U.S. companies are increasingly embracing pay transparency, even as regulatory complexities introduced by the U.S. presidential administration and EU Pay Transparency present new challenges, according to research from WTW, a global advisory, broking, and solutions company.
The survey finds that 82% of U.S. companies are either communicating, planning, or considering communicating individual pay ranges with employees and 79% are doing the same with external candidates, regardless of legal mandates. This shift is being driven by a combination of factors: growing regulatory requirements (72%), company values and culture (44%), and employee expectations (41%).
Navigating the complexities of U.S. and international directives, many organizations are taking proactive steps to provide transparency around pay equity. According to the survey, one-third (32%) of organizations have publicly shared a narrative or commitment on pay equity, 20% have done so for pay transparency. Another one-third are actively planning or considering doing similar disclosures. Among those that have issued a pay equity narrative, nearly three-quarters (72%) have adopted a global perspective, addressing pay equity across the entire organization, although they often allow for local or regional differences within this global narrative.
Most organizations believe that sharing pay ranges with employees will lead to significantly more questions about compensation from managers (70%), more questions about compensation from employees (68%), and more pay negotiations (53%). Also, concerns about managers’ ability to explain compensation programs and possible employee reactions are the most commonly cited factors holding back pay program communication. However, the survey found that organizations are currently more likely to educate senior leaders and managers on pay than employees are planning for more employee education in the future.
“We’re witnessing a broader cultural shift take place around communicating pay, even though many U.S. employers are not directly impacted by the EU Pay Transparency Directive,” says Lindsay Wiggins, North America pay equity co-leader. “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.”
The survey also finds that just more than half (56%) of companies use metrics to measure the impact of pay transparency. The most prevalent metrics used are adjusted gender pay gap, questions received from managers and employees, and impact on employee retention.
Despite growing interest, most employers are not utilizing AI technology to support their pay programs. Only a small percentage are planning on using AI to support pay information communication (15%), market compensation research (17%), or pay gap identification (11%). Barriers to adoption include data privacy and compliance risks, oversight in AI-driven decisions, and integration challenges with HR systems.
“With many organizations planning to take a global approach to their pay program communication, organizations need a clear, consistent, and well-documented approach to disclosure to ensure accurate data is shared with candidates and employees,” says Jill Havely, head of global community excellence, employee experience. “Educating relevant stakeholders and building employee trust is paramount in this process, as well as leveraging relevant technologies to support a clear and transparent communication process.”
