Currently, over half of UK job postings fail to disclose salary bands and just 16% of companies disclose pay ranges to employees, despite the general consensus among workers being pro-transparency. In an era of distributed workforces and global employers, local startups need to be keeping up with other markets to ensure they can separate themselves from larger players in the race for the best talent – or risk letting them find a home elsewhere.

Understanding the rules and pitfalls for the unprepared 

The directive aims to address inequality by spotlighting gaps in existing remuneration structures and providing workers with better visibility – both into how their pay compares internally and to the labour market. Companies in the EU will need to comply with stricter gender pay gap reporting, ensure transparency in salary and progression pathways for employees, and disclose salary bands for all advertised roles.

While the UK is not subject to the directive, the government has expressed interest in exploring similar measures in early drafts of the Employment Rights Bill. However, given just how many UK businesses have operations in Europe, there is little doubt the new rules will have a spillover cultural influence even without local regulations, and it’s only a matter of time until others follow suit.

The problem with the unclear pay models that abound today is they tend to foster workplace distrust, reducing employee morale and productivity. Workers not being able to gauge how their salaries stack up can lead to increased turnover and thus, added recruitment costs that startups running lean cannot afford. In an era where borders are no longer a limitation to finding great opportunities, if UK organisations fail to keep up with global trends it’s never been easier for their teams to look abroad for organisations that are more transparent, and therefore more attractive.

Embracing transparency – even amid growing pains

For HR teams to truly embrace pay transparency, they need to go beyond the obvious, like adding salary bands to job postings and engage with more nuanced conversations about pay gaps and what employees expect. With the right foundations, the long-term benefits of a clear and transparent pay model – like stronger morale, better retention, and a more inclusive culture – easily outweigh the initial growing pains.

Being transparent isn’t just about sharing numbers: it’s also about explaining the “why” behind them. That’s why having a clear compensation philosophy and solid strategy to back it up is so important. Companies should be working toward a well-defined approach that clearly shows people where they stand in the market and within the business, and how their pay reflects performance, company values and business goals. Building that framework means balancing competitiveness with fairness and managing expectations along the way.

And as startups evolve during their growth journeys, so should their approaches, whether that’s updating job specs or rethinking incentives. With a strong strategy in place, leaders can confidently tackle tough questions like: Why does my colleague earn more? How is my salary set? What can I do to grow?

When those answers are clear and consistent, employees can more easily trust their employers and are less likely to experience push factors stemming from uncertainty or feeling underappreciated. Startups often face issues competing with more established names for talent, but investing time and effort into making workers feel valued can keep their heads from turning to those bigger players.

Moving forward

If you’re currently not planning for these changes, you’re already behind. Rather than waiting for regulations to be enacted, there’s little reason UK startups can’t start getting their houses in order today. Plus, with the new trade deal with the European Union, it will put startups with international ambitions in better stead to expand into the continent if they’ve already given themselves a head start by aligning with the EU’s directive.

HR teams will know better than anyone how complex and costly hiring can be, and better transparency benefits both sides of the coin. Employees who trust their leaders are less likely to feel discontented, and jobseekers are more likely to seek roles where it’s clear how well they’d be paid. All in all, being more open is increasingly becoming a no brainer – so what are we waiting for?

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