Compensation Report Points to Gaps in Perceived Fairness, Training

A report released Tuesday, April 14, by Salary.com highlights a significant disconnect in how employers and employees perceive pay fairness. The compensation software, data and services company’s 2026 State of Pay and Compensation Practices Report shows that while 75% of HR professionals believe their organization’s employees are paid fairly, only 44% believe those employees share that view.

Based on insights from 525 HR practitioners across 23 industries, the report linked this 31-point “confidence gap” to communication issues as well as notable structural weaknesses. More specifically, the survey data found:

• The analytical element of compensation management is largely in place. Most organizations conduct market analyses and operate within documented processes and performance frameworks.
• However, the structural and communication layers that make those efforts legible and explainable to employees are deeply underdeveloped.

In assessing organizational practices, the surveyed HR pros’ responses showed: 

• 51% of organizations have a formal job architecture.
• 22% don’t use job leveling to inform pay structures.
• 34% are transparent with employees about how pay is determined.

“The organizations that struggle most with employee trust in pay are often not the ones with bad intentions. They’re the ones that haven’t yet built the foundation that would make a good explanation possible,” said Salary.com chief human resources officer Amy Dwyer. “You can’t communicate what you haven’t built. When job architecture is missing or job leveling is inconsistent, transparency can become noise instead of clarity.”

The Critical Role of Managers

The report also identified that, without complete structures and trickle-down processes that make “the mechanics [of fair pay] reliable, scalable and visible to the people they’re meant to serve,” corporate managers are often set up to fail.

The crux is this: Managers are typically trained to evaluate employee performance, but they are largely left unequipped to discuss the resulting compensation, creating a significant barrier to employee trust. 

According to the data:

• 69% of organizations provide manager training on conducting performance evaluations; but,
• Only 52% offer formal manager training on how to discuss pay — the very topic employees often raise following a review.

This disparity creates a “training gap” where pay philosophy conflicts with employee experience. 

Furthermore, 21% of survey respondents said their organizations rely on manager discretion for pay decisions, allowing perceptions of unfairness to flourish due to a lack of structured, transparent guidelines. While many employers invest heavily in fair pay mechanics (i.e., market analyses, job description management), the report indicates that without related manager communication training, the initiatives remain invisible and ineffective at building trust. 

Simply put:

• Managers can’t confidently explain pay decisions if they’re still trying to interpret decisions themselves.
• Pay confidence starts with clarity, not the conversation.

How TR Statements Clarify the Compensation Picture

While most organizations spend thousands of dollars per employee on benefits, retirement contributions and other perks, the study showed workers are typically in the dark about their total compensation.

The study found total rewards (TR) statements (documents that outline the full financial value of compensation beyond just the paycheck) remain the exception rather than the norm. Only 46% of survey respondents said their organizations provide these statements to their employees.

The report indicated that when employees don’t receive a TR statement, they fail to grasp the monetary value of non-salary elements, such as:

• Employer-matched retirement contributions;
• Company-paid health, dental and vision insurance premiums;
• Paid time off (PTO); and,
• Wellness programs, equity and educational stipends.

Without such transparency:

• Employees may feel underpaid, even in competitive compensation environments, leading to higher turnover and lower morale.
• Managers may be ill-equipped to explain the full value of the TR package to their teams.

With such transparency, organizations may:

• Illuminate TR’s full value;
• Increase employee engagement; and,
• Help retain top talent in a competitive market.

Additional Findings from the Study

The report surfaced additional data points with strategic implications for HR and compensation leaders. These include:

• Remote employees show dramatically lower turnover. Organizations with remote workers report 7% average total turnover for those employees versus 16% for the overall workforce — one of the most underutilized levers for workforce stability in the data.
• HR’s artificial intelligence (AI) adoption is concentrated in talent acquisition and has not yet extended meaningfully to compensation management. Sixty-four percent of organizations use (or plan to use) AI in HR, with talent acquisition (54.4%) leading adoption. Compensation and benefits rank near the bottom at 22%, despite being one of the HR’s most data-intensive functions.
• Being a high payer doesn’t substitute for being a good communicator. Organizations paying at higher market percentiles show no meaningful correlation with stronger compensation communication practices.

Five Action Steps to Consider

The report provided a sequenced set of recommendations, emphasizing organizations that pursue communication solutions before they build structural foundations likely find themselves explaining pay decisions they can’t yet make coherent. Action steps include:

1. Build job architecture and consistent job leveling, since it’s the prerequisite for downstream efforts toward pay transparency.
2. Train managers on how to lead performance and compensation conversations; such discussions should be done in tandem, not separately.
3. Expand transparency to pay ranges and market definitions; trust and credibility likely won’t come if employees don’t have the right context.
4. Deploy TR statements to give employees a full view of compensation value.
5. Leverage purpose-built AI in compensation analysis, where it can surface compression and equity gaps before they become retention problems.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Employee Compensation
• Total Rewards