By Sabina Mehmood
The global landscape of pay data reporting is rapidly evolving, fueled by growing demands for greater pay transparency and equity in the workplace.
In the U.S., several states including California and Illinois have enacted pay data reporting laws for large employers, requiring detailed breakdowns of compensation information by gender, race, and ethnicity. On the federal level, the U.S. Equal Opportunity Commission (EEOC) is preparing to propose a new pay data reporting rule in 2025 which, if passed, would reinstate an Obama-era pay data reporting requirement for large private businesses.
Internationally, countries like the UK, Germany, and Australia have enacted similar—and, in some cases, more expansive—pay regulations. Most notably, the European Union’s landmark “Pay Transparency Directive” is poised to reshape pay practices for European companies and solidify the principle of equal pay through enhanced transparency and pay data reporting enforcement.
As new laws are enacted to narrow the pay gap and provide visibility into pay levels, more companies worldwide will be challenged with remaining compliant with various local, national, and international regulations. While navigating this complex legal terrain is no easy feat, employers that take deliberate and proactive measures to comply with requirements will foster more equitable, inclusive, and competitive workplaces.
Here's three key steps that HR leaders can take to effectively navigate the complexities of global pay reporting and position themselves for success now and in the future.
1. Develop a comprehensive strategy for pay data collection and reporting. A strong pay data collection strategy is essential for employers seeking to remain compliant with evolving pay data reporting standards. As jurisdictions increasingly implement new requirements, having accurate and complete data across all operational locations is critical. Without this foundation, businesses risk falling short of compliance, resulting in legal repercussions, reputational damage, and poor workforce and business outcomes.
Effective pay data collection should encompass several compensation elements, including wages, bonuses, benefits, as well as employee demographic data, such as gender, race, and ethnicity, where required. By ensuring data collection is comprehensive and representative of all workers, employers can gain valuable insights into their pay practices and assess how they align with industry standards, regulations, and employees’ expectations of compensation.
While a strong pay data collection strategy offers many benefits, the complexity and volume of pay data required can be daunting for employers. Still, building this foundation is key to compliance. HR leaders that are feeling overwhelmed should focus on continuous improvement rather than striving for perfection, as the fear of data can stall progress. Remember, every effort must start somewhere.
Once HR and business leaders implement an effective pay data collection strategy, the next priority to address is pay data reporting. Like pay data collection, employers should implement a systematic approach to ensure compliance with evolving regulatory standards.
While the exact steps to pay data reporting compliance will vary based on various local, national and international regulations, HR leaders should consider the following as a baseline.
Determine applicability to various pay data reporting laws.
Select a single pay period to serve as a snapshot period, which will be used to identify the employees who should be included in the pay data report.
Count employees in each category. After selecting a snapshot period, employers should gather data on the number of employees by race, ethnicity and sex across different job categories. Classify employees into pay bands. For each employee included in the snapshot period, employers should determine employees’ total earnings for the entire reporting year using their country-specific federal wage and tax statement. Employers can then further analyze across varied demographics, including protected characteristics like race, ethnicity and sex, to identify any inequities.
Calculate the total number of hours worked by each employee counted in each pay band and determine a mean and median hourly rate for each combination of race, ethnicity and sex within each job category.
Complete and submit the pay data report according to the guidelines specified by regulatory authorities.
Audit data thoroughly and on an ongoing basis to identify discrepancies and proactively address issues to ensure pay practices remain equitable and align with evolving regulations.
2. Closely monitor the evolving regulatory landscape. As pay data reporting requirements rapidly evolve worldwide, it is critical that employers remain vigilant in monitoring legal developments across all regions where they operate and adapt their pay data reporting practices in accordance with new rules.
50% of HR respondents report they lack confidence in their ability to keep up with ever-changing employment laws and regulations.
Despite the critical nature of staying abreast of evolving regulations, many employers fall short in this regard. In fact, research shows that approximately 50% of HR respondents report they lack confidence in their ability to keep up with ever-changing employment laws and regulations.
To solve this issue, HR leaders should establish a structured system for monitoring pay data reporting regulations. This includes leveraging technology solutions—like automated compliance management tools or data analytics tools—to track real-time changes in employment laws and proactively flag any pay issues that require adjustments before regulatory audits or compliance checks occur.
HR leaders should also collaborate closely with legal and compliance teams to support this process. By fostering cross-functional collaboration, employers can build a robust compliance framework that adapts to the ever-changing regulatory landscape.
3. Ensure pay data reporting standards are widely communicated. Once employers have effective pay data reporting strategies and processes for regulatory monitoring in place, they must ensure these standards are communicated transparently and widely across their workforces.
Employees should have a clear understanding of how regulations around pay data reporting and pay transparency impact them and how their company is working to stay compliant with evolving standards. This not only builds trust with employees but reinforces the organization’s commitment to fairness, equity, and legal compliance—resulting in greater employee engagement and satisfaction. Mercer research reveals employees who believe they are paid fairly are twice as likely to have been provided with pay data from their employer. They are also 85% more engaged and 62% more committed to their organization.
Employees who believe they are paid fairly are twice as likely to have been provided with pay data from their employer.
As part of these efforts, organizations should develop a robust communication strategy for their people managers, empowering them to navigate pay-related conversations with confidence. This involves providing managers with guidelines on how to address difficult conversations around pay disparities with their workforce and training sessions on evolving pay compliance standards.
Despite advancements like pay data regulations, pay disparities continue to persist in many organizations. Per research from the World Economic Forum, no country has yet achieved full gender parity—and there’s still a long way to go. That is why it is essential for organizations to hold themselves accountable to pay data reporting and transparency standards and demonstrate a genuine commitment to closing compensation gaps.
Building Trust and Accountability The complexities of global pay reporting are only set to increase as new regulations emerge and existing ones evolve. By developing a comprehensive pay data collection and reporting strategy, staying ahead of regulatory changes, and fostering open communication about pay data compliance and equity progress, employers can position themselves for success in this challenging landscape.
Sabina Mehmood is global pay equity leader at Brightmine.
