Salary Transparency and Pay Benchmarking for UK SMEs

Showing your numbers: should you put pay in the advert?

Picture this: you post a great job, the role is spot on, but applications crawl in because your advert says "competitive salary". Most candidates now read that as "we would rather not say". Meanwhile, you feel a knot in your stomach at the thought of putting your rates out there for staff, competitors and your nan to see.

This is one of the top questions I get from SME owners: "Do we have to put the salary in?" and hot on its heels, "If we do, how do we know we have the number right?"

So here is the straight-talking version. What UK law actually says, what is trend, how to benchmark pay so you are not guessing, and how to steer clear of equal pay trouble.

Hazel (our Chief Wellbeing Officer) is fully transparent about her own compensation package: belly rubs, biscuits, and first refusal on any dropped toast.

Quick Answer Box

• Do this: benchmark each role against the market, set a salary band, and decide deliberately whether to publish it.
• Avoid this: pulling a number out of thin air, gagging staff from discussing pay, or letting similar roles drift apart in pay for no clear reason.
• Write down: how you benchmarked each role, your salary bands, and the genuine reasons for any pay differences.

What does UK law actually require?

Let us clear this up first, because headlines can make it sound scarier than it is.

There is currently no general UK law forcing you to publish a salary or salary range in a job advert. Putting pay in the advert is a choice, driven by what candidates expect, not a legal duty.

What the law does say matters here:

• Gender pay gap reporting is mandatory, but only for employers with 250 or more staff. Most SMEs sit well below that. Check the current threshold and rules on gov.uk before you assume it applies.
• The Equality Act 2010 governs equal pay and bans pay-secrecy clauses where the purpose is to uncover pay discrimination. In plain terms, you cannot use a contract clause to stop staff comparing notes when they suspect pay is linked to sex, race or another protected characteristic.

Official guidance: gender pay gap reporting on gov.uk and the Equality Act 2010 on gov.uk.

What about the EU Pay Transparency Directive?

You may have seen alarming posts about a new EU directive on pay transparency. Here is the calm version.

The EU Pay Transparency Directive is EU law that member states are turning into their own national rules. It does not directly bind a purely UK business. So if you employ people only in the UK, it is not a rulebook you have to follow.

It is still worth knowing about for two reasons:

• If you employ anyone inside the EU, or plan to, it may affect you there. Get specific advice for that.
• It is shaping expectations generally. Big employers are moving to published ranges, and candidates increasingly expect it everywhere.

Treat the directive as context for where the wind is blowing, not as UK law. Please verify the current transposition timetable before quoting any dates.

Should you publish salary ranges in adverts?

This is a genuine judgement call, and there are real benefits and real risks. Here is the honest balance sheet.

The benefits of publishing pay

• You get better, more relevant applications. People who need more than you can pay self-select out, saving everyone time.
• You build trust. Transparency signals confidence and fairness, which matters to good candidates.
• You sharpen up your own thinking. You cannot publish a range until you know what the role is actually worth, which drives good discipline.
• It supports fairness. Published ranges make it harder for pay gaps to open up quietly between similar roles.

The risks of publishing pay

• Competitors can see your rates. For some roles in tight local markets, that matters.
• Existing staff may compare the advertised range to their own pay and feel aggrieved. If a new starter could come in above a loyal existing employee, you need a story for that before the advert goes live.
• A fixed range can box you in if a brilliant, more experienced candidate appears.

My practical steer for most SMEs: publish a sensible range rather than a single figure, and sort out any internal pay anomalies before you advertise, not after the questions start.

How to benchmark pay fairly

Benchmarking is working out what a role is worth in the real market, so you are not guessing. Underpay and you get fewer, weaker applications and higher turnover. Overpay and you dent your margins. The point is to land the rate right.

Here is a method you can use.

Step 1: define the role properly

You cannot benchmark a job title. Write down the actual responsibilities, the skills and experience needed, and where the role sits. A "marketing assistant" doing social media is different to one running paid campaigns.

Step 2: gather market data from several sources

Do not rely on one number. Triangulate from:

• salary surveys and industry reports for your sector
• current job adverts for similar roles in your area (note the ones that include pay)
• recruitment agencies, who know live local rates
• professional bodies and trade associations
• your own past hiring data

The CIPD has useful background on market pricing and pay benchmarking.

Step 3: adjust for your context

Location, sector, business size and the rest of your package all move the number. A strong benefits offer can let you pitch base pay slightly below a corporate competitor and still win.

Step 4: set a salary band, not a single number

Give the role a minimum and a maximum. Bands give you room to reward experience, structure pay rises, and keep similar roles consistent. They also make your next benchmarking exercise far easier.

Step 5: sense-check against your existing team

Before you finalise, look at what your current people earn for similar work. If the new band would leapfrog a loyal existing employee, deal with that now.

Avoiding equal-pay risk

This is the bit that turns a pay decision into a legal one, so it earns its own section.

Under the Equality Act 2010, men and women must receive equal pay for equal work, or for work of equal value. Pay differences are fine, but only where they are explained by genuine, non-discriminatory reasons, such as skills, qualifications, experience, performance or location.

To keep yourself safe:

• Use consistent salary bands so similar roles are paid on the same logic.
• Write down the genuine reason for every pay decision, especially exceptions.
• Review pay regularly. Gaps usually open up quietly through one-off decisions, not deliberate unfairness.
• Never use a contract clause to stop staff discussing pay where the aim is to uncover discrimination. It is unenforceable, and it looks terrible.

ACAS has clear guidance on equal pay.

A short example

Priya runs a 14-person design agency and needs a mid-weight designer. She is tempted to advertise "competitive salary" and haggle later.

Instead, she defines the role, checks three local adverts that show pay, asks a recruiter, and looks at a sector survey. The market clusters in a clear range. She sets a band with a sensible minimum and maximum, then notices her existing designer of three years sits near the bottom of it. She nudges his pay up first, then advertises the role with the published range.

Result: stronger applications, no awkward "the new person earns more than me" conversation three weeks in, and a written rationale she could defend if anyone ever asked.

Common mistakes (and the fix)

• Mistake: writing "competitive salary" and hoping. Fix: publish a real range, or at least benchmark privately so you are not guessing.
• Mistake: benchmarking off a single source. Fix: triangulate from several, including live local adverts.
• Mistake: advertising a range higher than a loyal existing employee earns. Fix: sort internal anomalies before the advert goes out.
• Mistake: setting one fixed figure per role. Fix: use salary bands with a minimum and maximum.
• Mistake: using a contract clause to stop staff discussing pay. Fix: drop it. It is unenforceable where the aim is to uncover discrimination.
• Mistake: never reviewing pay again. Fix: revisit benchmarks and internal fairness regularly.

What to write down

Keep a simple, defensible record:

• the role definition you benchmarked against
• the sources you used and the market range they pointed to
• your final salary band (minimum and maximum) for each role or grade
• the genuine reason for any pay decision that sits outside the norm
• when you last reviewed pay for fairness, and what you found

If a pay dispute ever lands on your desk, this is the file that quietly wins it.

Bottom line

• There is no UK law forcing you to publish salaries, but candidate expectations are shifting fast.
• Gender pay gap reporting applies only at 250+ staff; the Equality Act 2010 governs equal pay and bans real pay-secrecy gags.
• The EU Pay Transparency Directive is context, not UK law, unless you employ people in the EU.
• Benchmark every role from several sources, set salary bands, and fix internal anomalies before you advertise.
• Write down your reasoning so any pay decision is fair, consistent and defensible.

Right, what do you do now?

If you are about to advertise a role and you are not confident your pay is benchmarked, your bands are consistent, or your internal pay would survive a fairness check, this is exactly the sort of thing we untangle on the HR Advice Line or pick up in an HR Health Check.

No judgement, no jargon. Just a clear view of whether your pay is fair, competitive and safe, and what to tidy up first. Book a discovery call and we will talk it through.