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

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Aon's 2024 North America Pay Transparency Readiness Study reveals that 75% of employers are not prepared for upcoming pay transparency laws. These regulations will affect 14 U.S. states and four Canadian provinces by 2025, and all EU countries by 2026.

Key findings from the study of 626 U.S. employers show that only 51% have conducted independent pay equity analyses, with 84% of those identifying pay gaps. However, just 34% of employers who found inequities have allocated funds to address them. Only 18% of employers feel ready for pay transparency, with retail & e-commerce showing the highest readiness at 33%.

The study also reveals that 63% of employers don't communicate salary ranges to employees, though 81% publish ranges in job postings. The predicted average salary increase budget for 2025 is 4.6%, similar to 2024's 4.7%. Employee turnover in the first half of 2024 was 20.7%, with 11.8% leaving voluntarily.

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.

Follow Aon on LinkedIn, X, Facebook and Instagram. Stay up-to-date by visiting Aon's newsroom and sign up for news alerts here.

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

Media Contact
Robert Elfinger
1-312-610-3182
robert.elfinger@aon.com

 

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SOURCE Aon plc

FAQ

What percentage of U.S. employers are ready for pay transparency laws according to Aon's 2024 study?

According to Aon's 2024 North America Pay Transparency Readiness Study, only 18% of employers say they feel ready for pay transparency laws, while 75% are unprepared.

How many U.S. states will be affected by pay transparency laws by 2025?

Pay transparency laws will be in effect in 14 U.S. states by the end of 2025.

What is the predicted average salary increase budget for 2025 according to Aon's study?

Aon's Salary Increase and Turnover Study predicts an average overall salary increase budget of 4.6% for 2025.

What percentage of employers publish salary ranges in job postings according to Aon's 2024 study?

According to Aon's study, 81% of employers publish salary ranges in job postings.

What was the employee turnover rate in the first half of 2024 according to Aon's report?

The total employee turnover rate was 20.7%, with 11.8% departing voluntarily in the first six months of 2024.