The UK’s pay transparency plans need to work for small businesses too

Later on this year, a new law could force employers to publish salaries in every job advert, something that a lot of businesses and HR teams have historically avoided. When you think about the principle behind it – saving candidates time, ensuring fair compensation – it’s hard to argue with. But, as with everything in business, the reality is a lot more complicated.

I’ve worked with small businesses throughout my whole career, and this is one of the biggest changes to recruitment I’ve seen in a long time. Under proposals now being consulted on by the Cabinet Office, employers across England, Wales and Scotland could soon be required to publish salary information in every job advert. Whether that means a precise figure, a pay range or a benchmark rate is still being decided, but it’s safe to say that secrecy around pay is being pushed out of the labour market.

Speak to any candidate and they will tell you this is overdue. Remuneration remains one of the key reasons someone might leave, or join, a company and for most jobseekers, transparency is increasingly seen as a basic signal of fairness.

For ministers, the argument is quite straightforward too. If people know what a role pays before they apply, it becomes harder for unconscious bias, inconsistent negotiation or opaque decision making to shape outcomes behind closed doors.

As I said, in principle, it’s hard to argue with. The question is whether the policy is being designed for the reality of British business.

The transparency gap

This news has landed at a difficult moment for employers. Small businesses are already dealing with higher employment costs, payroll complexity and a wave of new workplace regulation. For most of them, recruitment isn’t run by a dedicated team with salary benchmarking software and formal job evaluation frameworks. It’s run by a small HR team, a single person, or even a founder trying to hire quickly while keeping the business growing.

That distinction matters because transparency is not simply a case of typing a number into a job advert.

Once a salary is published, employers need to be able to explain why that number exists, how it compares with similar roles internally and what would justify someone being paid at the top or bottom of the range. Bigger businesses have the infrastructure to answer those questions, whereas many smaller businesses don’t. That creates a risk that has largely been absent from the public debate.

Big business will cope. Will everyone else?

The businesses most likely to adapt smoothly are those that already have structured pay frameworks, HR resources and access to market data. In practice, that tends to mean larger employers and firms concentrated in major cities. For smaller regional employers, the picture could be very different.

Imagine a 40-person business from a small town in Wales competing for a specialist employee against a handful of local rivals. Publishing a salary range doesn’t just inform candidates, it informs competitors too. And in sectors where talent pools are small, that information can quickly become a roadmap for poaching.

That doesn’t mean the concern should block reform, but it does mean ministers should acknowledge that the cost of transparency is not evenly distributed.

Small businesses make up 99% of all businesses, and yet policy is often designed around the capabilities of big business. This can unintentionally increase the burden on the very businesses that create most jobs.

Looking beyond the pay packet

The majority of small businesses I speak to don’t have the budgets to compete with larger companies when it comes to salary. Could this reduce the number of applicants they receive? It’s a worrying thought.

What SMEs lack in budgets, they make up for in opportunity. I started my career as an apprentice accountant in a small business and there’s no doubt that working directly with a founder and seeing first-hand how a business operates shaped the rest of my career. Those experiences are difficult to put a price on.

We’re in the midst of a cost of living crisis, with unemployment at an all time high. Of course, salary needs to be a key piece of the puzzle. But we also need to factor in other parts of the package – exposure, team morale, flexibility, recognition, personal development. If these aren’t prioritised, then we risk making the recruitment process far too transactional.

A better route forward

I believe the danger is not the principle of transparency, but the possibility of implementing it without enough support for smaller employers.

If the government wants this reform to succeed, it should pair any disclosure requirement with practical guidance on pay banding, simple job evaluation tools and a phased introduction for SMEs. Otherwise, businesses that have never formally documented their pay structures could find themselves facing a significant administrative exercise overnight.

Done well, pay transparency could reduce suspicion, improve trust and make recruitment more efficient for both employers and candidates. Done badly, it risks becoming another compliance obligation that falls hardest on firms with the least capacity to absorb it.

Britain is right to want a fairer and more transparent labour market. The challenge is ensuring that, in trying to open up pay, we don’t inadvertently widen the gap between the businesses that are equipped for transparency and those that are simply trying to grow.