To Disclose Pay or Not? How Companies are Approaching the Pay Transparency Movement

To Disclose Pay or Not? How Companies are Approaching the Pay Transparency Movement
Pay Transparency and Equity

05 of 11

This insight is part 05 of 11 in this Collection.

October 26, 2023 15 mins

To Disclose Pay or Not? How Companies are Approaching the Pay Transparency Movement

How Companies are Approaching the Pay Transparency Movement Hero Banner

New pay transparency laws are forcing employers to develop a pay disclosure strategy and make decisions like whether to voluntarily disclose salaries where it’s not legally required.

Key Takeaways
  1. Pay transparency laws are sweeping the globe and companies are acting fast to assess their own disclosure and communication strategy.
  2. Beyond compliance, it’s important to think through how to interpret disclosure and whether to voluntarily include employees as pay disclosure becomes more widespread.
  3. Aon survey data finds companies are divided on whether to voluntarily disclose pay when not required given this nascent movement.

The topic of pay transparency has become increasingly important as regulators, politicians, the media and other interested parties across the globe continue to make it a subject that is now widely discussed.

The term “pay transparency” generally refers to the practice of openly sharing information about compensation with employees and job candidates. With pay transparency sparking a patchwork of laws in different countries around the world, many companies are now asking how they should manage the practicality of disclosure.

There are a number of issues to consider regarding pay transparency laws and their long-term implications.

  • European Union

    In the European Union, there are several considerations for companies governed by the EU directive. Many firms are aware of pay transparency regulations, but still assessing how they will impact their business. EU member states have until June 2026 to “transpose” the directive to national legislation. The directive requires companies to publish information on the pay gap between female and male workers. Where a gender pay gap of 5 percent or more exists, employers will also be required to work with their employee representatives/works councils to conduct a deeper analysis and develop a corrective action plan. Furthermore, job applicants will have the right to receive information on the initial pay range for any advertised position and employers cannot ask about previous or current pay. Employers must also share information on how pay is set, progressed and managed.

    Only 21 percent of more than 250 companies with employees in the EU have a pay transparency plan in place, according to Aon’s August 2023 Pay Transparency Readiness survey. Thirty-seven percent of respondents are considering how the rules will impact their firm and don’t yet know the actions they should take.

  • United Kingdom

    In 2022, the UK government announced a pilot program to encourage companies to disclose salaries for all job openings to help encourage more transparency and close the gender pay gap. In 2023, the government said any pay transparency rules, including the pilot program, will be under consideration by a new Inclusion at Work Panel. There is speculation the UK will adopt rules similar to the EU directive. In fact, 87 percent of senior HR leaders surveyed by Aon in the UK and EU in 2023 said they believed the EU directive would impact UK companies.

  • United States

    Pay transparency laws in the U.S. are relatively new and differ by city and state, prompting companies to stay on top of compliance. Roughly two-thirds of U.S. companies share pay range data only where legally required. The remaining one-third share ranges with candidates seeking that information in any location, according to survey responses from more than 700 respondents across the globe to Aon’s 2023 Pay Administration Report (offered as part of the 2023 Aon Radford Market Practices Study Suite). Larger companies are likely to focus on compliance, while smaller companies more often embrace an open disclosure policy. This difference is likely due to smaller companies operating in fewer locations, which means fewer policies to manage.

    How Companies are Approaching the Pay Transparency Movement Diagram 1

    Many U.S. pay transparency rules require companies to disclose the pay scale for an open job. But it’s up to employers to decide if they disclose a more limited pay range or the full potential salary an employee may one day receive. There are pros and cons about how much information to share with candidates for the job.

    How Companies are Approaching the Pay Transparency Movement Diagram 2

21%

Only 21 percent of more than 250 companies with employees in the EU have a pay transparency plan in place.

Aon’s August 2023 Pay Transparency Readiness survey

Quote icon

Legislation requiring pay range communication to candidates creates opportunity for broader openness with existing employees. Now is an excellent time to establish practices aligned with your desired communication culture.

Tim Brown
Partner, Talent Solutions, North America

Understanding How Salary Information Is Shared

In the U.S., the legal aspects of sharing pay information focuses primarily on job applicants. Pay range data informs candidates, thus providing a more level playing field for salary negotiation and the prevention of issues like pay compression. Internal communication about pay ranges is a natural offshoot of pay transparency laws. Indeed, efforts to improve pay equity often start with greater information sharing.

Limiting disclosures to only outside candidates could harm employee relations and negatively impact company culture. At the same time, a company needs to carefully consider the repercussions of sharing pay ranges with existing employees. This information could expose pay equity gaps or cause employees to wonder why they are paid differently (or perhaps not as high as expected based on tenure) than the pay range disclosed for open roles like theirs.

Sharing information with current employees is much less common than sharing hiring pay data with managers. Around 40 percent of U.S. respondents do not share any pay range data with employees. That figure rises to 55 percent outside the U.S. However, once some employees do access pay data, it’s likely that they will share this information with their colleagues. A survey from beqom in March 2023 found that rising inflation was driving more candid conversations among colleagues around income. In fact, sixty-three percent of UK workers and 58 percent of U.S. workers said they are more likely to discuss pay with their colleagues in the current inflationary environment.

33%

About one-third of companies surveyed in the U.S. share salary ranges with candidates seeking that information in any location — not just where legally required.

Aon’s 2023 Pay Administration Report

Quote icon

Pay transparency regulations are the first step in a journey where stakeholders are demanding fairness, clarity and transparency in pay — it really gets to the heart of an organization’s DE&I agenda.

Alessandro Linari
Associate Partner, Talent Solutions, United Kingdom, Europe, the Middle East and Africa

Better Decisions

The Future of Pay Transparency

Interpreting and complying with new pay transparency laws is a key component of the pay transparency movement. But it’s just one of several aspects to consider. Other actions include:

  • Evaluate your communication strategy to current employees, hiring managers and job candidates.
  • Review and revise job architecture to organize jobs, levels, career paths and compensation structure, providing the inputs for pay equity analysis.
  • Conduct a pay equity analysis to close any gaps and make this ongoing; this can also help address pay gaps in retirement plans.

Reach out to our team to discuss how to get started or visit our Talent and Rewards site to learn more.

Aon's Thought Leaders
  • Tim Brown
    Partner, Talent Solutions, North America
  • Ephraim Edelman
    Partner and Head of Data Solutions, Talent Solutions, North America
  • Alessandro Linari
    Associate Partner, Talent Solutions, United Kingdom, Europe, the Middle East and Africa

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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