Over the last decade, numerous laws have been enacted across the U.S. to advance pay equity and transparency in the workplace. Pay data reporting laws, in particular, have gained significant momentum, becoming a key driver of progress toward fairer compensation practices.
Several U.S. states, including California and Illinois, have enacted pay data reporting laws, while localities such as New York City have proposed their own regulations to address wage disparities. On the federal level, the U.S. Equal Opportunity Commission (EEOC) is preparing to reinstate an Obama-era pay data reporting requirement for large businesses next year. The initiative was rolled back in 2019 after facing opposition due to concerns about the financial burden on employers and its “unproven utility,” which historically hindered progress toward pay equity. While the return of this mandate may result in gradual advancements, it marks a key step in the broader movement for fair pay and promises to drive lasting and meaningful progress.
Legislative advances signal change is on the horizon, yet significant challenges remain beyond legal requirements. Nonetheless, there is a growing consensus that companies should take ownership of their pay equity efforts. Accountability is no longer just a legal obligation but a business imperative.
Let’s explore three steps that employers can take to advance their pay equity efforts as pay data reporting and transparency mandates continue to sweep the nation.
1. Develop a Consistent Process for Collecting and Analyzing Pay Data
Achieving pay equity starts with building a consistent process for collecting and analyzing compensation data. Without this critical information, companies lack the insights needed to identify and address pay disparities.
Unfortunately, there’s significant room for improvement in this area. According to Brightmine research, 77% of senior leaders claim their organization conducts pay equity analyzes. However, a significant number also identify data gaps as a major obstacle to effectively addressing pay equity. In fact, 35% report a lack of pay data, 59% lack employee demographic data, and 59% lack employee self-identification data. This indicates that while pay analysis may be performed, many organizations do not possess the necessary data to derive actionable insights.
To address this, employers should develop a systematic approach to gathering pay data, ensuring it is broken down by gender, race and other demographics. This process can be time-consuming and complex, but it’s an important starting point to identify disparities.
Technology plays a vital role in supporting this data-driven approach. By utilizing advanced tools like analytics platforms and AI, organizations can sift through large volumes of data to uncover the fundamental drivers of wage inequities. Organizations can then leverage the data insights to shape their policies and practices, ensuring changes are measurable and actionable. This ability to quantify disparities is essential for lasting progress in pay equity.
2. Embrace Pay Data Disclosure to Foster Accountability
New pay data reporting laws reflect a broader societal movement towards greater transparency and accountability around compensation practices. Yet, although legislation mandating pay disclosure is increasing, many business leaders and people managers remain reluctant to engage in open discussions about remuneration. Per Brightmine research, just 12% of employees feel their managers are good at talking openly with their workforce about pay, while 22% say their managers never discuss pay with them.
While this reluctance to have open discussions about pay is understandable, it is no longer acceptable in today’s workplace. Transparency around compensation is becoming increasingly vital in fostering trust and driving progress in pay equity.
To encourage more open dialogue about pay, organizations should offer personalized training programs to empower managers with the skills to facilitate effective discussions about remuneration. Training should cover topics such as how to communicate pay structures and address employee concerns about pay decision-making.
Leaders should also outline clear action plans aimed at closing pay gaps. This involves articulating specific strategies for skills development and tangible steps for job progression, ensuring all employees understand the pathways available to advance within the organization. Additionally, leaders should prioritize listening to the individualized needs of employees, recognizing that each team member will have unique aspirations and challenges.
Pay disclosure at this level serves as a powerful tool for equity. By openly sharing pay information, organizations can build a culture of trust and demonstrate a genuine commitment to fairness and inclusivity.
3. Acknowledge the Responsibility Beyond Compliance
Establishing strong processes for pay data collection and disclosure is essential, but employers must also stay vigilant in complying with evolving local, state, and federal regulations around pay transparency. It is critical that organizations regularly monitor legal changes and adjust their pay practices to align with new rules.
To effectively stay informed about changes in wage laws, employers can adopt best practices, such as collaborating with legal or compliance experts or using technology like automated compliance management or data analytics tools to track regulatory changes.
However, employers should view complying with legal mandates as the baseline for their efforts, not the goal. Organizations should recognize the importance of moving past a “tick-the-box” mentality when it comes to pay data reporting.
To do so, organizations should conduct regular pay audits to understand the underlying factors contributing to wage gaps and set measurable targets for improving equity. Pay audits should not be viewed as a one-time effort. They require ongoing commitment to ensure fair practices are consistently upheld.
Beyond analyzing quantitative data, companies should also seek qualitative insights through employee feedback and surveys to gauge perceptions of pay equity within the organization. Leaders should consider keeping feedback anonymous to foster a safe environment for employees to express their opinions candidly.
By prioritizing pay transparency and remaining accountable to evolving legal standards, organizations can foster a culture of fairness and inclusion that benefits all employees. When employees feel valued and compensated fairly, it leads to increased job satisfaction and morale, heightened productivity and engagement, and a more loyal workforce.
A Continued Commitment to Pay Equity
As calls for pay transparency and equity grow louder, employers have a unique opportunity to lead by example. By developing a consistent approach to collecting and analyzing pay data, fostering a culture of openness and accountability around pay, companies can go beyond regulatory compliance to build fairer, more equitable workplaces for all.
Sabina Mehmood is Global Pay Equity Leader at Brightmine.