More than half of Americans live in an area already regulated by pay transparency, according to professional services firm Aon. That means if you have not yet been directly affected by pay transparency laws, you’re in the minority. And it’s a shrinking minority.

In 2025, new or stronger pay transparency laws go into effect across five states: Illinois, Massachusetts, New Jersey, Vermont and Minnesota. This adds to the dozens of states and municipalities that already have pay transparency laws in the books, including New York City. Even states with existing legislation, for example California, are introducing additional, stronger requirements. 

Action outside of the United States is set to affect American companies, too. The EU Pay Transparency Directive is a landmark rule that goes into effect in 2026 and requires companies to disclose and revise compensation structures if there is more than a 5% pay gap between men and women. It will apply to companies within Europe as well as global companies that have 100 or more employees in the region. 

There is a clear trajectory. Pay transparency is becoming the law of the land in more places each year. And where it isn’t yet the law, there is mounting pressure for companies to adopt these policies on their own in order to compete for top talent. That explains why, according to a SHRM survey, two-thirds of HR professionals at organizations not governed by pay transparency laws voluntarily choose to disclose the pay range in their job postings anyway.

It’s less about when pay transparency will affect your company and more about how you will manage it. 

So we are sharing the top considerations for HR leaders, including insights and advice from two experienced compensation professionals who are working with clients to optimize their approaches: Mary Rizzuti, CCP, PHR, SHRM-CP, Partner at EisnerAmper and the Practice Leader for Compensation Resources and Judy Freides, Total Rewards Expert at Inspire Human Resources. 

Pay transparency: a positive or negative for HR leaders?

Pay transparency can bring positive or negative results to a company, explains Judy Freides. It shines a spotlight on: 

1. How well (or poorly) a company has been managing incumbents’ salaries, and
2. Where the company targets salaries compared to the external market

For some companies, that spotlight is a positive one. But for those falling below market or with inconsistent salaries, it’s a challenge. And fixing those inconsistencies should be a top priority. 

Mary Rizzuti agrees that pay transparency can be either positive or negative, depending on the company. “For companies with formalized salary structures in place that are supported by empirical data, pay transparency won’t change much, outside of communications,” Mary says.

“The word transparency makes management uncomfortable,” Mary continues. However, this does not mean a company has to publish each person’s salary. The main focus is transparency in job postings. However, this one action may lead to internal conversations about compensation that companies need to be well-prepared for.  

Where to start? Advice for HR leaders

Only 18% of employers say they feel ready for pay transparency—a major pain point considering how quickly regulations and expectations are expanding. But, there is no reason to panic. If you have not completed a recent market study, now is the time to do so. That way, you will know where you stand in the market and can craft a competitive total rewards strategy.

5 steps to prepare for pay transparency

Judy recommends a 5-step approach for HR leaders uncertain about where to begin with pay transparency.

1. Ensure that you have credible salary ranges that encompass most employees. The market study is important here.  
2. Analyze where employees fall within their respective range and determine if you can defend that. For example, are there employees who were recently promoted who are paid more than employees who have been in the same role for 3 years? 
3. Make a plan to address anomalies. 
4. Train people managers on how to proactively and thoughtfully manage salaries going forward and how to respond when approached by an employee. 
5. Offer clear, consistent communications to employees on the company’s salary management policies and practices.

Communicating compensation policies with existing employees

While much of the existing regulations around pay transparency relate to job seekers, it is critically important for HR leaders to consider how these policies affect current employees, too. Of companies who reported to have conducted an independent pay equity analysis, 84% identified pay equity gaps and disparities. HR leaders must be prepared to address these. 

Mary advises leaders to develop a compensation philosophy statement, that could include elements like:

• Our desire is to be competitive with the market
• We are a pay-for-performance company
• We offer career development opportunities fit to where the business needs it

This helps to start the conversation internally. 

Share both the “what” and, more importantly, the “why” of your total rewards policies with all staff. At Inspire, we have found town halls are effective ways to share this kind of information and ensure consistency in how it is presented. At the town hall, you can present the salary ranges and how salaries are managed within them. Then equip managers to reinforce this information routinely with their teams. 

Competing for top talent with a limited budget

We often hear HR leaders express concern that pay transparency could present a hiring and retention disadvantage for them due to the nature of their business, for example they may be a start-up still working toward funding or a non-profit organization with a limited budget. However, it is important to consider the entire total rewards package and the intangible benefits that are part of the company culture and policies. 

Key benefits and company attributes that are particularly attractive today

Flexibility in where you work. From 2023 to 2024 the proportion of employees working in-person at least four days per week doubled from 34% to 68%. Maintaining flexible work options can be a competitive advantage given this trend.

Competency models that allow employees to identify a career path and outline the specific skills needed to advance. 

Sabbaticals. Not only do sabbaticals give employees the opportunity to connect with family, learn new skills, discover something new about themselves, focus on their mental health—whatever their goal is—they also help you maintain an energized workforce. 

Professional development opportunities including education and mentorship or access to senior leadership. It means a lot to an employee when they know they are on the radar of senior leadership. That visibility is not something a high performer wants to lose by moving to a new company and starting all over. 

An organizational culture that supports internal advancement. Mary highlights a financial services company she worked with through Compensation Resources. “Managers voluntarily put their people in front of other leaders,” she says. “It shows employees that not only do they not have to remain secretive about applying for internal positions, but their managers fully support their ambitions.”

Retain your flexibility as an employer

As a company, you need the discretion to adjust your approach to deal with talent shortages or an urgent need for niche skills. Salary bands with enough of a spread allow companies the flexibility to set consistent expectations and still account for market forces. 

“Instead of greater pay transparency, be more transparent about how salary decisions are made and what it takes to make more money,” Judy says.

If you establish your strategy first, then being ahead of legislation can be a good thing. But if you’re instead forced to react, you could end up in a counterproductive situation that actually harms morale. 

Mary shares a situation where an HRBP had posted salary ranges for open positions that were misaligned with what current employees were paid. Naturally, employees took notice and the company couldn’t roll this back. Mary and her team designed a formalized compensation structure, developed a training session on compensation, and deployed a communication plan around the new process. The company reallocated funds from other shared services to provide market adjustments to those employees that were significantly below market to avoid the more costly occurrence of employee turnover.  

Conclusion

Pay transparency is here for most employers, and will be for the rest soon enough. Though regulations are meant to protect employees, they can also serve as impetus for HR and business leaders to review their policies and make sure they are working for employees and the company. By developing a thoughtful Total Rewards strategy guided by a market study and maintaining clear communications with employees, companies can create a fair, inclusive environment that still provides the flexibility to adjust in a volatile market.    

Need help?

Now is the time to assess your total rewards offerings to prepare for upcoming pay transparency requirements – but you don’t have to do it alone.

We’re here whenever you need an extra set of hands or a strategic partner to plan your path forward. Reach out when you need us: hello@inspirehumanresources.com