Pay transparency strategies increasingly adopted by employers: report

In response to escalating regulatory demands worldwide, North American companies are increasingly adopting pay transparency strategies, according to a report.

The survey, conducted by global advisory firm WTW, shows that organizations are now more inclined to communicate detailed pay program information, including job levels, pay structures, and compensation policies, to employees.

The trend is spurred by regulatory requirements such as the EU Pay Transparency Directive, which has led companies to align pay communication standards across the U.S., Canada, and beyond.

Regulatory requirements drive pay transparency initiatives

The survey found that 73% of North American organizations cite regulatory demands as a primary motivator for implementing pay transparency. Many organizations are quickly adapting to these new standards to ensure compliance across all regions in which they operate.

“Employers are seeing an increase in regulatory requirements around the globe, which has forced many to act fast and comply with a consistent minimum standard, regardless of location,” said Mariann Madden, North America Pay Equity co-leader at WTW.

She emphasized that clear and well-documented pay strategies can help companies meet these transparency standards effectively, benefiting both current employees and job candidates.

For companies that have implemented pay transparency strategies, 86% in the U.S. and 58% in Canada now communicate pay ranges or rates nationwide, regardless of specific state or provincial regulations. Madden advises companies to reassess their job and reward structures to better align with these evolving transparency standards.

Transparency brings new challenges and employee expectations

As organizations become more open about pay, they anticipate increased engagement from employees, with 72% of employers expecting more questions on compensation details, found the WTW survey.

Additionally, 57% foresee more requests for salary negotiations, and 43% anticipate off-cycle pay adjustments as employees seek greater clarity and fairness in their pay.

“There has been a step-change in pay transparency as more organizations choose to be open about their pay structures and practices,” noted Lindsay Wiggins, also North America Pay Equity co-leader at WTW.

She highlighted that increased transparency could expose issues like salary compression and inequities arising from pay increases for new hires versus existing employees. Wiggins recommended strengthening policies and HR guidance to mitigate these risks.

Employee inquiries tend to focus on how individual pay aligns with organizational pay programs, with top concerns including:

• pay positioning (83%)
• pay management practices (72%)
• transparency in pay visibility (56%)
• understanding compensation terminology (44%).

Tracking ROI of pay transparency initiatives

In addition to transparency practices, more than half of North American employers (56%) have established metrics to measure the impact of their pay transparency strategies. These data points are helping organizations gauge whether transparency initiatives align with organizational goals and employee expectations.

These include:

• employee retention rates (40%)
• employee and manager inquiries regarding pay (37% each)
• changes in gender pay gap (36%).

WTW’s 2024 Pay Transparency Survey collected data from 527 respondents in North America, contributing to a global pool of 1,674 survey participants.