Legal Series: Top 4 Action Items for HR Regarding Pay Transparency

This article is part of an ongoing legal series designed to provide insight and practical guidance on current and emerging workplace compliance issues. These insights shared by lawyers are based on their interpretation of existing regulations and proposed changes, and intended for informational purposes, not to be regarded as legal advice. 

HR departments, like many offices, are evolving with the pace of technological change. Along with that change, state governments have taken a more active role in regulating employer activity. Several states have adopted pay transparency laws, and many more are considering passing them.

Moving into 2026, HR departments should consider addressing four action items related to these pay transparency laws: define a compensation policy, establish a proactive pay equity audit system, create a job posting that complies with the strictest state requirements where you might post a job, and plan how to respond if you learn about violations within your workplace.

As you work through these legal and technological changes and begin to implement pay transparency best practices, Outsolve is here to help. Outsolve is a HR compliance as a service partner that helps employers stay on top of compensation and pay laws, know when they change, and understand what those changes mean in practical terms.

What Is a Compensation Philosophy?

The first action item HR departments may consider is defining a compensation philosophy for the business. A compensation philosophy is a set of guidelines that outlines the pay you offer and how it is determined. You may tie compensation to, for example:

• Skills—the ability to complete the tasks that the position requires, considering effectiveness and efficiency;
• Performance—meeting goals to support the business’s mission;
• Education—official credentials, like a bachelor’s degree or certification; and
• Training—past work experience or special training programs completed.

Using your policy, you can decide what pay to offer prospective employees with consistency and address the potential for implicit bias before, not after, hiring.

To create your policy:

• Research what competitors pay for similar services by using compensation benchmarking,
• Factor in your business’s resources and how much the business can afford to pay,
• Determine what benefits you can realistically offer and what employees expect,
• Ensure the business’s leadership is on board with the new philosophy, and
• Train hiring managers and others involved in supervising employees on what the policy means and the reasons for its existence.

Once you begin to implement the policy, revisit it. Decide what works well, what you might improve, and then make adjustments. Seek input throughout the process. Once you officially update it, ensure you send out the new policy to everyone responsible for hiring or supervision.

How Do You Perform a Proactive Pay Equity Audit?

Another action item is to ensure you have a comprehensive pay equity audit system in place. Then, be proactive about running pay equity audits. Through a proactive pay equity audit, you can identify compensation inequalities that unfairly penalize individuals based on their personal characteristics rather than their skills and abilities.

Completing a pay equity audit usually requires:

• Defining the audit’s scope and objectives. Clearly define the roles you will audit and the goals you hope to achieve through the audit.
• Gathering compensation data. Collect and compile data about each employee’s pay benefits and personal characteristics.
• Analyzing the data you gathered. Compare employees who perform similar or the same work to determine whether pay disparities exist.
• Investigating any identified disparities. Determine why disparities exist, ensuring that you fully explore any reasons given for differences in pay, with an understanding that implicit biases often sneak under the radar.
• Developing an action plan. Figuring out what to do about identified disparities, specifically how to solve them and avoid repeating them.
• Monitoring and revisiting the system. Adjust any aspects of the audit process to ensure you get the best data possible and continue to monitor for pay disparities.

If you notice an inequality, address it promptly to create a safe, supportive work environment for everyone. By ensuring you provide fair compensation for services performed, regardless of an employee’s demographic characteristics, you:

• Pave the way for diverse ideas;
• Create psychological safety in the workplace; and
• Guide employees toward an ethical, respectful culture.

Schedule pay equity audits even if you don’t have specific reasons to believe pay equity is a problem. If you confirm that the business compensates employees fairly, you need not make changes. Even then, be on the lookout for any implicit bias that can slip through.

What to Include in a Job Posting

Various state pay transparency laws require employers to:

• Disclose a salary range in job postings,
• Clearly identify benefits,
• Not ask about salary or wage history of job applicants and candidates, and
• Provide current employees with their position’s salary range upon request.

Different states set different limits based on the employer’s size and location. However, you typically need to comply with the rules in any state where you might hire workers. So, if you hire remote workers, you must comply with the pay transparency laws where they live.

To create a comprehensive job posting that complies with the law, identify every state you plan to post jobs in. Then, review their pay transparency law, if any.

Once you know what the strictest state pay transparency law is, create a job template. Although you can post less comprehensive job ads in other states, pay transparency laws are gaining popularity. Erring on the side of overdisclosure may help you avoid surprise noncompliance.

Planning a Violation Response

Even if you don’t expect your business to pay unequal amounts for substantially equal work, HR teams need to be ready to respond if an audit identifies violations. By having a plan in advance, you can move quickly and show that you take inequity in pay seriously. Your plan may address:

• An ideal response timeline,
• Specific steps to take upon learning about a violation, and
• What to do to remedy different situations that might arise.

Address both how you will handle those who have received unfair pay and how you will avoid further unfair compensation. You may need to provide training on the law, implicit or explicit bias, and what your policies say is and is not acceptable.

As usual, reevaluate your response plan regularly. If you deal with correcting violations, you’ll certainly learn more about what works well, what doesn’t, and how you might want to modify your policy.

HR Pay Equity Audit Services and More Support from Outsolve

The world and workforce are changing. For guidance on understanding pay transparency laws and identifying when states pass new laws, follow a trusted compliance partner like Outsolve. Outsolve offers HR pay equity audit services and other resources to help businesses run smoothly.