in the UK to address the gender pay gap. 

There are future plans. They probably do not go as far as what the EU directive is asking member states to introduce, but if you join us for the session in early March, I will talk about what the Employment Rights Bill 2025 is asking employers to do around pay equality action plans. Please do join me then. 

Robert Shore: Brilliant. It just remains for me to say thank you to Jennie and Sheila for being with us today. Thank you for joining us for this webinar, and we look forward to seeing you again in the future.