Pay Transparency is Growing: Here’s What You Need to Know

Unless you’ve been hiding in a cave somewhere without internet access, you’re probably well aware that pay transparency is continuing its march through the world of HR and compensation. Back at the start of 2024, I predicted that pay transparency would remain a major trend in the world of comp, but I didn’t expect it to be quite so huge. Our recent (very official and scientific) poll on LinkedIn showed pay transparency beating out developments in AI and flex work as the trend that impacted comp pros the most over the past year.

Some leaders may think “pay transparency” is limited to sharing salaries on job postings. But with a growing number of pay gap reporting laws that put pay disparities on display, the impending EU Pay Transparency Directive that mandates pay equity analysis, remediation and communications, and cultural expectations that managers can clearly articulate why a person is paid what they are paid and why — the definition is broad and the implications transformational.

Today we’ll look at the two main factors driving the continued importance of pay transparency for compensation and HR teams:

1. Increasing adoption of pay transparency legislation across the globe
2. Shift in job seeker and employee expectations

We’ll start off with the regulatory side.

Growth of Pay Transparency and Reporting Requirements

Pay transparency and reporting requirements are becoming increasingly complex and widespread, which is transforming the world of compensation.  

Here’s what you should know as we begin the new year:

1. Pay gap reporting laws – new and modified – are set to double by 2027
2. The EU Pay Transparency Directive requires organizations to disclose pay ranges and conduct pay equity analyses — which means you’ll have to explain why you pay what you pay and ensure it’s competitive and fair
3. Companies are preparing now with compensation technology solutions that help them scale the analysis needed to prepare, comply, and meet regulations efficiently

If you’re worried about all the new regulations, our partners at Syndio, a pay equity and reporting software company, put together a set of comprehensive guides to help you understand pay gap reporting requirements across 43 countries. This is an invaluable resource for compensation and HR teams that need to comply with shifting regulations – whether in their back yard or across multiple locations.

With so much change in the regulatory landscape, partnering with trusted experts is crucial. At BetterComp, we collaborate with best-in-breed partners like Syndio to bring compensation teams solutions that help comp pros manage compensation data, implement fair pay practices, and ensure compliance with evolving regulations.

Pay Transparency as a Cultural Phenomenon

It’s not just regulations creating a push to pay transparency, it’s people. Legal mandates can create a forcing factor for companies, but ultimately, it’s the talent market that will cement pay transparency as more than a “nice-to-have” for companies. Compensation is the single largest line item in any company’s budget, and that’s because human capital is the driving force behind any company’s success. Attracting and retaining top talent is crucial, and in this environment, transparent pay practices are a must.

This isn’t just my opinion; research backs it up. In a 2023 report from Resume Lab, 87% of respondents strongly or somewhat agreed that job postings should always include salary ranges and 80% said a lack of salary information would prevent them from applying for a role. A 2022 survey by LinkedIn was even harsher, showing 91% of respondents said that seeing salary ranges in a job posting affects their decision to apply.

Even companies that operate in jurisdictions that don’t have pay transparency legislation are feeling the heat. While return-to-office (RTO) mandates are the big news, hybrid and remote work are still on the rise. That means for most jobs, your talent competition isn’t exclusively local to a specific office or location. Companies in, say, Texas are competing with those hiring in Washington, New York, Illinois, etc. for top talent. Remaining compliant with local regulations may not be enough to meet the expectations of your desired candidates.

Pay Transparency in 2025 and Beyond

So, what are we looking at for 2025? For starters, pay transparency isn’t going anywhere. While the incoming administration will almost certainly put a damper on the likelihood of any national legislation in the US, states and municipalities are certain to maintain or expand their regulatory mandates related to pay transparency and pay equity. And that’s not including the EU and other countries that are advancing pay transparency globally.

Combine these factors with the expectations current and prospective employees have related to upfront disclosure of job ranges, transparent pay practices, and pay equity, and it’s safe to say this will remain a major factor influencing talent acquisition and retention.

By embracing transparency and leveraging the right tools and expertise, companies can position themselves as leaders in competitive and fair pay practices and create a more engaged and equitable workforce. Staying informed and proactive is key to navigating the ever-changing world of pay transparency.