Lacking maturity
are at the top 2 stages of pay equity maturity
Did you know?
Work in Progress
are above-average or excellent in pay transparency
Demographic factor
examine gender and/or gender identity metrics for pay equity
HR Research Institute Research Report and Infographic - JANUARY 2025
HR.com’s Future of Pay Equity and Transparency 2025
Adopt effective practices to close pay gaps
Pay equity is a journey, and too many organizations are at the starting line, according to our latest research. Why should organizations care about pay equity? Well, obviously, there are legal compliance reasons, but there are other solid talent management factors as well. Read all about them and more in this report.
HR.com’s Future of Pay Equity and Transparency 2025
Executive Summary
Pay equity is a journey, and too many organizations are still at the starting line, according to our latest research. About two-fifths are at the beginning or undeveloped stages when it comes to pay equity, while just 21% are at the advanced level and 7% are at the expert level.
But there’s some good news as well. The majority of responding HR professionals (71%) say their organizations have integrated pay equity into their compensation philosophies.
Why should organizations care about pay equity? Well, obviously, there are legal compliance reasons, but there are other solid talent-management factors as well. In fact, the top three reasons for focusing on pay equity are the desire to retain talent (60%), ensure fairness (52%), and attract top candidates (49%).
Then there’s the related issue of pay transparency, which has become a higher priority as more U.S. states have implemented new laws. Our study finds that most organizations are only average or worse in implementing pay transparency in terms of sharing salary ranges and explaining pay structures.
Of course, issues related to pay gaps are not new by any means. In fact, the Pew Research Center underscores that progress in the specific area of gender pay gap has stagnated over the last two decades. But as the workforce grows increasingly diverse—and as women become more likely than men to graduate from universities —the issue of gender pay gaps grows ever more pronounced.
Our study shows that organizations that excel in pay equity stand out in various ways. For example, they are 5 times more likely to prioritize pay equity in HR strategies and over 4.5 times more likely to allocate a formal budget to address pay gaps. And their efforts go beyond compliance—they are reshaping their cultures to prioritize fairness, ensuring pay isn’t just equal but equitable. By following their lead, other organizations may be able to transform pay equity from a distant goal into a meaningful and beneficial reality.
About the Survey
HR.com’s “Future of Pay Equity and Transparency 2025” survey ran from October to December 2024. We gathered responses from 189 HR professionals in virtually every industry vertical. Respondents are located all over the world, but most of them reside in North America, especially the United States.
The participants represent a broad cross-section of employers by number of employees, ranging from small businesses with fewer than 100 employees to enterprises with 20,000+ employees. Sixty-seven percent of the responses represent midsize and large organizations.
Defining Pay Equity
For the purpose of this survey, we define pay equity, or equitable pay, as the practice of compensating employees the same way for the same or similar/comparable work, regardless of factors such as gender, race, disability, or religion. loyees to enterprises with 20,000+ employees. Sixty-seven percent of the responses represent midsize and large organizations.
Our Major Research Findings
1. A majority (71%) rate their organizations as intermediate or below in the area of pay equity.
-
When asked to describe the stage of development of pay equity in their organizations:
- 30% say they are at the “intermediate” stage
- two-fifths say they are at the “beginning” or “undeveloped” stages
- over a quarter say their organization is at the “advanced” (21%) or “expert” (7%) stages
- However, pay equity is reportedly part of the compensation strategy or philosophy in about seven out of 10 organizations.
2. There are many reasons to focus on pay equity, and over half say it is at least a top-five HR priority today.
-
Top reasons to focus on pay equity include:
- retaining the right talent (60%)
- ensuring fairness (52%)
- recruiting the right talent (49%)
- Pay equity is the top HR priority in only 11% of organizations, but another 43% say it’s at least among the top five HR priorities.
- In about a third of organizations, the person who has the primary responsibility is either the CEO (8%) or the Chief HR Officer (29%). In another 29%, the HR department as a whole is primarily responsible.
3. Pay transparency is still a work in progress for most organizations.
- Just one-third rate themselves as excellent (14%) or above average (20%) in pay transparency.
- Just two-fifths of respondents say their organizations include salary ranges for all job postings.
4. Organizations leverage a variety of different types of data to develop salary ranges and make hiring offers.
-
The four most common methods of developing salary ranges include:
- salary surveys/data from consulting organizations (56%)
- salary surveys/data from trade organizations or associations (55%)
- internal review of compensation data (54%)
- wage data from government resources (39%)
-
Factors influencing pay decisions when making hiring offers include:
- compensation levels of others holding the same job within the organization (70%)
- years of relevant experience (66%)
- compensation levels of others holding comparable jobs within the organization (52%)
- Among organizations that endeavor to link pay and performance, the top methods for doing so are by engaging in regular performance reviews (50%) and defining clear and accurate performance metrics (38%).
5. Just over half the organizations actively leverage data to improve pay equity, but they largely rely on just a couple of demographics and job-related factors for data analysis.
- Just over half agree (36%) or strongly agree (18%) that their organization analyzes and leverages data to improve pay equity.
-
The two most common methods to measure and determine pay equity include:
- comparisons of pay among comparable jobs (72%)
- comparisons within pay bands (60%)
-
Top demographic characteristics examined as part of pay equity analysis are:
- gender and/or gender identity (52%)
- race/ethnicity (51%)
- age (39%)
-
The top job-related factors examined as part of pay equity analysis are:
- years of experience (internal and external) (84%)
- performance (72%)
- role (69%)
6. Most organizations will act to close pay equity gaps when they’re found, but far fewer look for equity gaps to start with.
-
When asked about specific pay equity-related practices:
- a majority (78%) believe their organization acts to close pay gaps if inequities are found
- nearly two-thirds (64%) have plans to achieve sustainable pay equity
- under three-fifths (56%) have strategies in place to detect equity gaps
-
Specific actions organizations take to achieve pay equity include:
- increasing salary for underpaid employees (59%)
- making hiring offers based on factors other than past salary history (49%)
- standardizing pay practices (48%)
7. Compared to organizations with lower levels of pay equity maturity (less equitable organizations), those with higher levels of maturity (more equitable organizations) are:
- 35X more likely to rate themselves excellent in pay transparency
- 5X more likely to say pay equity is the top HR priority
- 5X more likely to have conducted a pay equity analysis in the past 12 months with internal team and external experts
- Over 4.5X more likely to have a formal budget to close pay gaps
- Almost 4X more likely to analyze and leverage data to improve pay equity
- 3X more likely to use compensation consultants to develop salary ranges
- 2.5X more likely to say pay equity is part of the organization’s compensation strategy or philosophy
- Over 2X more likely to include salary ranges in all job postings
- Over 2X more likely to increase salary for underpaid employees to achieve pay equity
- Over 2X less likely to say they do not ensure higher pay is given to better performers
The Pay Equity Maturity Gap
Finding: Just over a quarter of respondents believe their organization is at the “expert” or “advanced” stages of pay equity
We asked respondents to identify the level of development of pay equity in their organization (a detailed description of the levels is given in the chart below). Thirty percent of respondents believe their organization is at the “intermediate” level. Almost the same proportion say their organization is only at the “beginning” (27%) stage. Fourteen percent are at the “undeveloped” stage. Only a few are confident that their organization is at the “advanced” (21%) or “expert” (7%) levels of pay equity.
Differences based on organizational size
We asked respondents to identify the level of development of pay equity in their organization (a detailed description of the levels is given in the chart below). Thirty percent of respondents believe their organization is at the “intermediate” level. Almost the same proportion say their organization is only at the “beginning” (27%) stage. Fourteen percent are at the “undeveloped” stage. Only a few are confident that their organization is at the “advanced” (21%) or “expert” (7%) levels of pay equity.
Defining size of organization
For the purpose of this report, large organizations have 1,000 or more employees, midsize organizations have 100 to 999 employees, and small organizations have 99 or fewer employees.
Pay Equity Maturity: Three-Year Trend
We’ve asked a version of this question over the last three years . While there seems to be a marginal improvement in the proportion of organizations saying pay equity in their organization is at the expert/advanced stage, this proportion remains firmly under 30% of surveyed organizations, indicating much room for improvement in this area.
Pay equity-based cohorts
Throughout the report, we discuss differences between more and less equitable organizations. In order to examine these differences, we divided our sample into two cohorts:
- More equitable organizations: Those answering the question, “What best describes the stage of development of pay equity in your organization?” with “advanced” or “expert.”
- Less equitable organizations: Those answering with “undeveloped” or “beginning” to the same question.
Of course, correlation is not the same as causation. While we cannot state that any particular practice will definitely lead to better pay equity, we do see intriguing relationships that may, if used judiciously, result in greater success.
Finding: Pay equity is part of the compensation strategy or philosophy in seven out of 10 organizations
Is pay equity a part of the organization’s compensation strategy or philosophy? In about seven in 10 organizations, the answer is yes. This implies that in these organizations, pay equity is consistently linked to organizational goals to enhance competitiveness and compliance. However, the rest of the organizations potentially leave themselves open to issues such as legal and financial risks, employee disengagement, and talent acquisition challenges.
Finding: Pay equity is a part of the compensation strategy or philosophy of every more equitable organization
Pay equity is an integral part of compensation strategy or philosophy in every more equitable organization. In contrast, this is true among only two-fifths of less equitable organizations.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to say pay equity is part of their organization's compensation strategy or philosophy.
HRRI Strategic Recommendations
Based on our research, consider the following suggestions:
- Integrate pay equity into compensation strategies. HR professionals can ensure pay equity is a foundational element of compensation planning to foster fair practices.
- Focus on tools and training to establish pay equity frameworks. Start with education and the adoption of basic equity measures.
- Demonstrate tangible business outcomes such as increased retention and employee satisfaction to improve the strategic focus of pay equity.
The Business Case for Prioritizing Pay Equity
Finding: Over half of respondents believe pay equity is the top or among the top five HR priorities
A majority (91%) of survey respondents believe pay equity is an HR priority. In fact, 11% see pay equity as the top priority. Over two-fifths (43%) believe it is among the top five HR priorities, while 37% acknowledge that it is among many competing priorities but not near the top.
pay equity an organizational priority helps secure time, money, and effort to uncover pay gaps and remedy problems. Organizations that do not view it as a priority (9%) may find it challenging to attract and retain diverse talent, which may lead to competitive disadvantages in the areas of recruitment, innovation, and more.
Finding: One-fifth of more equitable organizations say pay equity is their top HR priority
More equitable organizations are significantly more likely to prioritize pay equity to a much greater extent than less equitable organizations. While 21% of more equitable organizations say pay equity is their top HR priority, 15% of less equitable organizations say pay equity is not currently viewed as an organizational priority.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to say pay equity is their top HR priority.
Finding: Three-fifths of organizations focus on pay equity to retain the right talent
When it comes to the reasons why organizations are focusing on pay equity, the primary drivers are retaining the right talent (60%), ensuring fairness (52%), and recruiting the right talent (49%). Retaining the right talent and ensuring fairness have remained the primary motivations for driving pay equity efforts over the last three years.
Although “ensuring compliance with laws and regulations” is among the top five reasons organizations focus on pay equity (43%), it is cited less often than the three talent-management drivers cited above, indicating pay equity is not typically seen as solely a compliance issue. In short, addressing pay equity aligns with broader goals of talent management and organizational integrity.
Finding: Responsibility for pay equity and related issues rests with the HR department or the CHRO in half of the organizations
Who takes primary responsibility for pay equity issues? Generally, the responsibility rests on the HR department as a whole (29%) or the CHRO (29%). This is understandable given the close ties of pay equity with major HR responsibilities such as employee experience, retention, and compensation. The HR department “as a whole” has remained among the top two answers to this question over the last three years.
It is concerning to note that 4% of respondents say no one in their organization is primarily responsible for pay equity and related issues.
Differences based on organization size
In large organizations, the total rewards/compensation/payroll department is most likely to oversee pay equity and related issues. In midsize organizations, pay equity is mostly handled by the HR department as a whole. In small organizations, the responsibility most likely rests on the Chief HR Officer.
HRRI Strategic Recommendations
Based on our research, consider the following suggestions:
- Prioritize pay equity in leadership agendas. Elevate pay equity’s importance by linking it to broader organizational goals such as talent retention and trust-building.
- Integrate equity with talent strategies. Position pay equity as essential to attracting and keeping top talent.
- Use pay equity as a foundation for transparent and equitable workplace practices to strengthen these initiatives.
- Implement audits and standardized pay review processes to mitigate risk and improve equity outcomes.
- Ensure pay equity is a strategic priority by assigning responsibility to HR leadership, other senior leaders, or a dedicated compensation team. Acknowledge its importance at the executive level to drive sustainable changes.
How Pay Transparency Drives Progress in Achieving Pay Equity
Finding: A third of respondents believe their organization is above average or excellent in the area of pay transparency
In the United States, there is no comprehensive federal pay transparency law, but such laws do exist at various state and city levels.
Pay transparency has been shown to reduce the wage gap by preventing the compounding effects of historical pay gaps. It reportedly empowers marginalized employees to negotiate better salaries and uncovers discriminatory pay patterns.
Two-thirds of respondents rate their organization as average or below when it comes to pay transparency. A third believe they are excellent (14%) or above average (20%) in this area.
Defining Pay Transparency
For the purpose of the survey on which this report is based, we defined pay transparency as organizations communicating with employees about how their pay is determined. For example, the parameters of pay bands are communicated so employees and/or prospective employees are fully aware of the job's pay range and how it is determined. Further, some U.S. states legally require job postings to include a salary range.
Finding: Three-fourths of more equitable organizations rate themselves excellent at pay transparency
How well do more equitable organizations fare at pay transparency? A majority of more equitable organizations rate themselves as excellent (35%) or above average (39%) at pay transparency, compared to only a handful of less equitable organizations (5%) that do the same.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to rate themselves above average or excellent in the area of pay transparency.
Finding: Two-fifths of respondents say their organizations include salary ranges for all job postings
While discussing pay transparency, it is essential to consider the pay disclosure requirements in the U.S. states. Results of our survey indicate that two-fifths of organizations include salary ranges for all job postings, but a quarter do so only for some job postings (23%), and another fifth do so only where it is legally required (17%).
A fifth of the organizations do not include salary ranges at present, though 8% are considering doing it. It’s not clear whether these organizations operate in states where such laws do not apply, but other research indicates that compliance with pay transparency laws is only about 70% even in states that have had laws in place since 2021.
Differences based on organization size
Smaller organizations are more likely to include salary ranges for all job postings (51%) compared to mid-size (30%) and large organizations (39%).
Finding: More equitable organizations are over twice as likely as less equitable organizations to include salary ranges for all job postings
Three-fifths of more equitable organizations include salary ranges for all job postings compared to only a quarter of less equitable organizations that do the same. Including salary ranges in job posts may influence a candidate’s decision to apply and give candidates a more positive impression of the employer.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to post salary ranges for all job posting
HRRI Strategic Recommendations
Based on our research, please consider these suggestions:
- Equip managers with tools and training to effectively communicate pay structures and the rationale behind salary decisions. This builds trust and ensures consistent messaging.
- Standardize salary range disclosures for all roles, especially during recruitment and performance reviews. This addresses employee expectations for fairness and clarity.
- Benchmark against industry leaders in pay transparency. Incorporate their strategies into your policies to close the gap.
- Highlight the link between pay transparency and employee engagement. Open communication about salary fosters trust and reduces perceptions of inequity, positively impacting morale and retention.
Key Drivers of Pay Decisions in Organizations
Finding: Organizations continue to rely on tried and tested sources of information to develop salary ranges
We asked a follow-up question to those respondents who said their organizations post salary ranges. We asked them to elaborate on which sources of information they relied on to develop those ranges. Over half use salary surveys/data from consulting organizations (56%) and trade organizations or associations (55%). Internal reviews of compensation data (54%) are another source of information while developing salary ranges. These have remained the top three sources of information since last year’s survey on this topic.
Two-fifths (39%) utilize wage data from government sources (such as the Bureau of Labor Statistics), and one-third use competitor research. A quarter of them rely on compensation consultants who may be able to provide a more customized pay structure to suit organizational needs.
Finding: More equitable organizations use a variety of methods to develop salary ranges to a much greater extent compared to less equitable organizations
More equitable organizations rely on a variety of methods to develop salary ranges. For instance, they are almost twice as likely to use salary surveys/data from trade organizations or associations (67% vs. 38%) and consulting organizations (65% vs. 33%).
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to rely on the listed sources of information to develop salary ranges.
Finding: Compensation levels of others holding the same jobs within the organization influence pay decisions in 70% of organizations
What factors influence pay decisions during hiring? Primarily, organizations rely on the compensation levels of others holding the same job within the organization (70%), thereby ensuring internal equity. The other top consideration is the number of years of relevant experience (66%). These emerged as the top factors over the last two years as well.
About half also utilize compensation levels of others holding comparable jobs within the organization (52%) and market compensation studies for benchmarking purposes (53%). These methods help determine if pay levels are competitive with the external market.
The glass ceiling and pay equity
We must note that, aside from the methods discussed above, other factors influence pay equity. One is the so-called glass ceiling , which is a metaphor for the invisible barrier that prevents some workers, especially women and ethnic minorities, from advancing to higher positions in organizations.
That is, overall compensation levels may be inequitably impacted if some groups are hindered from advancing within the organization. For example, for every 100 men who are promoted from entry-level to manager, only 87 women are promoted, and only 82 women of color are promoted. As a result, men significantly outnumber women at the manager level, and this affects pay levels. Moreover, if women and minorities are less likely to become managers, then there are fewer to be promoted to senior leadership positions. These trends can influence overall pay equity among different demographic groups.
Finding: A third of respondents say their organizations do not have a way to ensure higher pay goes to better performers
When it comes to ensuring higher pay is given to better performers, half of organizations rely on regular performance reviews. Fewer, however, define clear and accurate performance metrics (38%). Such metrics help create clarity in performance measurement. Even fewer build formal policies such as a pay-for-performance framework (25%); this may be one of the reasons why only a minority of organizations have clear communication about links between pay and performance (30%). Further, only 22% conduct regular compensation audits to spot biases or inconsistencies, leaving organizations vulnerable to compliance risks and reputational damage.
It is noteworthy that a third of respondents acknowledge a lack of direct correlation between pay and performance in their organizations. There are various possible reasons for this, from difficulties in accurately measuring performance to problems with aligning compensation structures with individual contributions.
The bottom line is that linking pay to performance is often challenging, and such challenges can make it more difficult for organizations to detect and address pay inequities.
Finding: More equitable organizations employ a range of methods to ensure higher pay is given to better performers
More equitable organizations consistently outperform less equitable ones in employing a variety of methods to ensure higher pay is given to better performers. In contrast, over half of less equitable organizations admit that they don’t ensure higher pay goes to better performers.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to rely on the listed ways to ensure higher pay is given to better performers.
HRRI Strategic Recommendations
Based on our research, consider the following recommendations:
- Establish a formal policy for salary range development that mandates the use of multiple sources. Develop consistent and competitive salary ranges that align with market and internal equity expectations.
- Define clear guidelines for pay decisions, ensuring internal equity and fair treatment for all employees. Focus on transparent and data-driven hiring practices that reduce bias and enhance organizational credibility.
- Implement a robust pay-for-performance framework, integrating well-defined metrics and transparent communication. Focus on building a merit-based culture that motivates employees while ensuring pay equity.
- Train HR teams, managers, and leadership on pay equity and transparency best practices. This develops informed stakeholders who contribute to building an equitable workplace.
- Develop a continuous monitoring and feedback mechanism to assess the effectiveness of pay practices. This develops agile pay policies that evolve with organizational needs and workforce expectations.
Role of Data in Pay Equity
Finding: Just over half of organizations analyze and leverage data to improve pay equity
Pay equity depends on the analysis of pay levels. However, over a fifth of respondents say they disagree (19%) or strongly disagree (3%) with the idea that their organization is analyzing and leveraging data to improve pay equity. This begs the question of how these organizations are planning to go about determining pay equity. Further, with growing legislation surrounding this issue, documenting and gathering data on pay levels and equity may no longer be optional.
Just over half agree (36%) or strongly agree (16%) that they analyze and leverage data to improve pay equity.
Finding: More equitable organizations are four times more likely than less equitable organizations to analyze and leverage data to improve pay equity
A majority of more equitable organizations (79%) actively agree that their organizations analyze and leverage data to improve pay equity. However, the same is true among only 21% of less equitable organizations. This indicates a strong correlation between data analysis and successful pay equity.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to say they leverage data in an effort to improve pay equity.
Finding: Three-fifths of surveyed organizations have conducted a pay equity analysis in the past 12 months
Conducting comprehensive pay equity analyses is vital to benchmarking and improving pay equity within organizations. Pay equity analysis that utilizes internal and external expertise ensures robust methodologies and actionable insights that are crucial to closing pay gaps.
Two-fifths of surveyed organizations have conducted such analysis over the last year with just their internal teams while about a fifth have included external experts with the internal team (18%) or involved external experts exclusively (3%). However, 38% of organizations have not conducted such an analysis over the past 12 months.
Differences based on organizational size
Small (36%) and midsize organizations (38%) are more likely to say they haven’t conducted a pay equity analysis in the past 12 months compared to large organizations (25%).
Finding: Nine out of 10 more equitable organizations have conducted pay equity analyses over the past 12 months
Compared to less equitable organizations, more equitable organizations are five times more likely to have conducted a pay equity analysis with an internal team and external experts in the past 12 months (34% vs. 7%). Almost half (47%) have also engaged in such an analysis with only their internal team compared to 30% of less equitable organizations that have done the same. This further reinforces that more equitable organizations tend to be more vigilant about equity by leveraging data.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to have conducted a pay equity analysis in the past 12 months.
HRRI Strategic Recommendations
Based on our research, please consider the following suggestions.
- Adopt data-driven tools for decision-making. Implement compensation management systems that analyze pay trends and highlight inequities. Equip HR teams with analytics dashboards to make informed decisions during hiring, promotions, and salary reviews.
- Form a cross-functional team dedicated to pay equity analysis, including HR, finance, and legal experts. A focused team ensures pay equity remains a priority and leverages both internal and external expertise effectively.
- If your organization lacks knowledgeable personnel, it can investigate hiring outside experts to help conduct pay analyses.
- Consider committing to conducting pay equity analyses regularly. Consistent audits highlight gaps and ensure accountability.
- Provide training to managers on interpreting pay data and applying it to performance reviews and compensation planning. This ensures fairer pay decisions and greater accountability.
Measuring Pay Equity: Methods and Metrics
We asked a few follow-up questions to those respondents who chose “agree/strongly agree” about their organization analyzing and leveraging data to improve pay equity. We asked them to elaborate on how their organization measures and determines pay equity and which demographic characteristics are examined as part of pay equity analysis.
Finding: A large majority of organizations compare pay among comparable jobs to measure and determine pay equity
What kinds of comparisons do organizations engage in while doing pay equity analysis? The most common comparisons are the pay among comparable jobs (72%) and comparisons within pay bands (60%). These were the popular metrics in our 2024 study as well. Such measures could increase internal equity within organizations.
Nearly half (47%) of organizations examine the career progression gap, and about two-fifths (38%) examine pay-for-performance measures. The adjusted pay gap, which is a good representation of the gender pay ratio, is utilized by a third (35%) of organizations. Similarly, analyses such as unadjusted median pay gaps are largely underutilized (22%). We believe these calculations may offer organizations greater insight into the cause of pay inequity by encapsulating all ways that pay disparity is compounded within the organization.
Finding: Over half of organizations examine gender identity and race/ethnicity as part of pay equity analysis
The most common demographic characteristics that are examined as part of the pay equity analysis are gender and/or gender identity (52%), race/ethnicity (51%), and age (39%) as sources of pay differences. All other listed factors are examined in only under a fifth of organizations.
We believe that, while gender and race are largely influential in discussions surrounding pay equity, organizations should take care to incorporate an intersectional lens to view pay equity issues. For instance, women of all races and ethnicities face a pay gap when compared with men of similar races and ethnicities, but women of color are affected by gender as well as race. Similar examinations regarding sexual orientation and mental health may be necessary. However, intersectionality is examined by a meager 6% of organizations.
It is worrying to note that the percentage of respondents saying “none of the above” to this survey question has been consistent and high over the last three years.
Finding: A large majority of organizations (84%) examine years of experience as a part of pay equity analysis
Years of experience (84%), role (69%), and performance (72%) are the most common job-related factors examined. Almost two-thirds (64%) examine skill sets, while over half examine educational background (53%). This indicates a shift from favoring educational degrees to practical skill sets. Tenure (55%) is also an issue that factors into pay equity analysis in over half of organizations.
HRRI Strategic Recommendations
Based on our research, please consider the following suggestions.
- Develop a comprehensive framework: Incorporate all relevant factors—experience, performance, skills, and role—to ensure balanced pay equity.
- Use external market data to validate the fairness of compensation levels.
- Regularly review analysis methods to identify and eliminate any unintended biases related to gender, ethnicity, or other demographics.
- Ensure executives and managers understand how these factors impact pay equity and organizational outcomes.
- Communicate pay philosophy to help build trust and foster a culture of equity.
Strategies for Closing Pay Equity Gaps
Finding: Almost eight in 10 respondents believe their organization acts to close pay gaps if inequities are found
We asked about specific practices related to resolving pay equity issues in organizations. The most common practice cited was to take specific actions to close pay gaps if inequities are found. While 78% of organizations claim to do this, it is remarkable that over a fifth of organizations take no action to close pay gaps even when inequities are found. This can be risky due to growing legislation surrounding this issue. This might be linked to the low proportion of respondents (30%) saying there is a formal budget allocated to closing pay gaps.
Fifty-six percent replied affirmatively that their organization has strategies in place to detect pay equity gaps, and just over two-fifths (45%) set goals to actively investigate and solve inequalities within the workplace.
What is done with the information from pay equity analysis? Two-thirds (64%) of organizations have plans to achieve sustainable pay equity. However, just half (51%) utilize pay equity information to modify recruitment policies and practices.
Finding: Compared to less equitable organizations, more equitable organizations are far more likely to take action to close pay gaps if inequities are found
More equitable organizations are more likely to engage in specific practices to improve pay equity than less equitable organizations.
It makes sense that more equitable organizations are more likely to have strategies in place to detect equity gaps and act to close pay gaps. These make them more equitable in the first place. There is also a large percentage point difference across all options mentioned below. It further reinforces the fact that less equitable organizations have a long way to go to get better at pay equity.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable ones to have utilized all listed practices to improve pay equity to a greater.
Finding: About three-fifths of organizations increase salary for unpaid employees to achieve pay equity
What specific actions do organizations take to achieve pay equity? Almost three-fifths aim to increase salaries for underpaid employees (59%). About half (49%) of organizations look to solve the problem at the source: that is, by making hiring offers based on factors other than past salary history. This might help to address existing pay inequities in the market. About half of them also aim to standardize pay practices (48%) in a bid to reduce bias in pay decisions.
Finding: More equitable organizations are over twice as likely as less equitable organizations to increase salary for underpaid employees
More equitable organizations use a variety of specific actions to achieve pay equity compared to less equitable organizations. For instance, they are over two times more likely to increase salary for underpaid employees (78% vs. 33%), and 2.5 times as likely to standardize pay practices (69% vs. 27%). These actions indicate that more equitable organizations are more committed to remedying pay inequity.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to have engaged in all listed actions to improve pay equity to a greater extent.
HRRI Strategic Recommendations
Based on our research, please consider the following suggestions:
- Establish measurable objectives to address pay inequities and ensure a formal budget is allocated for closing identified gaps.
- Consider modifying recruitment practices to reduce inequities by avoiding relying on candidates’ past salary histories. Standardize hiring offers based on market benchmarks and candidate qualifications.
- Train managers to make unbiased pay decisions and effectively conduct pay-related conversations. Equip them with tools and data to ensure accountability and transparency.
- Perform pay equity audits at consistent intervals and implement strategies to address discrepancies. Proactively increase salaries for underpaid employees and standardize pay practices across the organization.
- Recognize and reward departments or leaders actively contributing to achieving pay equity. Linking equity initiatives to performance metrics can sustain organizational focus on this priority.
Building a Future-ready Pay Equity Framework
Finding: Two-thirds of respondents believe their organization will improve its pay equity situation over the next two years
While three-fourths of respondents in 2024 and seven in 10 respondents in 2023 believed pay equity would improve over the next two years, this year about two-thirds say the same.
Correspondingly, there has been an improvement in the proportion saying their organization is already equitable. This proportion was only 15% in 2023 as opposed to 25% today.
Finding: Changing workforce expectations and legislation surrounding pay equity are most likely to influence pay equity and transparency over the next two years
About three-fifths of respondents believe changing workforce expectations and legislation and regulation are likely to affect pay equity and transparency over the next two years. Another 32% believe the need to recruit diverse talent is likely to be an important consideration.
Finding: Over half (56%) of organizations believe they are well-equipped to handle any pay-equity-related changes that could occur over the next two years
While organizations may be aware of factors likely to affect pay equity and transparency in the near future, how ready are they to contend with these changes? Over half (56%) are confident in their ability to handle changes over the next two years, while a fifth (22%) disagree about being well-equipped to deal with future changes.
Finding: Most of the more equitable organizations believe they are well-equipped to handle pay-equity-related changes in the future
The strategic focus on pay equity in more equitable organizations improves their efficacy in dealing with future changes and remaining agile. Fully 92% of more equitable organizations agree/strongly agree that they are well-equipped to handle any pay-equity-related changes that could occur over the next two years compared to only a quarter of less equitable organizations who say the same.
Results of Chi-square Test
A chi-square test of independence shows that more equitable organizations are significantly more likely than less equitable organizations to say they are well-equipped to handle pay-equity-related changes that could occur over the next two years.
Finding: Enhanced pay audits and analytics are seen to be the top benefit of applying AI in pay equity and transparency
We asked about the potential outcomes of employing AI in pay equity and transparency, and over a third of respondents said there is potential for enhanced pay audits and analytics (36%). However, there are several risks, such as AI bias (35%), legal risks associated with AI usage (34%), and over-reliance on AI for complex decisions (34%).
HRRI Strategic Recommendations
Based on our research, please consider the following suggestions:
- Respond to changing workforce expectations and increasing legislation and regulations to stay competitive and compliant. Develop proactive pay equity policies to meet both employee and legal demands.
- Use pay equity as a driver for attracting diverse talent and meeting globalization standards. Link pay equity progress to investor and consumer expectations to reinforce your organizational brand.
- Equip your organization to handle pay equity changes by building robust frameworks for monitoring and improvement.
- Set measurable goals for pay equity outcomes over the next two years to ensure accountability.
- Leverage AI to enhance pay audits, detect biases, and create real-time monitoring systems. However, implement AI with caution, ensuring transparency and addressing potential biases or legal risks.
Key Takeaways
1. Set clear goals and accountability.
Establish clear pay equity goals: Define measurable, time-bound goals to address pay gaps. Ensure these goals are aligned with your organization’s overall diversity and inclusion strategy to promote fair compensation.
Prioritize pay equity in leadership: Make pay equity a priority at all levels of leadership. Designate senior leaders to champion pay equity initiatives and ensure their accountability for progress. Keep tabs on the alignment of these initiatives with corporate values and strategic objectives.
2. Leverage data and technology.
Use data-driven insights: Regularly analyze compensation data to identify pay disparities. Use both internal data and external benchmarks to make informed decisions on pay adjustments, ensuring fairness across the organization.
Leverage technology responsibly: Implement technology solutions like AI and compensation management tools to monitor and enhance pay equity. However, ensure that AI systems have guardrails, are bias-free, and are regularly audited to prevent unintended outcomes.
3. Promote transparency and communication.
Promote transparency: Consider communicating salary ranges, pay structures, and the criteria for pay increases openly with employees. Transparency builds trust and reinforces the organization’s commitment to fairness.
Communicate progress clearly: Regularly share progress reports on pay equity efforts with employees and external stakeholders. Highlight the actions taken to close pay gaps, demonstrating the organization’s commitment to continuous improvement.
4. Adopt fair compensation systems.
Implement pay-for-performance systems: Where it makes sense, link compensation to measurable performance metrics. Ensure that high-performing employees are rewarded equitably, thus promoting motivation and a sense of fairness across the workforce.
Create clear and standardized pay practices: Standardize pay practices to ensure consistency and fairness. Clearly define how compensation decisions are made, including factors like experience, education, and job responsibilities.
5. Ensure legal compliance.
Ensure compliance with regulations: Stay informed about the latest legal requirements related to pay equity, including local, regional, and international laws. Ensure your pay practices are in compliance with these regulations to avoid legal risks.
Encourage non-retroactive salary history policies: Consider removing past salary history from compensation decisions to prevent perpetuating existing inequities. Offer pay based on the role’s market value and candidate qualifications instead.
6. Focus on diversity and inclusion.
Focus on diverse talent recruitment: Use pay equity as a means to attract and retain a diverse workforce. Highlight your organization’s commitment to equitable compensation as part of your recruitment efforts.
Integrate intersectionality into pay equity analysis: Analyze compensation data with an intersectional lens, considering how multiple related factors such as race, gender, disability, and other characteristics may influence pay disparities. This ensures a more comprehensive approach to equity.
7. Educate and train leaders.
Educate managers on unbiased pay decisions: Train managers on how to evaluate and make compensation decisions without bias. This ensures that decisions are based on merit and qualifications rather than unconscious and personal prejudice.
Provide training on pay equity conversations: Equip managers with the skills to have constructive, transparent conversations about compensation with employees. Open dialogue helps address concerns and reinforces the organization’s commitment to fairness.
8. Conduct regular audits and assessments.
Conduct regular pay audits: Schedule routine pay equity audits to identify disparities across various demographic groups. Audits should focus on internal equity, gender pay gaps, and other disparities and ensure pay practices are fair.
Monitor employee feedback on pay equity: Regularly gather feedback from employees through surveys or focus groups to understand their perceptions of pay fairness. This feedback can provide valuable insights for improving policies and practices.
9. Build trust and foster fairness.
Foster a culture of trust and fairness: Create an environment where employees feel confident that pay decisions are made fairly. This can be achieved through consistent, transparent communication and demonstrating commitment to equity at all organizational levels.
Link pay equity to organizational values: Integrate pay equity into your core organizational values. Ensure that compensation fairness is consistently reinforced in company policies and practices, aligning with the company’s broader mission of diversity and inclusion.
10. Plan for long-term success.
Promote long-term commitment to pay equity: Pay equity is not a one-time project but a continuous commitment. Develop long-term strategies for achieving and maintaining pay equity, with annual audits, reviews, and updates to ensure sustainability.
Tailor pay equity strategies to organizational context: Customize pay equity strategies to fit your organization’s specific context, including its size, industry, and workforce demographics. This ensures that your approach is relevant and effective in addressing unique challenges.
Meet Our Expert Advisory Board Members
Benefit from the expertise of renowned industry professionals who have contributed to the development of this survey research, study findings, and virtual event presentations.
Thanks to our great sponsor
Take advantage of this opportunity to gain valuable insights and actionable strategies from our exclusive HR Research Institute research findings.
