April 16, 2026
The Pay Transparency Disconnect: Why Employees and HR See Pay So Differently
Most HR professionals believe pay at their organisation is fair, yet barely half think their employees agree.
Published yesterday, Salary.com’s 2026 State of Pay and Compensation Practices Report finds a 31-point confidence gap between what HR believes about pay fairness and what they think employees actually experience. The research, which surveyed 525 HR professionals across 13 industries in the US, suggests the root cause is predominantly a structural one.
- Only 51.4% of organisations have a formal job architecture in place, meaning just under half currently lack the consistent salary structures needed to inform pay decisions.
- Nearly a quarter (22%) do not use job levelling when setting pay. Without it, organisations struggle to benchmark pay across comparable roles or explain to employees why their pay sits where it does.
- Fewer than one in three are transparent with employees about how pay is determined at all.
While the research is US-based, the findings resonate in the UK context too. “Many UK employers are still overly focused on base pay as the signal of fairness, while under-explaining the full value of total reward – benefits, pensions, flexibility and wellbeing support,” says Gethin Nadin, Chief Innovation Officer of Benifex. “When employees discount those elements, perceived fairness drops even if total compensation is competitive.”
Another factor is the unprecedented access employees now have to AI-powered salary benchmarking tools. Though these are not always reliable, as Nadin notes: “These tools can create distorted comparisons when roles, sectors or geographies are not truly comparable”.
There’s also the added dimension of employees experiencing sustained financial pressure. “We’ve had over a decade of relatively weak real wage growth, followed by a prolonged cost-of-living squeeze,” says Nadin. “Employees are therefore evaluating fairness through a much harsher lens.”
Managers Aren’t Prepared for Pay Conversations
This structural weakness compounds due to a lack of managerial training on effective pay conversations. While 69.2% of organisations train managers on performance evaluations, only 51.6% provide formal training on how to discuss compensation.
“For most people, a performance conversation is implicitly a pay conversation,” says Nadin. “Organisations are delegating some of their most sensitive fairness conversations to the least prepared group. Even where there is no pay gap, a lack of explanation creates a perception gap.”
Research consistently shows that employees are more satisfied with their pay when they understand how decisions are made and how progression works. Where managers cannot clearly explain pay positioning or future earning potential, employees tend to make assumptions (often negative).
The EU Pay Transparency Directive
For organisations with a European workforce, the issue has a pressing regulatory dimension too. Member states have until 7 June 2026 to implement national legislation under the EU Pay Transparency Directive, requiring organisations to provide clear pay information to jobseekers, employees and via corporate reporting.
“The Directive is a structural shift, not a compliance exercise,” says Nadin. “It will force organisations to be more explicit about how pay is set, how it progresses and how consistently it’s applied – it’s less about reporting and more about how we talk to people about pay. The organisations that adapt fastest will be those that treat transparency as a behavioural and communication challenge, not just a regulatory one.”
Closing the Pay Transparency Gap
Pay is one of the most emotionally significant moments in the employee journey. When it is handled poorly – or not at all – the employee’s sense of organisational justice erodes. Getting the structural foundations properly in place is therefore an experience design priority as much as it is an HR responsibility.
The Salary.com report recommends starting with building job architecture and consistent levelling frameworks. Without these, other actions to support pay transparency will lack substance. Training managers on compensation and performance conversations as a package rather than separately is the next lever. And giving employees a full picture of their total reward – not just base salary – remains one of the most underused tools available, with only 46% of organisations currently providing total rewards statements.
Becky Norman is the Employee Experience Editor for CXM. With 14 years in digital publishing, she champions the organisations and practitioners creating exceptional experiences for their people — and driving measurable impact on customer success as a result. Prior to this role, Becky spent eight years as editor of B2B publications HRZone and TrainingZone, covering the most pressing issues facing HR, people, and learning leaders. In 2020, she co-created Culture Pioneers – a global campaign recognising the organisations shaping workplace culture to drive both business performance and employee experience.
