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Payments

An illustration of reporter Courtney Vinopal's headshot.

Courtney Vinopal

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When pay transparency laws started going into effect about five years ago, employers had to decide what level of transparency was right for their organizations.

 much information—beyond the stated requirements of publishing expected salary ranges for open roles—could prompt employees to become dissatisfied with their pay, and lose motivation in their jobs.

 suggests that learning what the typical employee earns at a firm actually boosts pay satisfaction among average rank-and-file workers.

The research analyzed public firms’ compensation and benefits ratings on Glassdoor in the years after they were required to disclose how CEO pay compares to the median employee pay due to an SEC rule that took effect in 2018.

Disclosing the CEO-to-employee pay ratio resulted in a “significant increase” in pay satisfaction at these firms, according to the study. After one year the average compensation rating rose from 3.31 to 3.39. The average work-life balance rating on Glassdoor also rose, from 3.23 to 3.28.

But HR leaders shouldn’t take this to mean that workers are happy to find out what the CEOs of their companies make, said Lisa LaViers, an assistant professor of accounting at Tulane University's A.B. Freeman School of Business, who co-authored the research. CEO 

 by an eye-popping 1,085% from 1978 to 2023, and the growing gap between CEO pay and worker pay has been a 

 of union campaigns in industries like automotives and entertainment.

Instead, the disclosure of what the median employee earns seems to be driving the uptick in workers’ satisfaction with their pay, she explained. While public companies have long had to disclose what they pay their CEOs, workers only started finding out about median employee pay once the 2018 mandate took effect.

That doesn’t mean they didn’t have their own ideas about how their pay compared to peers prior to the SEC rule. Most workers 

, LaViers told HR Brew, and they are likely to make assumptions about how their firm pays its workers from other sources.

“You’re developing ideas of what [peers] are being paid,” she said. These ideas are likely to come from the Internet—sites like Glassdoor and Indeed include salary data for the companies they track, and many firms 

 for open roles. Workers’ perceptions about pay may also be shaped by their colleagues’ behavior, LaViers added.

“So companies are letting you develop your ideas of pay based on the Mercedes you see in the parking lot, because that’s what gets your attention; information that you see on Glassdoor that may or may not be accurate,” she said.

When workers were given information about rank-and-file pay for the first time in 2018, “that median employee pay was so much lower than any other reference point employees ever had that it made them happier,” LaViers said.

These findings may be helpful for HR teams at organizations that are weighing whether to make additional salary information available to their employees. Most employers are complying with laws requiring them to include salary ranges in their job postings, but sharing more than that with the workforce is a different question, HR Brew 

When considering how transparent to be about pay, “employers should try to get an understanding of what their employees think already and what information they have access to,” LaViers said. “If you know that your employee is getting on Glassdoor and seeing salaries for their role that are not accurate or are inflated, this might be a place where more transparency is better, because you’re correcting the misunderstanding.”

Of course, if additional transparency will reveal that your company is paying employees unfairly, that is unlikely to make workers more satisfied with their pay. Compensation experts typically recommend employers perform a compensation analysis to correct for any unexplained inequities before going public with salaries.

“If you don’t know if your pay is fair or unfair, find out,” LaViers recommended. “There are lots of ways of doing benchmarking.”

A Dollar Sign on top of a stack of money encased in a glass case and stacks of gold coins outside of it

CEO-to-worker pay ratio disclosures made employees happier

Employers may fear that disclosing too much information about how they pay will cause workers to become unhappy, but recent research dispels that.

Disclosing CEO-to-worker pay ratios made employees happier with their compensation

A policy that was embraced by both the Democratic and Republican candidates during the 2024 presidential campaign made it into the final version of the recently enacted tax and budget bill, and will affect employers in the service industry starting next year.

The provision in President Donald Trump’s “One Big Beautiful Bill,” called “No Tax on Tips,” will allow eligible tipped workers to deduct up to $25,000 from their tipped income each tax year from 2025 to 2028.

The Internal Revenue Service (IRS) recently published a draft W-2 form taking this policy change into account, and said it would publish a list of occupations that may be eligible to take advantage of the tax break in early October.

How taxes will change for tipped workers in 2026. 

Federal law allows employers to pay their tipped workers as little as $2.13 an hour provided that amount, combined with tips, comes out to $7.25 (the federal minimum wage).

Workers that receive at least $20 a month in tips have to report these earnings to the IRS, and pay taxes on them if their gross income reaches a certain level. President Trump 

 this practice, as did his Democratic opponent, Kamala Harris.

The final “No Tax on Tips” provision that made it into the Republican tax bill will allow workers in jobs that “customarily and regularly received tips” on or before Dec. 31, 2024 to claim the deduction. Workers who report $150,000 or more in gross income will see the deduction reduced and ultimately phased out.

The policy is unlikely to affect the entire tipped worker population (roughly 2.5% of all workers), as more than one-third (37%) of workers 

tax for this reason, according to The Budget Lab.

What this means for employers with tipped workers. 

 published by the IRS on Aug. 15 includes a section for employers to report employees’ “qualified tips” using the code “TP,” as well as a place to report an employee’s “tipped occupation code.”

It’s not yet clear what type of work will fall under the provision. The IRS is required to publish a list of occupations that fall under the “customarily and regularly received tips” category by Oct. 2.

Additionally, the IRS is expected to give employers additional guidance on how to calculate the amount of “qualified tips” a worker earned. For the purpose of this deduction, tips paid voluntarily via cash or credit card should count, but it’s 

 whether automatic charges such as mandatory gratuities will fall under this category.

 it would provide “transition relief” to workers claiming the deduction, as well as employers, in light of the new reporting requirements.

The draft W-2 also includes modifications linked to additional provisions from the tax bill that are set to change the way employers report on workers’ earnings.

 for a tax deduction on their overtime pay, so businesses will need to report overtime compensation if they have workers that qualify for that deduction. Additionally, employers will have the option to 

 on behalf of their employees’ kids starting next year—a benefit that will also need to be reported on a W-2 form.

Legislative Lowdown recurring feature illustration

IRS’s draft W-2 for 2026 incorporates “No Tax on Tips”

Employers with tipped workers are set to see reporting requirements change as a result of a new tax deduction, but some details are still being worked out.  

Legislative lowdown: IRS publishes draft W-2 for 2026 incorporating “No Tax on Tips”

Arkansas is the latest state to regulate earned-wage access (EWA), a benefit that allows workers to tap into money they’ve earned ahead of their scheduled payday.

, which was signed into law by Arkansas Gov. Sarah Huckabee Sanders on Mar. 20, applies to EWA providers, but not the employers that work with them. It requires EWA providers to offer at least one option at no cost, disclose all fees associated with their services, and allow consumers to cancel the services without being charged.

EWA providers are also barred from sharing any portion of fees, tips, or gratuities with employers under the Arkansas law.

Some 12% of employers offer EWA, according to a 2023–2024 report from Sapient Insights Group, with organizations such as the 

 touting the benefit. Supporters of the benefit have suggested it can have 

 on the workforce, boosting businesses’ ability to recruit and retain talent, as well as foster loyalty among workers.

The benefit has drawn scrutiny from consumer advocates, however, due to fees that employees can incur from using the services. A Consumer Financial Protection Bureau (CFPB) 

 of eight companies partnering with employers on EWA found workers often incur fees to get their wages early, with more than 90% of workers paying at least one fee in 2022 when their employer didn’t cover them.

 that stipulated many EWA products fall under the Truth in Lending Act, which requires lenders to disclose charges and fees associated with a loan. Members of the fintech industry pushed back on the rule, with one EWA provider, DailyPay, arguing its offering “does not have the hallmarks of a loan,” such as origination fees, late fees, or reporting to consumer credit agencies, HR Brew previously reported.

, but it’s likely President Donald Trump’s administration will take a different approach to regulating EWA. During his first term, the CFPB issued an 

 that indicated EWA products could operate without being subject to lending laws, so long as they’re offered at no cost to employees.

 to enact legislation regulating EWA, in addition to California, Nevada, and Wisconsin. Utah’s legislature 

The Arkansas law doesn’t go as far as some other states have gone in regulating EWA; Nevada, for example, requires providers to be licensed in the state before offering EWA to residents. It also 

 EWA providers to adhere to lending laws.

DailyPay voiced support for its decision to classify the benefit as a “financial product,” rather than a type of credit. “This is a victory for businesses in Arkansas that can benefit from utilizing earned wage access solutions,” Ryan Naples, VP of public policy, said in a statement.

Arkansas enacts law to regulate earned wage access 

Benefits that allow workers to access their paycheck early are growing in popularity, but some consumer advocates have voiced concerns about costs employees can incur. 

Legislative lowdown: Arkansas enacts law to regulate earned wage access 

As companies rolled out DEI goals following protests against racial injustice that occurred in 2020, some sought to track their progress by tying these goals to employees’ compensation.

Linking DEI metrics to executive compensation became a common practice in the private sector, with more than three-quarters of S&P 500 companies doing so as of 2023, according to 

from The Conference Board and ESGAUGE. In some cases companies made DEI a KPI, or key performance indicator, by asking employees to detail how they contributed to these goals in annual performance reviews, possibly affecting their compensation.

 in legal hot water, but they’re under much more intense scrutiny now due to President Donald Trump’s crackdown on DEI. On Mar. 17 Equal Employment Opportunity Commission (EEOC) Chair Andrea Lucas 

 questioning US law firms about their DEI practices, and specifically asked them if they’d tied “partner or associate compensation to DEI or diversity efforts.”

The administration’s focus on this practice is prompting some employers to be more cautious about tying compensation to DEI, HR and legal experts say, but recent data indicates companies haven’t dropped these policies altogether. Firms may still evaluate employees’ contributions to DEI, but the language and metrics they use to describe these goals will likely change.

Andrew Turnbull, co-chair of global employment and litigation practice at law firm Morrison Foerster, said he’s seen some companies move away from tying DEI to compensation in recent years over fears it could provide fodder for litigation.

While “tying somebody’s performance metrics to achieving certain DEI objectives in and of itself may not be an unlawful practice,” he said, combining this with certain “aspirational targets or goals” could be used to bolster claims that an employer implemented hiring quotas, in violation of Title VII of the Civil Rights Act of 1964. A plaintiff might argue, for example, that the act of paying managers to meet certain objectives for hiring more women or people of color into their firm serves as evidence of discrimination, whether direct or indirect.

“We are certainly advising companies to take a very hard look at those practices and determine whether they want to continue those or not,” Turnbull said

The DEI backlash began well before Trump took office, and already Turnbull said some companies have moved to “rebrand” or “derisk” their practices to lessen their legal exposure.

So while companies may still see a value in DEI, and finding a way to incorporate it into their employees’ goals, there’s a chance they’re calling it 

 at this point. McDonald’s, for example, no longer has “aspirational representation goals,” but still ties executives’ pay to “efforts that drive employee engagement and values, including inclusion,” Fortune 

“Organizations can still go about doing this, but they have to now be very careful about what the goals are,” said Ifedapo Adeleye, a professor and faculty director of Georgetown’s HR Management program, who specializes in compensation and total rewards, as well as DEI. He echoed Turnbull’s concern about tying compensation to DEI programs with quotas or direct targets. “The consensus around it is that most [organizations] will be adjusting some of the metrics that they use” to track progress against their goals.

Still, Adeleye pushed back on the notion that organizations are abandoning DEI entirely.

If executive compensation plans are any indication, these goals aren’t going entirely by the wayside yet. As of 2024 just under half (48%) of S&P 500 companies still incorporated ESG and DEI metrics into their CEOs’ compensation plans, 

If managers and executives believe there’s a business case for DEI, they’ll remain committed to these principles regardless of whether it’s tied to their bonus, and no matter how it’s branded, said Andy Behar, CEO of shareholder advocacy organization As You Sow.

“If you’re a manager judged by performance of your division, then you’re going to have a diverse team,” he posited.

DEI Coin surrounding by traffic cones. Credit: Anna Kim

Will employers stop linking pay to DEI amid Trump’s DEI crackdown?

The Trump administration’s focus on this practice is prompting some employers to be more cautious about tying compensation to DEI, but recent data indicates they haven’t dropped these policies altogether. 

Why some companies are more reluctant to link compensation to DEI 

Theresa Agovino

More than three-quarters (77%) of US companies in the S&P 500 tied executive incentive plans to at least one environmental, social, and governance (ESG) metric in 2024, matching the 2023 rate, according to a new study by WTW. However, the payout rate for hitting ESG metrics is about 10% higher than it is for reaching financial goals, leading some investors to worry that ESG aims are being set too low, the report said.

ESG incentives were paid out at an average of 122% of target compared to financial incentives that were paid out at 114% of target, the report said.

Kenneth Kuk, senior director of work and rewards at WTW, said there’s no evidence that the goals are only being met because they aren’t challenging.

“We couldn’t say why there is this difference. Is it because companies are setting soft goals, and they’re just doing that because then they can pay themselves more, or is it because they are doing quite well…on those non-financial metrics?” Kuk said.

Kuk added that it is the board’s responsibility to ensure that targets are “difficult enough and not set up as a slam dunk.”

The most popular ESG metric among US companies is the social category, with 74% of organizations using the segment, which includes diversity, equity, and inclusion. Governance and environmental issues are tied at 45 and 44%, respectively.

DE&I programs have been under attack since 2023, when the Supreme Court struck down the use of affirmative action in college and university admissions. Still, DE&I metrics remain a part of long-term incentive plans at 54% of companies. Some 29 companies stopped using DE&I metrics to determine incentive pay in 2024, but 26 companies began using them.

“You are starting to see the tide shifting a bit,” Kuk said. He said the number of companies using DE&I metrics may drop slightly again next year, though he doesn’t fear a worrisome trend emerging. He noted that over 50% of companies still have DE&I metrics.

“I think that the more important point here is that companies still deliberately make the choice to keep those metrics,” Kuk said, adding that companies have realized there is a link between investing in DE&I and business value creation.

Money overlayed on a graph and two business hands shaking.

Over 75% of S&P 500 companies in the US tie executive incentive plans to ESG metrics

More than 50% of US companies use DE&I metrics to develop executive pay plans, despite activist pressure against such programs.

Last year, the bonus pool at 58% of companies was expected to match the 2023 incentives rate, according to a 

. The 2024 study (surveying 64 total rewards leaders) found that 11% of organizations planned to increase their short-term incentive budgets, while 6% expected to decrease. Nearly a quarter (22%) hadn’t made a decision.

Bonuses in the financial services industry were expected to soar anywhere from 5% to 35%, the best performance since 2021, a 

“The economy was much better, and then markets were up dramatically,” said Alan Johnson, the company’s founder, explaining why bonuses were expected to surge. “I think people were expecting that, with some degree of probability, that it would be a lot worse. That didn't happen, which was a nice surprise.”

Some sectors in the financial services industry fared better than others. Those working in debt underwriting were expected to 

 of between 25% and 35% because business has been so strong. On the other hand, bonuses for those working in real estate were expected to be flat due to slow activity after years of tremendous growth.

And while workers overall weren’t expected to see huge increases in their bonuses, at least most of them received one. The Gartner survey found that 42% of companies planned to give bonuses to between 80% and 99% of their employees, while 13% of organizations planned to grant bonuses to all of their employees.

Augustus Vickery, a director in Gartner’s HR practice, said that one reason the bonus pool at most companies was largely the same is that employees liken lower bonuses to pay cuts.

“Almost all the companies we work with are very, very reluctant to cut anyone’s pay,” Vickery said.

Vickery said that he expects more US companies to develop better bonus strategies in 2025 as part of the movement toward pay transparency. He said some industries don’t have clear criteria that employees must meet to receive incentive pay. Another problem is that managers often don’t want to differentiate among their reports so that top performers get recognized while poorer performers get nothing.

“All managers want to give their people something,” Vickery said.

A present bow made from 100 US dollar bills

Most employee bonuses last year were expected to match 2023 levels

Bonuses for financial services employees were predicted to buck the overall trend, with payouts at a three-year high.

Despite a softening job market, US employers are expected to grant merit increases of 3.3% to non-unionized employees in 2025—the same rate as this year, according to a report by Mercer.

“It’s not surprising to us to see employers really kind of keeping up with the part of what they had done in the prior year,” said Jack Jones, principal consultant at Mercer. “I think what it shows is employers are still prioritizing the investment in their talent.”

Next year, employers are expected to increase their total salary budgets—which includes money for promotions and adjustments to reach equity—to 3.7%, excluding unionized workers. The increase was 3.6% for this year. About one-tenth (9.3%) of employees are expected to receive promotions next year, compared to 8% in 2024.

However, Jones noted the numbers could change because only 20% of the more than 850 organizations surveyed had finalized their budgets. Still, most organizations (69%) don’t expect to adjust their initial projections.

Employees in the tech sector may fare better than the average worker. Their merit raises are expected to reach 3.5%, while their total compensation is projected to hit 3.8%. The company said that’s because their skills are in high demand. Meanwhile, healthcare workers will likely fall short of the national average. Merit raises for them are expected to advance 3%, while total compensation jumps 3.5%. Mercer said that healthcare institutions face rising costs in multiple areas like equipment and drugs, leaving them less money for salaries.

Meanwhile, Jones said that companies continue to create more pay transparency as employees and job seekers demand it.

Nearly one-fifth of companies (18%) share pay ranges with both their employees and job candidates. More than a quarter are considering following their lead. Over half of companies (52%) plan to conduct pay equity investigations.

Jones said some employers are becoming more transparent because legislation demands it. But he added there is also a cultural shift, with more employees and candidates expecting transparency. “As more and more employers do it, it’s almost a competitive advantage for them, and those employers that are not are missing out on some of the talent,” Jones said.