By Jesse Matton and Eunice Ikene
Introduction
America’s leading companies know that paying workers fairly isn’t just the right thing to do, it’s a competitive advantage. Businesses that ensure pay equity attract stronger candidates, retain top talent and build the workplace cultures that drive long-term performance. In a global marketplace where pay transparency is increasingly required by law and expected by workers, employers who lead on pay equity aren’t just ahead of the curve – they are protecting their bottom line.
And yet, the gender wage gap persists. Across all workers in the United States, women are typically paid just 76 cents for every dollar paid to a man – a difference of $14,170 over the course of a year. These disparities hold across education levels, age groups, and occupations, and for the first time since this data has been collected, the gap has widened for the second consecutive year.
We are deeply concerned about what that means in the current moment. The Trump administration has significantly weakened the two federal agencies most responsible for helping employers close pay gaps and comply with equal employment opportunity law: the U.S. Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP). These agencies were created to enforce the law, including laws against discrimination that have been in place for decades. They were intended to provide technical assistance, conduct employer outreach, identify patterns of discrimination, and give businesses practical tools for ensuring fair pay. Stripping them of resources and authority doesn’t just harm workers – it removes infrastructure that responsible employers relied on.
That loss makes this guide more necessary than ever. Drawing on established best practices from the human resources (HR) community, prior federal guidance – largely from the experts within the EEOC and OFCCP – and the experiences of leading companies, this guide offers practical, actionable tools that any employer can use to assess and improve pay equity in their workplace. The work of closing the gender wage gap has always depended on business leadership. Companies such as Airbnb, Levi’s, L’Oreal, Microsoft, PayPal, and more have already recognized the importance of ensuring pay equity in their workplaces, and this guide is designed to help more employers join them.
The Business Case for Pay Equity
Pay equity isn’t a concession to political pressure; it’s a sound business strategy. We know that companies that ensure their employees receive fair compensation are better positioned against their peers on retention, productivity, talent acquisition and brand reputation – and the data backs it up. In an era of increasing global pay transparency requirements, this is also rapidly becoming a baseline expectation in competitive markets.
Pay equity drives retention and performance
When employees believe their compensation is fair, they are more engaged, more productive and more likely to stay. Research confirms what most HR leaders already know: perceived pay inequity has measurable costs. Employees who feel underpaid show 15 percent lower intent to stay and are 13 percent less engaged than those who feel fairly compensated. Turnover resulting from that dissatisfaction can cost employers up to twice an employee’s annual salary. And still, companies with strong pay equity practices are better positioned to attract and retain the high performers they need to compete.
Pay equity shapes how your company is seen
Employer brand matters, and pay equity is a significant part of it. A recent survey found that 99 percent of respondents across all job levels said equitable pay practices were important to them – and workers don’t just support the concept in the abstract. They support specific tools, such as salary transparency in job postings, and they notice when employers use them. Companies that lead visibly on pay equity build trust with current employees and signal to prospective talent that they’re worth working for. The reputational benefits extend beyond the workforce. Research shows that customers actively reward companies with smaller wage gaps.
Pay equity is increasingly required in global markets
For large corporations operating internationally, pay equity has moved from best practice to legal requirement in key markets. Some examples include:
- The European Union’s Pay Transparency Directive, which will be in effect across all member states by 2026, requires employers to disclose salaries during recruitment, share pay data with employees on request, publish gender pay gap data and submit to public audits.
- The United Kingdom requires gender pay gap reporting.
- Australia now requires employers with 500 or more employees to adopt measurable gender equality targets.
These aren’t distant concerns – they are current compliance obligations for any company with employees in those jurisdictions, and they signal where global standards are heading.
The scale of that compliance is already visible amongst America’s largest companies. National Partnership research finds that roughly two-thirds of Fortune 100 companies were already reporting gender pay gay data to the U.K. as of 2022. The fact that those companies are already collecting and reporting pay data to meet foreign requirements is strong evidence that doing so domestically is well within reach.
Even domestically, the landscape is shifting. Pay transparency and pay equity laws now span more than a dozen states and local jurisdictions – with Colorado, California, Washington, New York, Illinois, Massachusetts, Minnesota and Vermont among those that have enacted requirements in recent years, with more jurisdictions expected through 2027.
Best Practices: Taking the Lead
The following practices represent the established standard for employers committed to gender pay equity. They draw on prior federal guidance from the EEOC and OFCCP, HR best practices and the demonstrated approaches of leading companies. With federal enforcement infrastructure weakened, these practices are no longer just recommended – they are how responsible employers fill the gap.
Standardize Your Compensation Practices
The most common driver of pay inequity isn’t malicious intent, it’s inconsistency. When compensation decisions are made ad hoc, without a clear framework, disparities accumulate quietly over time. The fix is straightforward: establish a consistent, documented methodology for how pay is set, applied uniformly across roles and levels.
A strong compensation framework defines what counts as compensation; not just base salary, but the full picture, including bonuses, commissions, overtime, stock and benefits. It establishes clear criteria for how pay is determined, such as years of relevant experience, education and skill level. And it applies those criteria the same way every time, for every hire and every promotion.
Employers sometimes hesitate to examine their own pay practices out of concern that finding a problem creates legal exposure. The opposite is true. The EEOC and the Supreme Court have long held that employers are permitted – and encouraged – to take voluntary proactive measures to identify and remedy workplace inequities, including wage discrepancies. Proactively examining where barriers to equal opportunity may exist does not in itself create legal liability. Inaction, on the other hand, allows disparities to compound, and that is where real exposure lies.
This isn’t about rigid uniformity. It’s about ensuring that when two people in similar roles are paid differently, there’s a documented, legitimate reason – and that reason isn’t gender.
Stop Using Compensation History in Hiring
Asking candidates what they currently earn, and using that number to set their offer is one of the most incessant ways to impart past discrimination into your workforce. Because women are paid less than men in nearly every industry and occupation, a compensation system anchored to prior salary doesn’t accurately reflect the market. It just replicates its inequities.
The business case for dropping compensation history is stronger than many employers expect. Studies show that salary history bans increase the applicant pool, attract candidates who might otherwise self-select out, and reduce turnover. Nearly two-thirds of businesses have found that pay disparities in their workforce stemmed directly from reliance on salary history. Fixing the intake process is one of the highest-leverage interventions available.
Instead, set offers based on the skills, experience, and qualifications the role requires – benchmarked against what you pay current employees in comparable positions and what the market bears. That approach is more defensible, more equitable, and increasingly what top candidates expect.
Post Salary Ranges on Job Listings
Salary transparency in job postings has moved from progressive practice to mainstream expectation; and in many jurisdictions, a legal requirement. The evidence on its benefits is consistent: postings with salary ranges attract more applicants, more qualified applicants and applicants who are less likely to leave once hired.
A survey found that 91 percent of U.S. respondents said salary ranges affected their decision to apply for a job. A separate survey of HR professionals found that 70 percent of companies that posted salary ranges saw increased applicant volume. And research from a compensation software firm found that pay transparency reduces employee intent to quit by 30 percent. These aren’t marginal effects – at scale, they add up to real money and real competitive advantage.
For employers, posting ranges also creates internal accountability. When salary bands are visible, it becomes harder for compensation decisions to drift outside them without notice. That discipline benefits both employees and the organization.
Ranges should reflect a genuine good-faith estimate, not a band so wide it’s meaningless. Data shows that wide pay bands are unhelpful for both prospective hires and for identifying pay disparities. The goal is a range that gives candidates real information and gives your organization a real benchmark to hold itself to.
Conduct Regular Pay Audits
You can’t fix what you can’t see. A pay audit – a systematic analysis of your compensation data – is the foundational tool for identifying where disparities exist, understanding their causes, and taking corrective action. Without it, good intentions about pay equity remain unverifiable.
The best practice, drawn from prior OFCCP guidance, is to conduct pay audits annually. Annual auditing allows employers to catch and correct disparities before they compound, track whether interventions are working and demonstrate to employees and the public that pay equity is an ongoing commitment rather than a one-time exercise. This practice and consistency is valuable across the organization – including workplace culture and fostering trust with employees.
Grouping employees
Start by pulling together payroll and compensation data and organizing employees into groups of similarly situated workers – comparable role, level, function, and geography. The federal Standard Occupational Classification (SOC) system is a recommended framework: it’s the primary tool federal agencies use for classifying occupations, it’s routinely updated and it allows straightforward benchmarking against federal workforce data rather than requiring employers to construct their own job categories from scratch.
Within those groups, distinguish between employees exempt or non-exempt from minimum wage or overtime provisions under the Fair Labor Standards Act (FLSA) and between full-time and part-time employees. Employers should also ensure their groupings allow analysis across broader workforce categories, including race and ethnicity, LGBTQIA+ employees, workers 40 and older, people with disabilities and veterans. Pay equity analysis that looks only at gender misses compounding disparities that affect women of color and other groups in distinct ways.
Analyzing the data
Once groups are established, analyze compensation for statistically significant disparities – separately for base pay and total compensation, and where necessary, for individual components like bonuses, commissions, overtime and shift differentials. It may also be necessary to statistically account for compensation hierarchy, job structure and other pay-related variables within your groupings.
Multiple linear regression analysis is the standard statistical method for this work. It is expected that most organizations don’t have in-house statisticians equipped to run this analysis. Employers should consider engaging an outside expert or purpose-built compensation software. Whatever approach you take, ensure the methodology can identify broad systemic patterns, not just individual outliers, and that statistical outliers are analyzed separately to check whether they indicate flawed groupings rather than genuine exceptions.
Acting on what you find
A pay audit that produces findings without producing action isn’t an audit, it’s documentation of a known problem. Where the analysis identifies statistically significant disparities, employers should develop a concrete remediation plan with clear timelines and assigned accountability.
Finally, consider making your audit results publicly accessible – to employees at minimum, and where possible to the public and researchers. Just Capital’s 2024 Americans’ Views on Business Survey found that public demand for corporate transparency increased across all disclosure categories from 2023 to 2024, and that Americans across political ideologies support greater disclosure on compensation and demographic data. Transparency about the process reinforces the trust that pay equity work is meant to build – and increasingly, it’s what employees and investors expect.
Ban Pay Secrecy
Approximately 60 percent of private sector employees report that discussing wages is prohibited or discouraged in their workplaces. Pay secrecy doesn’t protect employers – it protects disparities. When workers can’t discuss compensation, inequities go undetected longer (especially for women), resentment builds quietly, and the employer’s legal and reputational exposure grows.
The federal government has found that eliminating pay secrecy encourages fair, market-aligned wages, reduces turnover and compensation disputes, and strengthens employee morale – ultimately supporting a more productive and competitive workforce. The National Labor Relations Act already protects most employees’ right to discuss their wages, but these protections don’t apply to all workers. And legal protection and cultural permission are different things. Employers who want to close pay gaps should go further than avoiding violations – they should actively signal that pay transparency is a value, not a threat.
That means written policies that explicitly encourage compensation discussions and protect employees from retaliation for having them. It means managers are trained to handle those conversations constructively. And it means an organizational culture where fair pay is something the company is confident enough in to discuss openly.
Vet AI and Automated Tools Carefully
Artificial intelligence (AI) is increasingly embedded in HR functions including compensation setting, performance evaluation and hiring decisions. Used well, these tools can help surface pay disparities and reduce inconsistency. Used poorly, they can encode and amplify the biases they were meant to eliminate.
The core risk is straightforward: AI trained on historical compensation data will learn from historical inequities. A tool that recommends salaries based on market data is drawing on a market that has systematically underpaid women and workers of color. These tools may also fail to account for other structural factors that drive pay gaps – disparate access to promotions and advancement opportunities, biases in performance evaluations and unequal distribution of high-visibility assignments. “Debiased” doesn’t mean bias-free; it means the vendor made an attempt. Employers are responsible for the outcomes regardless.
Before deploying any AI tool that touches compensation, employers should require transparency about how the tool was built and validated, insist on ongoing auditing for disparate impact and ensure that human judgment remains in the loop for consequential decisions. The EEOC developed specific promising practices for AI deployment before the current administration’s restructuring – they remain a useful framework even without active federal enforcement behind them:
- Provide notice and transparency to employees and prospective applicants when AI is being used, so that those who need an accommodation know to request one.
- Develop and evaluate technologies with legally-protected characteristics in mind, including sex, race, national origin, religion, and disability.
- Audit regularly and check for bias.
- Ensure the ongoing validity of AI systems.
Assign Ownership
Every practice in this guide requires someone to be responsible for it. Pay equity work that lives in a policy document but has no owner tends to stay there. For large organizations, this means designating a senior official – with genuine authority, resources and access to leadership – whose role includes accountability for pay equity practices, audit cycles and remediation efforts.
This isn’t just good governance. It signals to employees, investors and partners that pay equity is an organizational priority, not a compliance checkbox.
Conclusion
The gender wage gap is not an abstract idea. It represents real money – $14,640 a year, on average, for every working woman in America. Working women comprise approximately half of the workforce and are increasingly the primary or co-primary breadwinner for their families. Collectively, that adds up to nearly $1.9 trillion annually that women lose to wage inequity – money that would otherwise be spent in local communities, invested in families and returned to the broader economy.
American businesses have always been central to closing that gap. Not because the law requires it, but because the companies that lead on pay equity are the ones that recruit better, retain longer, perform stronger, and earn the trust of the workforce they depend on. That case has never been clearer, and the moment has never been more pressing.
The federal infrastructure that once supported this work has been deliberately weakened. The technical assistance, employer outreach and accountability mechanisms that helped businesses identify and correct pay disparities have diminished. Advocates are deeply disappointed by those rollbacks and their consequences for working women and for employers who relied on that support. But they are equally clear that this work cannot wait for federal leadership to be restored.
The practices in this guide are not aspirational. They are proven, they are legal, and they are within reach for any organization that chooses to prioritize them. The employers who act now, who standardize compensation, audit their pay data, post salary ranges and build cultures of transparency are the ones who will be positioned to lead.
The gap won’t close itself. The employers who close it will be the ones who understood, early, that fair pay and strong business are the same thing.
The authors are grateful to Michelle Feit, Sharita Gruberg, Udochi Onwubiki, Peach Soltis, Brittany Williams and Gail Zuagar for their thoughtful comments and support on this brief.
