Pay transparency has become a hot topic lately, in part due to evolving legislation and increased regulatory pressure from governments—and companies have been scrambling to keep up.
In recent years, dozens of countries and jurisdictions have enacted laws around pay transparency in order to promote fairness and equity, reduce systemic bias and close pay gaps. In the U.S., for example, states like California, Colorado, New York and others require employers to list pay ranges in job postings. In 2025, one in three employees in the U.S. will be covered by pay transparency laws.
In Europe, the EU Pay Transparency Directive, adopted by the EU Council in 2023, will require member states to enact legislation to comply with the directive by 2026. Canada has pay transparency mandates at both the federal and provincial levels, and Australia now prohibits pay secrecy clauses and requires job ads to include salary information.
The accelerating pace of regulatory change makes it clear that pay transparency is here to stay—and employers will have to adapt. What does this mean for your organization? And how can you proactively evolve your organizational culture in the direction of pay equity instead of reactively complying with each new law that comes up?
Here’s how HR can successfully navigate the legal, cultural and ethical issues to stay ahead of the curve and position your organization as a fair and progressive employer.
First, it’s important to recognize that pay transparency is more than just a compliance issue—it’s also a people and culture issue. When companies grudgingly comply with pay transparency laws by posting absurdly large pay ranges, for instance, it’s clear that they’re acting in bad faith, and it signals to candidates and employees that they don’t really support equity and transparency.
With the increasing cultural awareness of systemic bias, discrimination and inequity, employers need to respect not just the letter of the law but the spirit of the law. Being transparent with your compensation practices shows that you’re serious about paying fairly, closing pay gaps and avoiding bias. From a people and culture perspective, this will help foster trust and increase employee satisfaction, leading to a stronger organizational culture.
It’s not as simple as slapping salary ranges on job ads
Pay transparency isn’t as simple as adding salary ranges to job postings. While companies usually do have a pre-determined budget for any new position they’re advertising, there’s a lot of work you need to do internally before you can just pop that range into the job ad.
For instance: If a candidate asks why they’re being offered a salary at the low end of the range rather than the high end, or why the offer is less than their friend makes at another company—do you have a clear justification you can provide? Keep in mind also that your current employees in equivalent roles may also compare their current salaries to what’s in the job posting, so that’s another source of questions HR will have to be prepared to answer.
Make sure you do the foundational work of building out a clear framework of job categories, levels and competencies so that you have something concrete to refer to when faced with these questions.
Define your compensation philosophy
In addition to job standardization, HR also needs to do the hard work of developing and defining the organization’s compensation philosophy, which articulates how and why a company pays people the way it does. It explains the reasoning behind compensation practices, such as why engineers might be paid more than customer service agents, why employees in Ohio might be paid less than those in New York, why the organization might be paying at the 50th percentile for certain roles but at the 90th percentile for others or what benefits package you’re offering in one location versus another. The reasons you put forth might have to do with business priorities, supply and demand, cost of living considerations, compliance issues and more.
Developing a compensation philosophy and making it available internally makes it clear to everyone that there’s logic and consistency behind your compensation practices. It creates greater transparency around the pay ranges for different job categories and makes pay conversations more objective rather than subjective. Ideally, a compensation philosophy should be aligned with the organizational culture and values, so that the pay approach is guided by values and also reinforces the culture HR is trying to create.
Fix any existing pay gaps
Another important step before you can implement pay transparency is to conduct a thorough pay audit to identify any gaps or discrepancies that may have cropped up over time. This may, for instance, happen if an early-stage company was growing fast without robust job frameworks in place, or due to lack of alignment between different departments or changing market conditions.
If you do discover any disparities, address them immediately to ensure that compensation practices align with the compensation philosophy. Otherwise, releasing your compensation philosophy internally or pay ranges externally can potentially cause chaos and discontent among employees who discover that they aren’t being paid as they should be.
Ensure a smooth rollout
Once you have all the foundations in place, the final piece is the rollout. Make sure you have a clear plan for communicating your compensation philosophy internally and for educating employees about job levels, competency frameworks, pay bands, total compensation and more. Thorough documentation and clear communication will help to make the uptake easier. Be sure to also train and enable managers who will likely have to field questions from their teams.
One way to reduce the pressure on your HR team and managers is to create a self-serve tool where people can look up job levels and pay bands. This also has the added benefit of building trust through transparency.
Moving towards a fairer world of work
Pay transparency is a fantastic way to create a fairer and more equitable workplace. It also aligns with a more transparent approach to running a company, which fosters trust and positively impacts company culture and employee satisfaction. So, instead of thinking of pay transparency legislation as a compliance box to check, treat it as an opportunity to evolve your business practices and organizational culture toward greater fairness, trust, equity and inclusion.
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