Robert Sheen is founder and CEO of Trusaic, a purpose-driven technology company focused on pay equity, DEI and healthcare.
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You don’t need a crystal ball to see the future of pay transparency: more, more, more. There will be more of it in more places, with more scrutiny and more legal actions against employers who violate burgeoning transparency laws.
However, most employers can’t just start publishing salaries and pay ranges without creating some internal turmoil. This is mainly because pay inequities and imbalances creep into organizations over time based on variations in salary negotiations, fluctuations in the cost of talent and shifts in their own compensation philosophies and talent needs.
As a result, the journey to greater pay transparency needs to be methodical and deliberate, unfolding in stages and over time.
The Global March Of Transparency
Pay transparency is a truly global force. In the United States, 10 states have passed transparency laws, and more are reportedly considering doing the same. Across the European Union, for example, the ranks of employers closing pay gaps and disclosing wages continue to swell ahead of the EU Pay Transparency Directive's 2026 deadline. In Canada, three provinces have passed pay transparency legislation within the past two years, and more are expected to follow. In Australia, pay transparency is rising steadily, particularly among lower-wage jobs, and New Zealand recently announced the start of its own progression on pay transparency laws related to gender pay gap reporting.
More Scrutiny From More Sources
Legislators and lawyers aren’t alone in putting pay transparency under the microscope. Investors also want to know which employers are putting their money where their mouths are and which are remaining conspicuously silent. One resource they’re using is Arjuna Capital’s Racial and Gender Pay Scorecard.
The Scorecard grades U.S. companies on their pay gap disclosures and, to a lesser degree, their results. The 2024 Scorecard examined 128 major companies, and it reported that at least 59% of the 2024 companies have been engaged by investors to improve their pay equity disclosures. As responsible investors, employees and other stakeholders lobby for more pay-related information and transparency, the current level of scrutiny is sure to rise.
The Surge In Legal Actions
In just the final three months of 2023, New York City’s Commission on Human Rights filed pay transparency complaints against more than 30 employers and third-party job posting sites, sharply highlighting the legal ramifications of flouting current laws. The Commission alleged that these organizations’ job postings contained salary bands so wide they failed to qualify as the good-faith estimates required by the city’s pay transparency law.
Employers in Washington State are also facing a surge of class-action lawsuits in the wake of the state’s Equal Pay and Opportunity Act. Hundreds of complaints and dozens of lawsuits have been filed against employers for failing to include mandated wage scale, salary range and benefits information on job postings.
Clearly, legal actions like these will ramp up as more transparency laws take effect—and the penalties aren't inconsequential. In New York City, the Commission on Human Rights can fine employers up to $250,000 per violation. That’s not exactly peanuts, even for deep-pocketed companies, and it’s especially concerning for employers who post multiple jobs monthly or quarterly.
The Journey To Greater Transparency
As the pressure to become more transparent grows, employers often struggle to know what and when to communicate, and with which audiences. But it’s important to remember that the journey to greater transparency doesn’t begin with external communication. It begins with a series of incremental internal steps.
1. Pay Equity Audit And Analysis
Performing an audit and analysis of your pay data should uncover unexplained gaps between employees, groups and functions. It should reveal the sources of these gaps, inconsistencies between compensation policies and how they’re actually applied, and whether pay practices align with a company’s overall compensation philosophy. Because the process of compiling, scrubbing and analyzing pay data reliably is so complex, it may be wise to partner with a third-party expert and/or utilize specialized software.
2. Course Corrections
Correcting compensation disparities, bridging pay gaps and realigning pay practices frequently require the establishment of new salary ranges. These ranges must be competitive externally, equitable internally and communicated clearly to employees and other stakeholders.
3. Training
Next comes training for hiring managers, compensation staff and your full HR team. All these employees must be trained in how to communicate about compensation with various audiences and negotiate salaries properly going forward.
4. Communication
With all of this preparation in place, you can begin sharing details on salaries and ranges, compensation philosophy and specific practices, both internally and externally.
Of course, we’ve barely scratched the surface of the nuanced, multifaceted journey to pay transparency. While a relatively small contingent of employers continue to resist it, transparency is demonstrably good for businesses. It strengthens talent attraction and retention, mitigates legal and compliance risks, and boosts stakeholders’ perceptions of trust, fairness and brand reputation.
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