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Key Insights

  • Why transparency creates clarity and trust

  • How openness on pay attracts top talent and builds loyalty

  • How upcoming pay transparency laws make immediate action a business imperative

Imagine a workplace where everyone knows the principles and frameworks around how their pay is determined, and where fairness is a measurable reality with real impact. 

This is the promise of pay transparency, an approach that’s redefining how organisations build trust, attract talent, and advance equity goals.

By sharing the principles and frameworks around compensation more openly, organisations can:

  • Instil confidence, trust, and credibility among your talent
  • Assess and address pay disparities you might not have been aware of
  • Create a fairer and more respectful workplace
  • Gain a reputational and competitive advantage through openness and transparent policies

With societal expectations and laws around the world changing, it’s now imperative to address the issue. Here’s how to develop an effective pay transparency strategy and navigate implementation challenges. 

Understanding Pay Transparency

What Is Pay Transparency?

Pay transparency involves openly sharing information about how compensation decisions are made.

Typically, this includes sharing the principles and frameworks of the compensation programme and disclosing salary ranges for specific roles internally and on job postings. It can also include providing pay information across all positions to regulatory authorities.

The primary goal of these efforts is to better enable pay equity and foster accountability and clarity in organisations. When employees and job applicants understand the rationale behind their compensation, it minimises pay inequities and builds trust .

The impact is clear—organisations that embrace transparency see a 20% reduction in pay disparities. This significant decrease underscores the pivotal role of transparency in creating fair and equitable workplaces.

The Evolution of Pay Transparency

The journey towards transparency hasn't happened overnight. It's been shaped by shifting societal expectations, regulatory changes, and a growing emphasis on workplace equity and inclusion.

The late 20th century saw policymakers, advocacy groups, and labor unions pushing for greater salary disclosure to address pay inequities. Despite landmark legislation in countries around the world, such as the US Equal Pay Act of 1963, the UK’s Equal Pay Act 1970, and Europe’s EEC Equal Pay Directive of 1976, wage disparities persisted.

Data from the early part of the 2020s reveals that aggregate wage gaps still exist, particularly affecting women and minority groups. That’s why new legislation around pay equity and pay transparency now or will soon come into effect in a multitude of regions around the world.

Recent Legislative Strides Around Pay

In response to these ongoing challenges, a number of US states and the European Union have recently introduced laws mandating that target pay or pay ranges for jobs are visible to candidates as well as employees.

For example, the EU's Pay Transparency Directive, set to be fully integrated into national laws by 2026, marks a significant step towards ensuring fair compensation across genders, aligning with broader diversity, equity, and inclusion (DEI) initiatives. Take a deeper dive into the evolving legislative landscape and how multinational businesses can prepare for these shifts in our report on international pay transparency and pay equity trends.

To find out more about the state of pay equity, Korn Ferry surveyed executives across 30 countries in Europe to assess their readiness and explore strategies for implementing pay transparency. Download our report to access valuable global insights.

The Digital Catalyst

The rise of social media and salary information platforms, such as Glassdoor, Indeed, and PayScale, has accelerated the pay transparency movement. These digital tools have provided wider access to compensation data as well as employee perceptions about their organisations. Employees can anonymously share salary information, compare their earnings with industry standards, and provide their opinions on pay.

As a result, employees can increasingly seek out organisations that demonstrate trust and respect by practising openness around compensation, rewarding employers who prioritise fairness and accountability.

A Generational Shift

Millennials and Gen Z have emerged as vocal advocates for pay transparency, having grown up in a culture with tools that enable more clarity around pay. Many are challenging long-standing norms of salary secrecy, and they expect transparency as a way to promote fairness and accountability in the workplace.

Benefits of Pay Transparency

The Business Case for Pay Transparency

A Guide to Fair Pay: Attract Top Talent with Pay Transparency

Explore our pay transparency guide to learn how to implement fair pay, build trust, and attract top talent through fair compensation practices

Learn more

Embracing pay transparency isn't just about compliance—it's a strategic advantage.

Promotes Fairness and Pay Equity

  • Visibility into how compensation is determined, including pay scales and compensation frameworks, ensures fair compensation for employees.
  • When employees understand how pay decisions are made, they’re less likely to perceive disparities as unfair or discriminatory.
  • Learn how pay transparency and equity can transform your workplace and elevate your organisation.

Builds Employee Trust and Engagement

  • Transparent pay practices demonstrate organizational integrity and professionalism, fostering trust between employers and employees.
  • When employees feel that their compensation is based on objective criteria, aligned with organisational values, and applied consistently, they’re more likely to feel respected, valued, engaged, and committed to their work.

Reduces Pay Gaps

  • Pay transparency can enable the identification and correction of discrepancies in pay that may be based on factors such as gender, race, ethnicity, or other demographic characteristics.
  • Organisations can take proactive measures to ensure all employees have equal opportunities by addressing such inequities.

Improves Employee Productivity

  • Pay transparency can boost employee engagement and performance, creating a culture of trust and accountability.

Attracts and Retains Talent with Transparent Compensation

  • Organisations that embrace pay transparency are viewed as more attractive, particularly by younger generations who prioritise openness and social responsibility.
  • Employees who feel that their compensation is competitive and equitable will likely stay with the organisation longer.

Enhances the Organization's Reputation with Fair Pay Practices

  • Organisations that prioritise pay transparency are often perceived as ethical, inclusive, and socially responsible.
  • This can lead to positive brand perception and increased competitiveness in the marketplace.

Position Your Organisation at the Forefront
of Pay Transparency

As you prepare your organisation to enact pay transparency, consider the scope and scale of change needed. Korn Ferry can help you each step of the way.

Potential Drawbacks of Pay Transparency

Leaders who are accustomed to an environment of secrecy and discretion around compensation might resist pay transparency. A WorldatWork report on Compensation Programmes and Practices found that:

  • 80% of organisations say most employees don’t understand the organisation’s compensation philosophy
  • 40% of organisations don’t have a documented compensation philosophy
  • 40% of organisations don’t let employees know their own salary range
  • 80% of organisations don’t include the employee perspective in reward programme design

Some employees are also uncomfortable with pay transparency and may prefer to keep their salaries confidential. Younger generations tend to be more open to this change, but the older generations may see it as an invasion of privacy.

While the benefits of pay transparency are well established, implementation sometimes can be a bumpy ride. Here are some potential drawbacks:

  • Problematic Perceptions of Pay Discrepancies

  • Public disclosure of salary ranges can lead to employees feeling demotivated or dissatisfied due to perceived pay disparities, even when differences are justified.

  • Challenges Managing Perceived Pay Unfairness

  • Managers may feel ill-equipped to address perceived unfairness in compensation, which can affect team dynamics.

  • Legal Risks from Pay Discrimination

  • Pay transparency could increase the risk of legal challenges if compensation disparities are seen as unfair, inconsistent, or discriminatory based on gender, race, or ethnicity.

  • Market Salary Benchmarking

  • Today, employees can often very easily compare their salaries with market rates. If they think they’re being underpaid, they might seek better offers elsewhere, leading to higher turnover.

  • Competitive Pay Undercutting

  • Transparent pay practices may allow competitors to poach top talent.

  • Administrative Complexity in Pay Systems

  • Establishing and maintaining transparent pay practices requires a significant investment of resources.

Implementing Pay Transparency

Organisations that want to develop more transparency in their rewards programs should align their programmes with their business and talent objectives and get leadership buy-in. The pay transparency framework should include  competitive pay benchmarking, job and career architectures, pay for performance linkages, and communication and governance processes.

To gain deeper insights into how to integrate pay transparency into your workforce planning, watch our webinar, It Pays to Plan: A Strategic Roadmap for Pay Transparency.

Led by Korn Ferry experts from North America and Europe, this session explores how transparent compensation practices can drive fairness, trust, and organisational success.

But before an organisation can be transparent in its rewards programme, it must have something it can be transparent with, says Tom McMullen, a senior client partner at Korn Ferry. Organisations must fix any gaps in their reward programmes before they can effectively and transparently communicate about it. Learn more about putting pay transparency into action.

Steps to Implement Pay Transparency in Your Organization

  1. Audit Your Current Pay Practices
    • Evaluate your existing reward strategy, structure, and processes to uncover hidden disparities and inconsistencies.
    • Assess job sizing, grading, levelling, and pay policy so you can address issues prior to formal reporting or communications.
  2. Align Salary Transparency with Company Values
    • Ensure transparency efforts reflect your company's core values and principles, and that leaders are aligned with this.
  3. Leverage Pay Tools and Resources
    • Use analytic pay tools and leverage external benchmarking data to inform workforce planning, job architecture, and pay structures.
    • Create clear and consistent compensation opportunities across the organisation.
  4. Develop a Transparent Communication Strategy
    • To foster a culture of trust and openness, inform employees about new frameworks and practices, as well as the reasoning behind them.
    • Remember that clarity and consistency are key.
  5. Enable Managers to Have Compensation Discussions:
    • Build capabilities, provide tools, and train managers to have confident, open, and respectful pay and performance discussions with their teams.
  6. Create Employee Compensation Feedback Channels
    • Establish channels for upward feedback and ongoing employee input, questions, and concerns regarding compensation.
    • Encourage an environment of open dialogue, promptly address any issues raised, and be willing to refine practices accordingly.
  7. Monitor and Adapt
    • Continuously assess and refine your pay transparency initiatives as needed.

To effectively implement pay transparency and build a culture of trust, organisations can benefit from structured guidance on compliance, pay structure assessment, and communication strategies.

Explore our pay transparency road map for a detailed, five-step guide to help your organisation navigate this transformative process and build a competitive advantage.

Take the Next Steps Towards Pay Transparency

Implementing pay transparency isn’t just about compliance—it’s a powerful strategic tool to drive organisational fairness, trust, and long-term success.

As the movement toward transparency reshapes the workplace landscape, now is the time to act. By implementing a thoughtful and strategic approach, you can reduce pay disparities, enhance employee engagement, and strengthen your reputation as a forward-thinking organisation.

Ready to Take the Next Step Towards Pay Transparency?

Our experts can help you design a strategy tailored to your business needs.

Contact Us to learn more!

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FAQ for Pay Transparency

Are companies legally required to implement pay transparency?

Some regions and countries have enacted laws mandating pay transparency. For example, the EU Pay Transparency Directive requires employers to disclose pay information and address wage gaps, which must be integrated into national laws by 2026. In the U.S., certain states, including California, Colorado, and New York have passed legislation requiring salary ranges to be shared in job postings. These laws aim to promote pay equity, but regulations vary widely by region.

How does pay transparency help close the pay gap?

Pay transparency helps address wage disparities by promoting objective, data-driven compensation practices. When salary ranges and pay decisions are made public, it reduces the likelihood of biases—such as those based on gender or race—impacting compensation. Transparency ensures accountability, as employers must justify pay differences based on performance, skills, and experience, rather than subjective factors. Over time, this leads to more equitable pay structures and helps close the pay gap.

Can pay transparency reduce turnover?

Yes, pay transparency can significantly reduce turnover by fostering trust, fairness, and openness within an organization. When employees understand how their compensation is determined and feel that it is fair compared to their peers, they are less likely to feel undervalued or seek employment elsewhere. Transparency around pay also promotes employee engagement and retention by creating a culture of accountability and ensuring that pay aligns with performance and contributions.