How to Achieve Pay Equity and Transform Your Workplace

Defining Fair and Equitable Pay

Remember when the female cast members of the TV show Friends successfully negotiated the same pay as their male counterparts in 1996? What about a decade later, in 2007, when tennis star Venus Williams fought for and won the right to pay equity at Wimbledon?

Now and then, pay equity makes the headlines, often linked to new pay transparency laws, such as the EU Pay Transparency Directive, which comes into play in 2026. But the real opportunity for organizations today goes beyond reacting to laws. It’s about building a culture of respect, where people understand and trust how they’re valued.

Whether the motivation is cultural, legal, or ethical, fair pay practices should always be a priority for growth-oriented organizations that put people first.

Here’s what you need to know about pay equity and pay transparency and why it’s important to take action now.

What Is Pay Equity?

Pay equity means ensuring that people are compensated equally for doing the same or similar work, regardless of their gender, race, religion, ethnicity, or other demographic factors.

The goal of pay equity is to create a level playing field and eliminate significant differences in pay due to gender, race, ethnicity, and other protected groups of employees. It means that people get equal pay for equal work, so there is fairness across the board.

Historically, discrimination based on race or gender created pay disparities. In many countries, equitable pay is now the law, since it helps address pay gaps that exist between men and women, or between people of different ethnicities. Pay equity is meant to counteract harmful discriminatory practices and biases in the workforce.

The good news is that committing to pay equity can lead to greater success in recruiting and keeping top talent, because people want to stay where they feel fairly treated.

What Is Pay Transparency?

Pay transparency is when employers disclose information about how employee compensation is determined. The goal is to provide clarity on how pay decisions are made, which helps build a culture of trust.

Wage information can be shared within organizations internally, publicly, or both. Shared information may include salary ranges, how pay is determined, or the promise to let employees discuss wages without repercussions.

Some regions now mandate specific methods of pay transparency. But even if your organization isn’t operating in one of those regions, choosing openness shows they respect employees enough to be clear with them. In regions where transparency is optional, it’s up to the business to decide how much and what type of information is disclosed.

Pay Transparency vs. Pay Equity

Both pay transparency and pay equity focus on addressing fair pay. This might include only the headline salary, but it more often includes the full package of compensation and benefits.

The two concepts differ because pay equity focuses on ensuring that people are paid equally for equal work, regardless of their background, while pay transparency makes relevant pay information more visible in the organization—which usually helps lead to equity.

“Pay transparency is a dimension of pay equity,” explains Tom McMullen, a senior client partner at Korn Ferry. “Pay equity is about ensuring that employees are treated fairly and consistently in access to roles, how they are paid, and in pay outcomes.

"It's about ensuring that important pay-related processes are communicated with applicants and employees.” Together, they form a powerful combination—fairness backed by clarity.

Are Pay Equity and Pay Equality the Same Thing?

Pay equity and pay equality are similar but aren’t the same.

Just as “equality” refers to the quality or state of having the same rights and opportunities, pay equality ensures equal access to job opportunities for everyone, regardless of gender, race, religion, disability, or other factors.

That sounds a lot like pay equity, doesn’t it? It's close, so here's a simple way to think about it.

It's an established fact that more men hold CEO positions than women.

• Pay equity is about women receiving comparable pay to men for comparable work.
• Pay equality is about changing the system, so more women would have a chance to become CEOs and earn CEO-level pay.

Simply put, pay inequality means that underrepresented groups have fewer chances of getting higher-paying jobs. Pay equality aims to change that.

Equity and equality are both important. But pay equity is often the first step on the path to pay equality.

Is Pay Equity Required by Law?

Many countries have laws in place to govern pay equity. The specific rules you must follow will depend on your geographic region.

Failure to comply can result in lawsuits, fines, or other penalties.

“It’s also bad for optics,” adds McMullen. Beyond compliance, failure to pay equitably can damage the company’s reputation among employees and stakeholders.

In the US, the Equal Pay Act of 1963 states that men and women employed at the same business should receive equal pay for equal work. The Civil Rights Act of 1964 offers broader protection and also prohibits discrimination based on race, color, religion, and nation of origin. And many states have introduced newer and more robust laws for any businesses operating within their borders.

The UK has the Equality Act 2010, which says that men and women in the same employment performing equal work must receive equal pay, unless any difference in pay can be justified. The law also protects against discrimination based on age, disability, race, religion, sexual orientation, and other factors.

The European Union has new pay transparency legislation in 2026. The rules require companies to share salary information and correct gender pay gaps of more than 5%. It also includes fines for employers who break the rules.

Of course, laws alone are not enough to solve pay inequality. After all, the Equal Pay Act was established in 1963, and many employees are still paid unfairly.

“Pay equity is not something that’s going to be fixed through governance alone,” says Vijay Gandhi, a regional director at Korn Ferry Digital. “Your culture should transcend whatever the local policy is.”

What’s the Business Case for Pay Equity?

Why should you focus on pay equity, pay transparency, and pay equality in your workplace? Because fair compensation makes good business sense. It builds respect and trust throughout your workforce and with the wider industry.

In areas where it’s not required by law, there is often societal, shareholder, and employee pressure to do so. “Ethically and for the good of the business, it is often seen as the right thing to do,” says McMullen. This is more than a legal moment—it’s a people moment.

There are many reasons to examine your current practices and perform a pay equity analysis to learn more about your internal business practices. Here are a few factors to consider:

• Talent acquisition and retention
  • Recognizing the importance of pay equity and equality, and choosing to act with transparency, builds trust from the start.
  • It will make your company more attractive to today’s top talent, who are increasingly valuing fair pay practices and transparency when deciding where to work.
  • Gen Z workers are particularly attracted to companies that operate with openness and practice social responsibility.
    
• Reduced turnover
  • “Fair and transparent pay practices help employees feel more engaged, which can result in fewer voluntary exits,” says McMullen.
  • When people understand how and why they’re paid, they trust more and stay longer.
    
• Enhanced productivity
  • Employees who feel valued have better morale, engagement, and productivity.
  • Employees were more productive when pay was made transparent, as long as the pay wasn’t inequitable, researchers from two leading universities found in a recent study.
    
• Less pay-related conflict
  • With pay transparency, employees understand how compensation is structured and are less likely to question pay differences.
  • That reduces suspicion and mistrust, and leads to greater workplace harmony.