Your new hire may be paid a competitive salary and still earn almost as much as the person training them.

That is not simply a pay anomaly. It is a warning that external competitiveness and internal fairness have drifted apart.

Salary benchmarking shows what the market pays for a role at a given point in time. It is essential, especially when organisations are competing for scarce skills. But a market rate is a reference point, not a complete reward decision.

Internal equity asks a different question: what will a new offer mean for employees already doing comparable work? When external pay is reviewed regularly but existing employees’ pay is considered only at the annual review, the two processes begin to move at different speeds.

If that gap is left unchecked, pay compression follows. A new starter may join on a salary close to that of an experienced employee who has built expertise, taken on more responsibility and is expected to train or support them.

What the Research Tells Us

Recent research from IRIS Software Group illustrates the issue. In a Censuswide survey of 511 UK senior HR professionals and 500 UK employees with two to five years of full-time work experience, 32% of HR leaders said the pay gap between young professionals and entry-level recruits had narrowed over the previous two years. The average reported difference was £650 a year.

The employee view is just as important. 71% of employees with two to five years’ experience said a shrinking pay gap made it harder to feel motivated to train or help new starters.

Among those who knew what a new starter earned, 69% said they felt undervalued, frustrated or disappointed.This matters because experienced employees often carry institutional knowledge and support new colleagues. When the pay gap no longer reflects that contribution, the organisation risks weakening knowledge transfer and confidence in progression.

The findings show that concern is not yet translating into action. Although 84% of HR leaders were worried about losing employees who felt their additional experience and responsibilities were not reflected in their pay, only 20% said their organisation planned targeted salary adjustments.

Pay compression has several causes. These include rises in the National Minimum Wage and National Living Wage, competition for talent, scarce skills, pressure to offer attractive starting salaries and salary bands that are not reviewed often enough.

The deeper issue is often governance: external pay is tested when a vacancy becomes urgent, while the value of existing roles is revisited far less often. Recruitment decisions then become disconnected from progression and retention decisions.

Why Transparency Matters

Greater pay transparency will not create these inconsistencies, but it will make them easier to see and harder to defend.

The EU Pay Transparency Directive required EU Member States to bring the necessary national laws into force by 7 June 2026. Implementation has varied, but the deadline marks a significant shift towards greater visibility of pay ranges, pay-setting criteria and pay differences for organisations operating in the EU.

It is not a direct UK employment-law obligation simply because the UK was once an EU Member State.

In the UK, employees do not currently have a general right to know what colleagues earn. However, certain pay discussions are protected when their purpose is to establish whether a difference may be linked to a protected characteristic.

The practical point is that greater visibility places more pressure on organisations to explain how pay is set, why differences exist and how employees can progress through the salary structure.

Recent Ministry of Justice figures also show a sharp rise in Employment Tribunal activity overall. Between April and June 2026, single-claim receipts increased by 28% compared with the same quarter in 2025, while the open single-claim caseload rose by 51% to 70,000. These are not equal-pay figures, but they underline the importance of being able to explain how pay decisions are made.

The long-running Asda equal-pay litigation is another reminder that legal comparisons do not necessarily end with job titles, reporting lines or organisational functions. Depending on the facts, the analysis may consider whether roles are of equal value by looking at factors such as skill, effort and responsibility.

Internal equity is broader than equal pay in the legal sense, which concerns equality between women and men doing equal work or work of equal value. A compressed pay relationship may be unfair, demotivating or commercially risky without automatically being unlawful discrimination.

The question is not simply whether a pay difference exists, but whether the organisation can explain it, apply its reasoning consistently and show that any exceptions are properly governed. International Equal Pay Day falls on 18 September and focuses on equal pay for equal work or work of equal value between women and men. It is a useful opportunity for leaders to consider whether pay across their organisation is fair, explainable and sustainable.

A More Connected Reward Process

Salary benchmarking matters, but it should be the first step in a wider assessment of internal equity.

Benchmarking should inform a wider review of internal equity. Every competitive offer should trigger a proportionate assessment that connects market data, role evaluation and clearly defined salary bands.

Market benchmarking tracks changes outside the organisation, while internal-equity reviews assess what those changes mean for existing employees. Salary bands then provide a consistent structure for recruitment, progression and pay review.

Before approving an offer, leaders should ask:

• Who is already doing comparable work?
• What experience, skills and responsibilities do they bring?
• What will the proposed offer do to the pay relationship with those employees?
• Will it create compression or pay inversion?
• Does it sit within a clear and defensible salary structure?
• Can the difference be explained consistently?
• If an exception is being made, is it documented and governed appropriately?

Fairness does not require every employee to be paid the same. It requires differences to reflect credible factors such as role scope, skills, experience and contribution, with reasoning that can be explained consistently.

The strongest reward frameworks bring market benchmarking, internal role equity and transparent salary bands into a single decision-making process.

1. regular salary benchmarking;

2. internal role-equity analysis; and

3. the development of transparent, defensible salary bands.

The value is not in producing another market report. It is in turning market evidence into better decisions about hiring, progression, retention and pay, while giving managers and employees a clear account of how those decisions have been reached.

Leaders therefore need to consider both the external market and the effect of each pay decision on existing employees. What is the market telling us, and what will this decision signal to the people we already employ?

Considering both the external market and the effect on existing employees helps organisations recruit competitively while retaining trust, supporting progression and protecting the experience on which performance depends.

Henley Insights Group helps organisations connect market benchmarking, internal role equity and transparent salary bands in a consistent and defensible reward process.

For more information, please get in touch with Emma Caiger – emma.caiger@henleyinsightsgroup.com

From Identifying Inconsistencies to Addressing Them

Identifying pay inconsistencies is only half the challenge. Once an issue has been found, employers need to understand why it exists and decide what, if anything, needs to change.

A useful process is:

1. Diagnose Review current roles, grades, salaries, job descriptions and structures to understand the starting point.

2. Evaluate Establish the relative size and responsibilities of roles using a consistent job evaluation methodology.

3. Benchmark Compare salaries against reliable external market data to understand how current pay compares.

4. Identify Highlight anomalies, unexplained differences and areas where the organisation may be exposed to greater risk.

5. Understand Look at the reasons behind each difference. Is it supported by the role, market conditions or another objective factor, or is it the result of a historical or inconsistent decision?

6. Prioritise Not every issue can or needs to be addressed immediately. Determine which inconsistencies present the greatest risk or require the most urgent attention.

7. Remediate Develop a realistic plan for correcting pay, grading or structural inconsistencies. Depending on the issue, this may need to happen gradually rather than through an immediate change.

8. Communicate Give managers the information and confidence they need to explain how pay and progression decisions are made.

9. Monitor Continue to review salaries, market movements, roles and internal relativities. Pay structures need to evolve alongside the organisation.

The aim isn’t necessarily to remove every difference in pay. There may be legitimate reasons why employees or roles are paid differently.

The aim is to ensure those differences can be understood, supported by evidence and objectively explained.

Henley Insights Group: How we can help

Preparing for greater pay transparency can highlight questions that organisations have not previously needed to answer.

• How do we know if our job grades and salary bands are fair and consistent?
• How can job evaluation help us identify pay inconsistencies?
• Are our salary ranges competitive with the current market?
• How can salary benchmarking help us set fair and competitive pay ranges?
• How do we identify and explain pay differences between similar roles?
• Does our job architecture provide clear and consistent job families, levels and career paths?

At Henley Research, we work with organisations to answer these questions and build a stronger foundation for fair and transparent reward decisions.

Our support includes:

• Job evaluation to establish the relative value of roles and identify potential inconsistencies.
• Salary and market benchmarking using relevant market data to understand external competitiveness.
• Pay and grading structures that provide a clearer and more consistent framework for reward decisions.
• Job architecture to create logical job families, levels, career paths and role structures.
• Pay analysis to help identify and understand inconsistencies across roles, teams and locations.
• Reward frameworks that give organisations a clearer basis for making and explaining pay decisions.

If your organisation is reviewing its approach to pay transparency, we can help you identify where inconsistencies exist and develop a practical approach to addressing them. To find out more, please get in touch with Emma Caiger: emma.caiger@henleyinsightsgroup.com

This article is intended for general information and does not constitute legal advice.

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How to identify and address pay inconsistencies through job evaluation, market benchmarking and job architecture

The EU Pay Transparency Directive is changing how organisations both within and outside of the EU think and talk about pay.  EU Member States were required to bring the Directive into national law by June 2026. While the exact rules vary between countries, the overall direction is clear: employers are expected to be more open about how pay is decided.

The Directive includes requirements around:

• Sharing salary information with candidates during recruitment.
• Not asking candidates about their salary history.
• Giving employees greater access to information about pay.
• Reporting on gender pay gaps for certain organisations.
• Taking action where pay differences cannot be objectively explained.

As pay becomes more transparent, expectations are changing too. Employees and candidates, both within the EU and further afield, increasingly want to understand not just “What does this role pay?” but “Why does it pay that amount?”

This means organisations need to be able to explain how salaries have been set, why differences exist and whether people doing work of equal value are being treated fairly and consistently. Importantly, these expectations are not limited to the EU.

Why is this relevant to the UK when we are no longer in the EU? 

Although UK employers are not directly bound by the EU Pay Transparency Directive, its influence is likely to extend beyond the EU. UK businesses with European operations or employees may need to meet local requirements, while greater transparency could also shape candidate and employee expectations more widely. Adopting similar principles, such as clearer salary ranges, consistent pay-setting criteria and regular analysis of pay gaps, can help organisations strengthen trust, support fair and defensible reward decisions, attract talent and prepare for the possibility of further UK regulation. The Directive therefore provides a useful benchmark for good practice, even where compliance is not mandatory.

The UK Government is already encouraging employers to be clearer about how decisions on pay and progression are made. This includes reviewing how jobs are classified, sharing how decisions about pay bands are made and providing clearer criteria for salary reviews and promotions.

Taking the opportunity to review job evaluation, salary benchmarking and job architecture now can help employers identify inconsistencies before greater transparency brings them to the attention of employees and candidates.

What happens when pay becomes visible?

Inconsistencies that may previously have gone unnoticed can quickly become more visible.

For example, greater pay transparency may uncover:

• Employees doing comparable work on significantly different salaries.
• Similar roles sitting within different grades.
• Salary bands that have not kept pace with the external market.
• Historical pay decisions that are difficult to justify today.
• Job titles that do not accurately reflect responsibilities or seniority.
• New recruits being paid more than longer-serving employees.
• Inconsistencies between departments, locations or countries.

A useful question for employers to consider is:

If every employee could see the salary range and grade for every role tomorrow, how confident would you be explaining the differences?

Why do pay inconsistencies develop in the first place?

Pay inconsistencies can emerge gradually as organisations grow, restructure, recruit and respond to changing market conditions.

They can result from:

• Counteroffers and retention decisions.
• Promotions and organisational restructuring.
• Changes in the external market.
• Acquisitions or rapid business growth.
• Inconsistent approaches to job evaluation.
• Different recruitment practices between teams.
• A lack of clear salary and grading structures.

For example, an organisation may need to offer a higher salary to attract someone with a particularly scarce skillset. Elsewhere, a long-standing employee’s role may have grown considerably without their grade or salary being reviewed.

This is why a pay difference isn’t automatically a pay problem. The important question is whether an organisation can objectively explain why that difference exists. Job evaluation, market benchmarking and job architecture each provide a different way of answering that question.

Job Evaluation: Understanding the Value of the Role

Job evaluation is a systematic process used to understand the relative value of different roles within an organisation. It focuses on the role’s duties, responsibilities and requirements, rather than the performance or characteristics of the individual carrying out the role.

Job evaluations typically consider factors such as:

• Knowledge and skills: The training, expertise and technical ability required.
• Responsibility: The level of decision-making, supervision and accountability involved.
• Effort: The mental, physical or emotional demands of the role.
• Working conditions: The environment and any particular demands or hazards associated with the work.

By applying the same evaluation methodology across roles, employers can compare jobs more objectively and identify where inconsistencies may exist. For example, two roles with very different job titles may be found to have a similar level of responsibility and organisational value yet sit within different grades or salary ranges. Equally, a role may have evolved significantly over time without its grade being reviewed. Someone who joined an organisation several years ago may now have responsibilities that are very different from those included in their original job description.

Job evaluation can bring these discrepancies to light by looking beyond job titles, individuals and historical pay decisions to assess what the role actually requires. It gives employers an evidence-based starting point for asking an important question: Are roles of comparable value being treated consistently within our organisation?

Market Benchmarking: Understanding What the Market Pays

While job evaluation helps employers understand how roles compare internally, market benchmarking looks outside the organisation to understand what similar roles are being paid elsewhere.

Market benchmarking involves comparing salaries against reliable market data for comparable roles. This helps employers understand whether their pay is competitive and, importantly, identify where inconsistencies may have developed.

For example, benchmarking may highlight:

• Roles being paid significantly above or below the market rate.
• Salary bands that have not kept pace with changes in the market.
• New employees being recruited at higher salaries than existing employees doing similar work.
• Certain departments or roles where salaries have increased more quickly than others.
• Similar roles being benchmarked differently across departments, locations or countries.

However, salary benchmarking isn’t as simple as comparing job titles. Two people with the same title can have very different levels of responsibility and job scope. Location, sector, organisation size and demand for particular skills can also influence what the market pays. This is why using relevant and reliable data is so important, employers need to make sure they are comparing like-for-like roles and understand the reasons behind any differences they uncover.

Market benchmarking also doesn’t mean organisations should automatically pay whatever the market average suggests. Instead, it provides evidence to help employers decide where they want to position themselves against the market and whether existing salaries and salary ranges continue to make sense.

When combined with job evaluation, employers can start to build a much clearer picture of pay.

Job evaluation asks: Are roles being valued consistently within our organisation?

Market benchmarking asks: Does what we’re paying make sense against the external market?

Together, they can help employers identify where pay differences are justified, and where they may need a closer look.

Job Architecture: Bringing Everything Together

Job evaluation and market benchmarking provide valuable information about individual roles and salaries, but organisations also need a clear structure that connects those roles to one another.

Job architecture provides a framework for organising roles according to factors such as job families, levels, grades and career paths. It creates a consistent structure that shows where different jobs sit within an organisation and how they relate to one another. For example, an organisation might group roles into job families such as Finance, HR, Sales, Marketing and Technology. Within each family, roles can then be organised by level, from entry-level positions through to management and senior leadership.

It can also help identify inconsistencies by showing where roles do not fit logically within the wider structure. For example, a role may be sitting at a higher level than other jobs with comparable responsibilities, or two similar roles may have been assigned to completely different grades simply because they sit within different departments.

Job architecture can therefore help organisations:

• Create consistent job families and levels.
• Clarify the difference between roles at different levels of seniority.
• Align grades and salary ranges more consistently.
• Identify duplicate, overlapping or unclear job titles.
• Establish clearer career and progression pathways.
• Apply job evaluation more consistently across the organisation.
• Make market benchmarking easier by creating clearer role definitions.
• Give employees and managers a better understanding of how roles and pay fit together.

When employees can clearly see how roles are structured and what distinguishes one level from another, they can better understand their potential career path. Managers have a clearer framework for discussing progression, and HR teams have a more consistent basis for recruitment, workforce planning and succession.

From Identifying Inconsistencies to Addressing Them

Identifying pay inconsistencies is only half the challenge. Once an issue has been found, employers need to understand why it exists and decide what, if anything, needs to change.

A useful process is:

1. Diagnose Review current roles, grades, salaries, job descriptions and structures to understand the starting point.

2. Evaluate Establish the relative size and responsibilities of roles using a consistent job evaluation methodology.

3. Benchmark Compare salaries against reliable external market data to understand how current pay compares.

4. Identify Highlight anomalies, unexplained differences and areas where the organisation may be exposed to greater risk.

5. Understand Look at the reasons behind each difference. Is it supported by the role, market conditions or another objective factor, or is it the result of a historical or inconsistent decision?

6. Prioritise Not every issue can or needs to be addressed immediately. Determine which inconsistencies present the greatest risk or require the most urgent attention.

7. Remediate Develop a realistic plan for correcting pay, grading or structural inconsistencies. Depending on the issue, this may need to happen gradually rather than through an immediate change.

8. Communicate Give managers the information and confidence they need to explain how pay and progression decisions are made.

9. Monitor Continue to review salaries, market movements, roles and internal relativities. Pay structures need to evolve alongside the organisation.

The aim isn’t necessarily to remove every difference in pay. There may be legitimate reasons why employees or roles are paid differently.

The aim is to ensure those differences can be understood, supported by evidence and objectively explained.

Henley Insights Group: How we can help

Preparing for greater pay transparency can highlight questions that organisations have not previously needed to answer.

• How do we know if our job grades and salary bands are fair and consistent?
• How can job evaluation help us identify pay inconsistencies?
• Are our salary ranges competitive with the current market?
• How can salary benchmarking help us set fair and competitive pay ranges?
• How do we identify and explain pay differences between similar roles?
• Does our job architecture provide clear and consistent job families, levels and career paths?

At Henley Research, we work with organisations to answer these questions and build a stronger foundation for fair and transparent reward decisions.

Our support includes:

• Job evaluation to establish the relative value of roles and identify potential inconsistencies.
• Salary and market benchmarking using relevant market data to understand external competitiveness.
• Pay and grading structures that provide a clearer and more consistent framework for reward decisions.
• Job architecture to create logical job families, levels, career paths and role structures.
• Pay analysis to help identify and understand inconsistencies across roles, teams and locations.
• Reward frameworks that give organisations a clearer basis for making and explaining pay decisions.

If your organisation is reviewing its approach to pay transparency, we can help you identify where inconsistencies exist and develop a practical approach to addressing them. To find out more, please get in touch with Emma Caiger: emma.caiger@henleyinsightsgroup.com

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Starting in June 2026, EU member states will introduce a new framework that fundamentally shifts the current pay equity laws. On 7th June, each member state will have to sign into law more transparent legislation on remuneration and gender pay gaps.  

Employers will be required to: 

• Share salary ranges with candidates before hiring  
• Stop asking about pay history  
• Provide employees with access to pay data 
• Report on gender pay gaps  
• Take action where unexplained gaps exist 

These changes will undoubtedly alter major aspects of the employment lifecycle, namely on the initial recruitment side, as HR, Hiring Managers and Talent Acquisition Specialists will no longer be able to ask about previous salaries, and will have to be transparent about salary ranges for each role. It also requires companies to be much more proactive about gender pay gap reports, and employees will be entitled to financial compensation if an unexplained gender pay gap is revealed, through a tribunal system. 

These broader changes will go into effect from 7th June 2026, but each member state does have some level of subjective control over the legislation. For example, one country could decide that salary ranges must be available at the outset with a job advertisement, whereas another could opt for salary ranges to be made available at interview. 

As we’ve left the EU, what does this mean for the UK?

Any UK employer that has employees or operations within the EU must comply with the local laws, including the EU Pay Transparency Directive. This includes subsidiaries, branches, and even remote EU-based employees. In effect, even if a company’s headquarters are UK-based, any employee residing in the EU will legally have the right to access pay data, including gender pay gap reporting, and may be entitled to compensation if not provided or if unexplained gaps are found. It also impacts UK Hiring Managers who are looking to recruit from these talent pools, as they will not legally be able to ask about candidates’ historical pay. 

Even when not legally required, most firms won’t run two competing systems; maintaining separate EU vs UK pay frameworks is administratively complex and culturally inconsistent, and it is anticipated that many organisations will “level up” their UK practices to match these new EU standards. 

These spillovers will most likely include: 

• Publishing salary bands in UK job ads 
• Standardising job architecture and grading globally 
• Aligning pay transparency polices across jurisdictions 
• Undertaking external job evaluations and gender pay gap reporting

Trying to maintain transparent salary bands in the EU and opaque or inconsistent practices in the UK creates both administrative friction as well as reputational risk. 

 Competitive pressure in talent markets 

Any UK employer that has employees or operations within the EU must comply with the local laws, including the EU Pay Transparency Directive. This includes subsidiaries, branches, and even remote EU-based employees. In effect, even if a company’s headquarters are UK-based, any employee residing in the EU will legally have the right to access pay data, including gender pay gap reporting, and may be entitled to compensation if not provided or if unexplained gaps are found. It also impacts UK Hiring Managers who are looking to recruit from these talent pools, as they will not legally be able to ask about candidates’ historical pay. 

Even when not legally required, most firms won’t run two competing systems; maintaining separate EU vs UK pay frameworks is administratively complex and culturally inconsistent, and it is anticipated that many organisations will “level up” their UK practices to match these new EU standards. 

These spillovers will most likely include: 

• Publishing salary bands in UK job ads 
• Standardising jo architecture and grading globally 
• Aligning pay transparency polices across jurisdictions 
• Undertaking external job evaluations and gender pay gap reporting

Trying to maintain transparent salary bands in the EU and opaque or inconsistent practices in the UK create both administrative friction as well as reputational risk. 

Changes in gender pay gap reporting 

The UK currently has gender pay gap legislation, but the EU Directive offers several distinct additions to the current UK mandates. In the UK, gender pay gap reports are mandatory for companies over a certain size, but there’s no prescribed remediation required when gaps are identified. 

Once the EU Directive is in place, companies that operate within the EU, that are of a certain size, will have required gender pay gap reporting plus mandatory actions if the gap is >5% between genders for unexplainable reasons. 

These changes create a regulatory divergence risk for companies operating in both the UK and EU, with many companies opting to follow the EU legislation. HR leaders in the UK are already seeing this as a likely policy direction in the UK, with legislation potentially tightening over the coming years surrounding unexplainable gender pay gaps, which currently have to be reported, but not addressed. This EU shift will move from gender pay gap visibility, to pay gap accountability. 

Data and analytics implications 

Operationally, this creates a data problem just as much as it creates a compliance one. In the EU, companies will need robust job architecture/levelling, consistent pay banding, ability to analyse equal work / work of equal value, and auditable gender pay gap calculations. 

These needs will drive investment in reward analytics, a demand for talent intelligence (particularly regarding job evaluation, pay grading, salary band development, salary benchmarking and gender pay gap reporting), and the implementation of a standardised global compensation framework.

What’s the bottom line for UK employers? 

Even without a direct legal requirement, the most forward-looking organisations are already acting. 

Typically, this starts with: 

• Auditing pay data and identifying gaps 
• Reviewing job architecture and role comparability
• Defining clear, defensible salary ranges 
• Aligning recruitment practices with greater transparency

The EU Pay Transparency Directive is more than just a piece of legislation; it’s a signal that expectations around pay are changing faster than many organisations are prepared for, and those that aren’t taking proactive action will find themselves competing for talent that know exactly what compensation is being offered elsewhere. 

The reality is simple: transparency is coming, whether driven by legislation, talent expectations, or competitive pressure. UK employers that wait for regulation to force change risk falling behind those already building the structures, data, and confidence to operate in a more open pay environment. 

Want to learn more about the EU Pay Transparency Directive? Download our guide here.