Dive Brief:
- Regulatory requirements are combining with a cultural shift to push most U.S. companies in a recent WTW survey to adopt pay transparency practices, the consulting firm said in a press release Monday.
- WTW’s poll of 388 U.S.-based respondents found that 82% were either communicating, planning or considering communicating pay ranges with employees and 79% were doing so with external job candidates. However, fewer than half said they shared base pay determinations or progressions, and “even fewer” shared how pay ranges are designed or managed, or shared the employee’s position within a given range.
- More than two-thirds of employers cited regulations as driving their pay transparency efforts, while 44% said the same of company values and culture and 41% pointed to employee expectations. These are signs of a “broader cultural shift” around communicating pay, Lindsay Wiggins, WTW’s North America pay equity co-leader, said in the release.
Dive Insight:
While a growing number of states require pay transparency in some form, international regulations — specifically the European Union’s 2023 directive on the subject — also are causing U.S. employers to shift, WTW said. That’s despite the fact that many of the nation’s employers are not directly affected by the EU’s directive, Wiggins noted.
“Companies recognize that increased pay transparency is becoming a new reality that can support their employer brand and build competitive advantage in the talent market,” Wiggins said.
WTW similarly found in a 2024 survey of more than 500 North American employers that most had put pay transparency in place, primarily due to regulatory requirements. Others cited company values and culture as well as employee expectations. Sources who previously spoke to HR Dive earlier this year said transparency has increasingly become standard business practice for employers.
But other research disputes whether employers are actually ready to comply with transparency requirements.
For example, Aon published data in July from a study showing that only 19% of global organizations considered themselves prepared to be transparent about their pay practices, including just 25% of North American respondents. A separate report by Mercer, published in January, found that only 19% of U.S. companies had a pay transparency strategy in place, even as most said they planned to share pay information both internally and externally.
Panelists at a 2024 SHRM event advised employers to adopt broader pay philosophies rather than solely complying with applicable pay disclosure laws. This includes establishing clear criteria for determining employees’ initial pay, as well as pay for performance, such as merit-based increases and bonuses. The panel also noted that benchmarking against industry peers and using market data can further clarify an organization’s pay bands.
