Companies express concerns about growing pay transparency pressures

The approaching EU Pay Transparency Directive will “upend” how companies manage and explain pay, an expert said.

As pay transparency legislation becomes more prevalent, companies are facing increased pressure to adapt their practices, invest in pay equity strategies and prepare for complex pay transparency requirements, according to an Oct. 28 report from software company Syndio.

For instance, with the upcoming EU Pay Transparency Directive, 47% of companies with major operations in Europe expressed concerns about how the legislation will affect their organization.

“The EU Pay Transparency Directive is the most significant piece of pay equity legislation anywhere in the world in the last 50 years. Based on hundreds of conversations and over a dozen roundtables with large employers across Europe, it’s clear that these leaders understand how the Directive will upend how they manage and explain pay,” Christine Hendrickson, vice president of strategic initiatives at Syndio, said in a statement.

“As one leader put it: ‘We’ve moved from pay reporting being a compliance exercise to a broad human resources-wide strategic mandate,’” Hendrickson said. “But I fear there are too many leaders, including some U.S.-based employers with a footprint in the EU, who have not yet digested what a massive change management exercise this will be.”

In a survey of 400 HR and total rewards leaders worldwide, only 1 in 8 organizations said they’re fully prepared for pay and career transparency alike.

HR leaders identified inconsistent pay decisions as a core reason their organizations are unprepared, the report found. About 24% of respondents said they regularly stray from policies when making pay decisions.

Static compensation also leads to inconsistent pay, with practitioners believing that 17% of employees would earn less and 38% would earn more if they were hired today, the report found

Pay structures appear to be changing to meet equity and transparency needs, according to a Payscale report. Although organizations are becoming more transparent, they still generally only disclose data to individual employees — and typically only when required to do so.

In the U.S., salary transparency has increased nationwide, even in states without mandates, according to a report from the National Women’s Law Center. Researchers said it was “notable” that states without disclosure laws showed an increase in transparency and that employers may proactively prioritize transparency “to attract and retain top talent.”

In a WTW survey, most of the 500 North American employers had pay transparency policies in place, partly due to increased regulatory requirements worldwide. More than half have implemented measures such as communicating job levels, variable pay opportunities and how individual base pay is determined. Although most said they shared pay range information, external candidates were more likely to receive this information than internal candidates.

Average salary increases are sloping downward, survey shows

While the median salary increase stayed at 4% in 2024, average increases dropped from 4.3% to 3.9%, according to survey results collected by Salary.com from more than 1,000 HR professionals in the U.S. and Canada.

The drop is due to fewer companies doling out higher raises, Salary.com found; only 14% of companies gave out raises between 5% and 6.9%, compared with 25% of companies in the previous survey. Additionally, more companies — 38% in 2024, compared to 25% in 2023 — returned to “typical” salary increases in the 3% to 3.9% range.

“Last year, we noted that salary increases might be at a peak, even with 4 percent becoming the norm,” Andy Miller, vice president of compensation consulting at Salary.com, said in an Oct. 29 news release. “While 4 percent remained the median in 2024, further analysis suggests a shift is happening.”

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