Pay equity and pay transparency are quickly becoming essential requirements for organizations across the world — critical not only to maintaining legal compliance but also to attracting and retaining employees.
Mercer provides strategic alignment of your employee value proposition to ensure that your total rewards philosophy and programs adhere to the principles of fair pay, supporting your goals for pay equity, pay transparency and your overall total rewards strategy.
People expect compensation that is market competitive, and reflects their skills, experience and contributions.
Moreover, they also expect pay that is fair relative to their colleagues.
Mercer 2025, Global Talent Trends
Eight steps to achieve pay equity
To achieve accurate pay equity, it's essential to take a comprehensive and continuous approach. Here's a step-by-step guide to help you start and maintain this journey:
Begin by identifying and analyzing any existing unexplainable pay gaps. This step lays the foundation for targeted action.
Work systematically to address any unexplainable gaps revealed by your analysis. This includes reviewing and adjusting base salaries, bonus pool allocations, salary increases and promotion decisions to ensure fairness.
Fair pay does not mean that everyone should receive the exact same amount of pay. There are a number of factors that could drive differences in pay, such as individual performance, education, experience, skills or even location (high cost versus low cost). Taking a comprehensive view allows you to identify the drivers of pay that are warranted and those that are unexplainable — or potentially unfair or inconsistent with company objectives.
Recognize that achieving pay equity is just the starting point. While it lays the foundation, it doesn't fully address where pay should be based on individual tenure, experience, multi-year performance and skills. Truly fair pay also considers external factors such as pay rates within comparable jobs, employers, sectors and markets. All of these factors will evolve over time, and require ongoing analysis and review.
Ensure your pay practices reflect your company's stated ideals about how employees should be compensated, especially when pay ranges become transparent.
Implement training for managers and establish guidelines around discretionary decision-making to maintain fairness and objectivity in starting salaries, pay raises and bonus allocations.
Introduce checks, balances and scrutiny before implementing decisions about new hire salaries, pay raises and bonuses to avoid patterns of unfair pay practices.
Apply the same rigorous review process to career advancement and promotion decisions to ensure they are fair and objective.
Effectively addressing pay transparency
To successfully tackle pay transparency, companies can first assess and refine their job architectures, compensation strategies, salary structures and pay equity initiatives. Transparency programs can be carefully considered to align with the overall people strategy. By acting now to integrate pay transparency within broader total rewards programs, companies can better navigate this complex landscape to achieve fair, sustainable outcomes.
