Full pay transparency remains distant prospect for large companies

Pay transparency is becoming a requirement for organisations around the world. But most large firms feel they are unprepared for it, with fewer than one-third ready to meet global regulatory shifts, according to a new study from Mercer.

Wage transparency, salary compensation, and compensation transparency generally, involves disclosure of employee compensation amounts, either among other employees in an organization, to owners, regulators or the general public. In recent years it has become a key part of pushes for workplace equality, as it can help reveal gaps in the treatment of workers according to gender, ethnicity, social class and sexuality, among other factors.

Due to this, regulators around the world are finally working to make pay transparency a legal requirement for businesses. For example, the EU pay transparency directive is a set of measures aiming to combat pay discrimination and reduce gender pay gaps across Europe, and setting out goals that EU countries must achieve.

Mercer has surveyed more than 1,000 companies worldwide, to uncover their attitudes to pay transparency. And amid the rise in legislation on the topic, Mercer has found companies are mostly fixated on the subject from a regulatory angle. But they may be missing out on major opportunities to supercharge their efforts, in the process.

The survey found that while 77% of companies cited compliance as a key driver of their pay transparency strategy, more than 50% of companies noted increasing employee satisfaction and aligning with company values as additional leading drivers. But even as firms struggle with digital skill gaps and filling roles that have been vacant for record periods, firms could also benefit from pay transparency from an HR angle – as almost half of respondents said employee satisfaction was not a driver for their pay transparency strategy – and only 36% said they prioritised it to help with their recruitment efforts.

“It’s time for companies to act on pay transparency. With fair pay the second-most important reason employees choose to stay with an organisation, employers need to prioritize these efforts to position themselves for success,” explained Gordon Frost, Mercer’s global rewards solution leader.

Mercer found that firms were not looking at pay transparency as a way to win or retain talent, in spite of the fact many companies seemed aware it was important to that end. A 69% majority of companies said they knew transparency was an expectation of candidates for their roles, while 58% said it was also important as an expectation of their existing employees.

Taking this into account, and making it a priority for firms on a basis beyond regulatory needs might help get extra buy-in from stakeholders that could hasten change. And large firms in particular are in sore need of that extra push – particularly in Europe. In the EU, only 7% of respondents said they had developed and implemented a strategy and approach to pay transparency – with this falling to just 1% in the UK. This put both geographies well behind the global average.

While employers acknowledge the rising expectations around pay transparency, there is still a significant readiness gap. Just 32% of organisations said they feel prepared to meet global transparency requirements as things stand.

This may also be because, of the information companies already share voluntarily, it is conspicuously vague, and centred around concepts rather than material results. When asked what they shared globally in terms of pay transparency, the only majority was in ‘pay philosophy or strategy’ – at 54%. Meanwhile, the next highest 46% said that globally they shared pay policies.

In sharp contrast, when it came to the data that governments are currently legislating on, few said they had globally volunteered information on demographic pay. Just 7% – the lowest portion of any category – said they had globally published their unadjusted gender and ethnic pay gaps. Meanwhile, only 9% volunteered pay ranges on job postings. While every company will have their own reasons for this, it will be hard for critics not to see this and assume the worst about their intentions. But changing now could also present firms as leaders, and help them stand out to talent.

“The journey towards pay transparency is challenging, but it’s also ripe with opportunities for those who navigate it early and effectively,” continued Frost. “As organisations strive to meet the growing demand for transparency, they have the unique chance to transform what was seen as a compliance effort into a competitive advantage.”