How to Build Defensible Pay in the Age of Pay Transparency and AI

Key takeaways

1. Treat the EU Pay Transparency Directive as the benchmark, even if you only employ people in the UK

   Hill described the Directive as the most robust example of where pay legislation is heading. It requires employers to show a role's value using objective, gender-neutral criteria, to publish pay ranges and progression criteria up front, and to report on groups of workers doing work of equal value. Hill expects the UK to follow the same direction.

2. Do not rely on market rate, business size or job title alone to justify base pay

   Hill said recent cases have raised the bar for justifying pay differences. Hill described a German case in which a department head compared her pay with a peer running a bigger department, and the size of the department did not justify the gap in base pay. A bigger remit may justify bonus or additional pay, but not base pay on its own.

3. Equal pay does not mean flat pay, but every difference needs a recorded reason

   Hill said the law allows you to pay people doing equal work differently, as long as the difference rests on an objective, gender-neutral reason backed by evidence. Record the reason at the time of the decision, so an information request can be answered later.

4. Revisit fast pay decisions before transparency brings them into the open

   Hill gave the example of a hire paid above range because they were the only candidate. Right at the time, it can look unfair two years later, when nobody remembers why. Some employers now use clear pay bands with no salary negotiation to take bias out of offers.

5. Build pay on evaluated work, with market data as an input rather than the justification

   Hill set out the layers: level and evaluate roles, organise them in a job architecture, agree pay principles, attach pay bands to groups of roles of equal value, and record the contextual factors behind each individual decision. Market data sets where bands sit, and a regular pay equity analysis checks whether the recorded reasons actually explain the gaps.

6. Keep premiums and legacy pay visible and temporary

   The expert panel Hill drew on advised paying a premium for scarce skills separately from base pay, so it can be removed when the skill stops being scarce. Tenure is not a proxy for competence. Legacy pay should be explicitly red-circled, frozen rather than increased, with the gap shown to be closing.