The New Pay Transparency Consultation Explained: Risks And Opportunities For Employers

The government has recently launched a consultation on pay transparency proposals. Principally the government is seeking to ‘fix’ the equal pay system. Amongst the proposals, the government is consulting on whether employers should be required to include salary information in job adverts and to provide written salary information before an interview if the role is not publicly advertised. Ministers have argued that greater pay transparency will help candidates navigate the job market and that this could prevent future discrimination claims.

This consultation follows the government’s Make Work Pay plan, which committed to extending equal pay rights to ethnic minority and disabled workers. The consultation has also been launched following the publication to government commissioned research reports i.e. “Understanding the gender pay gap in the UK” (14 July 2026); “The lived experience of pay discrimination on the basis of race and disability” (14 July 2026) and “Understanding pay discrimination in the UK” (15 July 2026).

In the preamble to the consultation, the government notes that the current equal pay framework is excessively complex, costly and protracted and that there are tens of thousands of claims stuck in the system meaning that cases can take up to a decade to resolve. With this backdrop it is clear that there needs to be reform.

Key questions being asked in the consultation include: what level of transparency around pay should be used during recruitment and whether it should be mandatory to indicate an exact salary, pay range or a benchmark rate and whether additional elements such as bonuses should be included; how should employers be required to identify and remedy unequal pay (i.e. should the tribunal order pay audits); how should pay transparency be enforced and should there be equivalent protections for employees experiencing race or disability pay discrimination (comparable to those available for equal pay claims based on gender).

In addition to this, the government has also reaffirmed its commitment to ensuring mandatory ethnicity and disability pay gap reporting and that employers should continue to prepare for its introduction in future.

For SMEs, the biggest challenge is that pay decisions have often evolved informally as businesses have grown. A new disclosure requirement could expose inconsistencies in pay across similar roles. However, increased transparency may also improve recruitment by helping candidates assess whether or not to invest their time in what can often be onerous job application processes.

Whilst this is still in its infancy, employers should start preparing now by:

• Reviewing all job descriptions and salary bands – this includes establishing clear salary bands for roles (if these do not exist).

• Benchmarking pay against the external market and internal comparators.

• Documenting the rationale for pay differences between employees. This is crucial to help employers ensure that there are legitimate reasons for pay differentials (this will be particularly important in the event discrimination is alleged).

• Training hiring managers to discuss pay openly and consistently (this includes being able to field those awkward questions!)

• Update recruitment processes and advert templates in anticipation of greater pay transparency.

• Essential action: considering how existing employees may react when advertised salaries become visible (particularly where there is a pay differential).

Now is the ideal time for employers to audit salary structures, benchmark roles, and introduce clear, consistent pay frameworks.

By taking proactive steps today, organisations can strengthen recruitment outcomes, improve employee trust, reduce potential equal pay risks, and ensure they are ready for future compliance requirements.

Employers that embrace transparency early will not only be prepared for regulatory change but will also gain a competitive advantage in attracting and retaining talent.

The consultation closes on 27 October 2026 so please continue to watch this space.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.