Are You Prepared for Pay Transparency? Most Aren’t.

More than 60 million U.S. workers are now covered by pay transparency laws across 12 states, with another dozen state laws set to take effect later this year. Simultaneously, the European Union (EU) Pay Transparency Directive is driving pay transparency pressure for organizations inside and outside of Europe. (The latter directive applies not only to employers headquartered in the EU but also those with any employees there, with reporting required for businesses with 100 or more payrolled workers.)

With that as the setup, consider that only 19% of organizations surveyed globally consider themselves ready for pay transparency, according to recent data from professional services firm Aon.

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The findings align with recent data from HR consulting firm Mercer, which showed 32% of surveyed organizations said they feel prepared to meet global transparency requirements.

Key takeaways from these and other reports include:

Mercer and Aon found significant regional variations in pay transparency readiness. According to Aon, the percentage of “not ready” organizations in North America dropped from 18% to 16%, but other regions didn’t fare as well (47% in the Asia-Pacific region, 40% in Latin America, and 26% in Europe, Middle East and Africa).
Both reports found compliance is the main reason organizations engage in pay transparency, far outpacing considerations such as improving the employee value proposition or aligning with corporate values.
Less than half (45%) of jobs listed in the U.S. were fully compliant with pay transparency requirements, according to a recent analysis from HR tech company beqom.
Just 26% of Aon’s survey respondents conducted a pay equity analysis in the past 12 to 18 months.
Only 9% of Aon’s respondents are highly confident their organization’s managers are trained to discuss compensation effectively.

So, how did organizations get to this point and what can they do about it?

The Pressure Is Mounting

Gail Greenfield, the executive vice president of pay equity and total rewards strategy and solutions at Trusaic, a pay equity and regulatory compliance software company, links the start of pay transparency’s momentum to the emergence of workplace review website Glassdoor, which launched in 2008.

“Until this point, pay was largely a black box to employees, spoken about with a few select colleagues,” she said. “[Glassdoor] was the beginning of the democratization of pay.”

Today, the combination of available crowdsourced data, pay transparency laws and a cultural shift toward greater pay transparency are generating pressure for employers to create a pay transparency strategy, Greenfield said.

The push for transparency is indeed coming from lawmakers and job candidates, said Lulu Seikaly, a senior corporate attorney at Payscale, a compensation software and data company.

“Job seekers, especially millennials and Gen Z, who now make up most of the workforce, expect open conversations about pay from the start,” she said. “Attracting and retaining top talent requires organizations to be open about how pay decisions are made.”

And when employers don’t provide this transparency, employees turn to the internet and artificial intelligence (AI) to fill the information void, Seikaly said.

Payscale’s Pay Confidence Gap Report showed roughly one in five employees use AI assistants like ChatGPT for compensation insights, and 38% of organizations said AI is driving salary demands higher.

“Nearly half of employees report never having a clear conversation about how their pay is determined. They’re making career decisions based on potentially inaccurate information rather than trusted data,” Seikaly said. “Pay transparency and communication about pay can solve for this.”

Fear, Caution and Nightmares

Many organizations hesitate to implement pay transparency because they lack robust and consistent reward principles, processes and governance for managing pay, said Tom McMullen, a senior client partner and total rewards expertise leader at organizational consulting firm Korn Ferry.

“Unbridled management discretion is the enemy of pay equity and transparency,” he said. “If you want to tell a good story around pay transparency, you need to have a good story to tell.”

Employers fear revealing inequities to employees. The complexity of collecting and analyzing accurate pay data, especially across multistate and multinational operations, also poses a barrier. And, concerns about increased wage demands and budget limitations make HR leaders cautious, McMullen said.

Total rewards leaders also can struggle to get leadership buy-in, added Payscale’s Seikaly.

“Compensation professionals often face the challenge of educating leadership on just how much work is involved in getting ready to post salary ranges. It’s not just throwing a dart at a dart board to figure out a range,” she said. “Developing salary ranges requires reliable data, a well-defined job architecture and thorough pay equity analyses. And, trying to do all that in Excel can be a nightmare.”

These professionals also must contend with the fact that their internal pay ranges often weren’t designed to be shared externally, pointed out Trusaic’s Greenfield. Wide ranges can undermine employee trust, she said.

Even when an organization is prepared on the back end for transparency, managers often lack training and tools to have meaningful conversations with employees about compensation, Seikaly said.

Progress Amid the Challenges

Nonetheless, there has been significant progress on pay transparency, according to the sources for this article.

A recent Trusaic survey on pay equity and pay transparency (with full results slated for release in September) found only 28% of surveyed organizations reported having no pay transparency with employees, while 24% offer full transparency, defined as providing pay ranges for all roles.

Trusaic also found organizations with less than $1 billion in annual revenue are just as likely to be fully transparent as those with more than $30 billion. Looking at industry initiative, Greenfield shared healthcare and financial services are most likely to be fully transparent (31% and 30%, respectively), while manufacturing and retail/wholesale are the least likely (6% and 15%, respectively).

Strong legislative mandates have pushed this progress, with corporations such as Microsoft and Google proactively disclosing salary ranges across the U.S. to stay ahead of regulatory requirements, McMullen said. Meanwhile, countries like Japan and Australia have introduced gender pay gap reporting to add to the complexity.

Pay Transparency as Critical Cornerstone

Employers that push through this complexity tend to realize important returns.

“Typically, we find organizations embracing pay transparency early tend to experience improved employee engagement, performance and reduced legal risks,” McMullen said.

“An organization’s pay transparency strategy plays a central role in how employees understand their compensation,” Greenfield said. “But its impact goes beyond rewards. The way an organization handles pay transparency also shapes employee perceptions of fairness, engagement and trust in the organization.”

Beyond these returns, Seikaly pointed to reduced turnover and greater accountability. “It reinforces your employer brand and signals to current and prospective employees that organizations value their employees,” she said. “[Toward that,] we also need to remember that the purpose of pay transparency legislation is to level the playing field.”

Ensuring all candidates — regardless of their background, experience or negotiation skills — have access to the same information to negotiate their salary promotes fair offers and mitigates pay gaps.

“If employees don’t believe they’re paid fairly, that doubt doesn’t stay confined to their paycheck,” Seikaly said. “If employees question the fairness of their pay, they’ll question the value of everything else.”

Action Steps

Pay transparency is an ongoing process, Greenfield said. Within such work, she advised organizations and their total rewards professionals to:

Conduct regular pay equity reviews and address any disparities identified.
Ensure pay decisions (e.g., starting salaries, promotions) align with internal equity.
Resolve pay compression issues and make sure employees are paid within the appropriate range for their role.
Strengthen career architecture, especially when employees in the same role perform significantly different work or are misclassified.
Show the full value of total rewards to each employee during the end-of-year process. (While not a legal requirement yet, Seikaly said this could be where legislation heads next.)
Normalize ongoing compensation conversations between managers and employees.
Use internal dashboards or tools to help employees see how acquiring new skills or certifications could impact their future earnings.

“Total rewards encompass the mix of rewards employees receive for their work: base pay, benefits, recognition, development opportunities and workplace perks,” Seikaly said. “Compensation is the foundation that either builds or undermines trust in everything an organization offers.”

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