How Transparent Should Your Pay Strategy Be?

By Laura Muldoon

The idea of pay transparency has been around for a long time. The EU Pay Transparency Directive was issued in 2023 with implementation required by June 2026. 

More and more states in the US have also introduced their own pay transparency laws.  The pressure to get it right is rising. HR leaders are being asked not just to manage pay but to explain it, stand behind it, and communicate it in a way that is defensible to employees and candidates in a world with increasing levels of transparency.

The instinct is to ask: 

But that’s not the most helpful question.

The companies that get this right are the ones who shift their focus. Instead of getting stuck in a debate over how much to share, they ask: 

This is a subtle but important shift. Because transparency is not about volume but clarity, it’s not about sharing everything but rather sharing the right things. The main goal is to help employees understand how decisions are made, what they can expect, and what’s expected of them in return.

Once you start from that perspective, the decisions about what to share - and how - become a lot easier to make. Here’s the framework to consider when making decisions around pay strategy and how transparent it should be. 

1. Start with the basics: What do employees need to know?

If your goal is to build understanding, it helps to start by asking: what do employees need to feel informed and confident about how pay works here?

Most people aren’t expecting a full breakdown of every compensation detail across the company. What they’re looking for is a clear and honest explanation of the system they’re part of. They want to understand:

• how their pay is determined

• what’s expected of them at their level

• what it takes to move forward

• and whether they’re being treated fairly compared to others.

This is the foundation of effective pay communication which requires clarity, consistency, and a willingness to address the questions employees are already thinking about.

You don’t have to have every answer, but you do need to be prepared to explain the reasoning behind your approach. That’s what builds trust - and makes it easier to evolve your pay strategy over time.

2. Make sure your foundations are strong

Before increasing transparency, it’s essential to understand whether your current compensation framework is clear and reliable. This means your salary ranges, job levels, and decision-making processes need to be consistent, up-to-date, and grounded in data.

Ask yourself:

• Are your pay ranges built on current, trusted market benchmarks?

• Do your job levels reflect real differences in scope, responsibility, and impact?

• Is your compensation process consistent across teams and business units?

• Can your managers explain how pay decisions are made - and why?

If the answer to any of these is no, focus on fixing those issues first. Transparency only works when what you’re communicating is solid. If your structure is messy or outdated, more openness can create confusion rather than clarity.

3. Build manager confidence and capability

Your managers are most likely the ones employees turn to when they have questions about pay. If managers don’t understand your compensation philosophy or feel unsure about how to answer common questions, trust can break down quickly.

Spend time equipping managers with tools and talking points. Help them understand not just what decisions were made, but how and why they were made. Give them space to ask questions too - many managers have the same concerns or blind spots as employees do.

Managers don’t need to be compensation experts. But they do need to feel prepared to explain the basics and redirect to HR when needed, without creating confusion.

4. Choose the level of visibility that fits your culture

Once the foundation is in place, you can think about what level of transparency makes sense for your organization.

Some companies are comfortable publishing salary ranges for all roles. Others prefer to start with internal visibility - by sharing ranges with employees, but not externally. Some go further and explain their pay philosophy or publish company-wide equity or pay gap metrics.

There’s no single right level of openness. What matters is whether employees can understand how the system works, see that it’s applied consistently, and trust that they’re being treated fairly.

You don’t have to roll everything out at once. Start where you are, test your messages, and build on what works.

5. Reinforce the message over time

One announcement or FAQ isn’t enough: pay communications need to be part of manager training, performance reviews, onboarding, and career development conversations. Make sure your compensation principles are visible, not just buried in a slide deck.

It’s also important to listen. If employees are still confused or skeptical, take that seriously. Often, the issue isn’t with the structure itself but with how it’s being explained. You can use the feedback to refine your approach.

Final thoughts

When companies ask how transparent their pay strategy should be, they’re usually looking for a benchmark. But rather than treating it as a compliance exercise, we at Nua see it as a communication challenge. The real goal is to help employees understand and trust the system they’re part of.

When employees understand how pay works, they’re more likely to stay engaged, ask the right questions, and feel confident in their future with your company.

And that’s the real value of a well-explained pay strategy.

Looking for a partner to guide you through the process? We are here to help! Get in touch.