Employers unready for pay transparency – and the tough conversations it demands

The movement toward pay transparency is strengthening, albeit slowly. 

At least a dozen states in the U.S. are enacting the rules, which require employers to be more open about pay, including pay ranges and gaps, and some will go into effect in the coming weeks. A similar movement is underway across the European Union as a result of the EU Pay Transparency Directive. 

However, many employers are still unprepared to comply with such rules. And many aren’t prepared to properly discuss what’s happening among their staff — especially when they bring concerns about their salaries to their managers, according to workplace experts. 

Some 75% of employers admit they are not ready for pay transparency laws, according to a survey of 600 U.S.-based HR and rewards professionals from professional services firm Aon. Those rules typically stipulate that employers must post an expected salary range in job postings, to give job seekers more information about their own pay potential and power to negotiate. 

Just half of employers have conducted a pay equity analysis within their organizations, and over 60% say they have not communicated salary ranges or other pay transparency information to their employees. 

Conducting pay equity analyses to better understand pay gaps within a company is a key step to being able to talk about and justify salary decisions among staff, said Sabra Sciolaro, chief people officer at Firstup, an intelligent communications platform. 

“It is incredibly critical to stop and pause and do this at work,” Sciolaro said in a statement. “It is nice to be able to say, with integrity, that you are an employer who is fair and equitable. But you have to prove that to yourself.”  

Some barriers to conducting pay equity analyses include trouble gathering and normalizing employee data. This can be a significant challenge, especially for larger companies with data spread across multiple sources, Sciolaro said. New AI tools can help make the process accessible and less expensive compared to relying solely on independent third-party firms though, she said.  

Once that data is available and organized, employers must identify disparities and potential issues, then work to address them by adjusting compensation for impacted groups. Right-sizing can be challenging following the Great Resignation, when workers held more power and were able to command higher salaries – often higher than companies are willing to pay for certain roles today. 

When it comes to discussing salary ranges and other information with staff, some companies are embedding that into their performance reviews process. At Payscale, during its employee review cycle in February, employees are provided with a total reward statement informed by a pay equity analysis. That statement contains the salary range of the role and where an employee falls within that range.  

That helps managers have more informed conversations around salary with staff.