Cost of living: The context for every pay conversation
With inflation, rising energy bills and the general cost of living placing real strain on households, employee expectations around pay have shifted dramatically in recent years. Pay is no longer viewed simply as a transaction, but as a reflection of how much an employer values its people.
At the same time, organisations are facing financial pressures of their own. Many are unable to meet expectations for inflation-matching pay rises. In this context, the way pay is communicated becomes a key differentiator in retaining trust and morale.
“Fairness isn’t a feeling — it’s a framework”
Transparency, honesty and context must be central pillars in any pay-related communications. Employees understand that employers face constraints, but what they expect is to be treated fairly and for decisions to be communicated clearly and respectfully.
Rising scrutiny on executive pay
Perhaps the most visible symbol of fairness — or perceived unfairness — in pay is the CEO paycheck.
High executive pay has come under intense scrutiny in recent years. According to People Management, the majority of UK workers support capping CEO pay to help address wage disparities. The question of how leaders prove their pay is “worth it” is more relevant than ever.
Recent data shows FTSE 100 CEO pay stretching significantly beyond median worker earnings, amplifying concerns about fairness. This is further highlighted by the new UK executive pay transparency measures requiring companies to publish CEO-to-employee pay ratios.
However, this must be carefully balanced against the need to offer competitive compensation that attracts top-tier talent with the right expertise for such a high-profile and demanding role. As the figurehead of an organisation, a CEO is rewarded for the significant risks, responsibilities, and pressures they shoulder. An effective CEO is expected to drive performance, steer the company through uncertainty, and make decisions that directly impact a broad range of stakeholders, including employees. Their remuneration reflects not only their leadership but also the strategic direction and accountability they bring to the business. As such, executive benchmarking plays a key role in ensuring CEO pay remains aligned with broader market trends and does not become disproportionate.
The Pay Transparency Directive: A game-changer for employers
In Europe, the upcoming EU Pay Transparency Directive will add further momentum to this shift. Organisations operating across Europe must prepare for the new rules, which aim to close the gender pay gap and empower employees with more information about pay practices.
By June 2026, employers with more than 250 employees must comply with the directive, which includes:
- Mandatory pay reporting
- Transparency in salary ranges in job postings
- The right for employees to request information on pay levels and criteria
As Pinsent Masons outlines, this directive not only requires new processes but a cultural change in how pay is approached internally and externally. The UK may no longer be part of the EU, but for multinational employers, the directive will still be relevant — particularly in creating consistent pay policies across regions.
Fairness, equity and job evaluation
If organisations are going to navigate these complexities and build trust, they must move beyond subjective pay decisions and establish clear, structured frameworks.
This is where job evaluation becomes vital.
A robust job evaluation methodology provides a transparent, objective basis for:
- Structuring pay frameworks
- Comparing roles fairly across the business
- Justifying salary differentials
- Supporting internal equity and external competitiveness
It is also a powerful tool for justifying pay decisions during audits and communicating transparently with staff about why they are paid what they are — especially as pay transparency laws expand.
