What the UK’s new job adverts and salary bands could look like
The Competition and Markets Authority (CMA) has thrown its support behind the government’s plan to disclose pay in job adverts, but cautioned that the adverts need to be formatted properly so as not to impact competition.
On 6 November, Prime Minister Andy Burnham announced that the government will make it mandatory for job adverts to ‘say what you pay’ by making the publication of salaries a legal requirement.
“The CMA is broadly supportive of improving pay transparency in recruitment. Well-designed disclosure requirements can reduce information asymmetries and search costs, improve matching between workers and jobs, and strengthen competition between employers for labour,” it said in a note on Tuesday (10 November).
“However, the precise design matters: requirements should provide useful information to candidates without unnecessarily disclosing granular information that could reduce competitive uncertainty between employers.”
It added that requiring employers to disclose either a binding minimum salary or a pay range with a binding minimum and indicative upper bound may offer the best balance between improving information for jobseekers, promoting competition and preserving scope for individual negotiation.
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The CMA specifically warned that the way that salaries are presented could actually have a negative impact on the job market.
“The extent to which the risks of weakened incentives to compete are likely materialise will depend on the nature of the salary information employers are required to disclose,” it said.
“The risks are likely to be greater where disclosure facilitates coordination by creating a focal point for salary offers or reduces competitive uncertainty about final salary likely to be agreed between employer and employee.”
These risks are likely to be greatest where employers must disclose a specific salary, it said.
“This applies whether the disclosed salary is binding, such that the employer cannot increase it following assessment or negotiation, or nonbinding, such that the employer retains flexibility to vary its offer.
“A specific non-binding disclosure may present a particularly significant focal-point risk, since it increases transparency over employers’ stated salary offers while preserving their ability to depart from those offers.18
“A specific binding disclosure, by contrast, eliminates the opportunity for individual salary negotiation and reduces competitive uncertainty about the final salary agreed between employees and employers,” it said.
The CMA proposed two alternatives that it said would protect both competition and individual negotiation:
Disclosing a genuine minimum salary, below which the successful candidate cannot be appointed – this would not limit the employer’s ability to offer a higher salary following assessment or negotiation.
Disclosing a credible pay band with a genuine and binding minimum salary and an indicative upper bound. This would provide candidates with the benefit of more information about what an employer may be willing to pay, while retaining scope for the final salary to be negotiated above the minimum. The government would need to consider how to prevent employers undermining the policy objective by using excessively wide pay bands that provide little meaningful information.
“In line with the risks outlined above, we would propose the bottom of the band should be a binding minimum, while the upper bound should be indicative rather than a binding constraint on the final salary,” it said.
