Seventy-Five Percent of U.S. Employers Are Unprepared for Pay Transparency Laws, Aon Reports

New regulations in the U.S., Canada and Europe require companies to be more transparent about their pay practices

CHICAGO, Dec. 5, 2024 /PRNewswire/ -- Aon plc (NYSE:AON), a leading global professional services firm, today released results from its 2024 North America Pay Transparency Readiness Study, revealing that 75% of employers are not ready for pay transparency laws, which are currently or will be in effect in 14 U.S. states and four provinces in Canada by the end of 2025 and in all EU countries by the end of 2026.

Pay transparency laws aim to close the gender wage gap, and the study highlights the challenges in reaching that goal. The study, which includes survey results from 626 U.S. employers with employees based both inside and outside North America, shows only 51% of employers have conducted an independent pay equity analysis. Of those that conducted this analysis, 84% identified pay equity gaps and disparities. Only 34% of those employers that found pay inequities have added additional funding to correct them.

"The rise of pay transparency and pay equity initiatives reflects a broader cultural shift, particularly among younger employees," said Brooke Green, Head of Talent Solutions for North America at Aon. "What was once considered impolite to publish salary information has increasingly been recognized as a practice that reinforces and exacerbates pay gaps. Employers who align with these new regulations sooner rather than later will be better positioned to address wage disparities, promote fairness and empower employees to make informed career decisions."

Additional findings from the report include:

• 18% of employers say they feel ready for pay transparency.
  • The industries with higher levels of readiness include: retail & e-commerce (33%); financial institutions (21%); manufacturing (20%); and professional & business services (20%).
• 63% of employers do not currently communicate salary ranges to their employees.
  • Of the 37% that communicate salary ranges, 61% only do so where required by law, 23% throughout the U.S. and 16% globally.
• 81% of employers publish salary ranges on job postings, indicating a gap in how employers communicate with their employees and prospective talent.
  • Of these 81%, 34% publish a portion of the salary range where legally required, 20% list the full salary range by location, 18% provide a portion of salary range by location and 10% publish the full salary range by location.
• 69% of employers have not implemented a pay transparency communication strategy.

"More than half the U.S. population lives in places with some form of regulation, and more than 60% of Europe will be covered by the EU Pay Directive," said Kelly Voss, head of rewards and career advisory, North America at Aon. "This, coupled with the growing compliance concerns and the social movement toward pay transparency, is spurring more employers to act and become more transparent with their total rewards strategies. Those organizations that are out in front will have a more compelling employee value proposition. This will not only increase engagement among their current workforce but will be more attractive to prospective employees."   

To support employers in navigating pay transparency and developing effective total rewards strategies, Aon recently announced new features to its integrated Radford McLagan Compensation Database. These enhancements expand the platform's data and analytics capabilities, empowering HR and total rewards leaders to benchmark compensation, evaluate plan design practices and access actionable talent insights to drive better decision-making.

"To keep pace, companies must have access to data and intelligence to properly and consistently benchmark, evaluate and define jobs around the world," Voss added. "This intelligence readies organizations for pay transparency and helps them to both remain competitive in local, regional and global job markets as well as differentiate themselves among their competitors."

As pay transparency rises in importance, employers are making plans for 2025 employee raises, portions of which may be used by some companies to address pay inequities. Average overall salary increase budget* for 2025 is predicted to be 4.6%, roughly the same as 4.7% reported this year in the U.S., according to data from Aon's Salary Increase and Turnover Study. This includes merit increases, promotions and market adjustments. Aon also reported 20.7% of U.S. employees left their jobs, of which 11.8% departed voluntarily in the first six months of 2024.

About Aon

Aon plc (NYSE:AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

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* Includes promotion increases, market adjustments, internal equity adjustments and merit increases. 

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SOURCE Aon plc