Top trends in compensation

As pay transparency legislation becomes more prevalent, companies are facing increased pressure to adapt their practices, invest in pay equity strategies and prepare for complex pay transparency requirements, according to an Oct. 28 report from software company Syndio.

For instance, with the upcoming EU Pay Transparency Directive, 47% of companies with major operations in Europe expressed concerns about how the legislation will affect their organization. 

“The EU Pay Transparency Directive is the most significant piece of pay equity legislation anywhere in the world in the last 50 years. Based on hundreds of conversations and over a dozen roundtables with large employers across Europe, it’s clear that these leaders understand how the Directive will upend how they manage and explain pay,” Christine Hendrickson, vice president of strategic initiatives at Syndio, said in a statement.

“As one leader put it: ‘We’ve moved from pay reporting being a compliance exercise to a broad human resources-wide strategic mandate,’” Hendrickson said. “But I fear there are too many leaders, including some U.S.-based employers with a footprint in the EU, who have not yet digested what a massive change management exercise this will be.”

In a survey of 400 HR and total rewards leaders worldwide, only 1 in 8 organizations said they’re fully prepared for pay and career transparency alike.

HR leaders identified inconsistent pay decisions as a core reason their organizations are unprepared, the report found. About 24% of respondents said they regularly stray from policies when making pay decisions. 

Static compensation also leads to inconsistent pay, with practitioners believing that 17% of employees would earn less and 38% would earn more if they were hired today, the report found

Pay structures appear to be changing to meet equity and transparency needs, according to a Payscale report. Although organizations are becoming more transparent, they still generally only disclose data to individual employees — and typically only when required to do so.

In the U.S., salary transparency has increased nationwide, even in states without mandates, according to a report from the National Women’s Law Center. Researchers said it was “notable” that states without disclosure laws showed an increase in transparency and that employers may proactively prioritize transparency “to attract and retain top talent.”

In a WTW survey, most of the 500 North American employers had pay transparency policies in place, partly due to increased regulatory requirements worldwide. More than half have implemented measures such as communicating job levels, variable pay opportunities and how individual base pay is determined. Although most said they shared pay range information, external candidates were more likely to receive this information than internal candidates.

While the median salary increase stayed at 4% in 2024, average increases dropped from 4.3% to 3.9%, according to survey results collected by Salary.com from more than 1,000 HR professionals in the U.S. and Canada.

The drop is due to fewer companies doling out higher raises, Salary.com found; only 14% of companies gave out raises between 5% and 6.9%, compared with 25% of companies in the previous survey. Additionally, more companies — 38% in 2024, compared to 25% in 2023 — returned to “typical” salary increases in the 3% to 3.9% range.

“Last year, we noted that salary increases might be at a peak, even with 4 percent becoming the norm,” Andy Miller, vice president of compensation consulting at Salary.com, said in an Oct. 29 news release. “While 4 percent remained the median in 2024, further analysis suggests a shift is happening.”

Respondents told Salary.com they expected the trend to continue in 2025.

As it rose and continued to remain high over the past few years, experts weren’t sure when the salary budget increase rate would decline back to pre-pandemic levels — or if it would at all. Last fall, compensation experts questioned whether the median 4% raise was becoming the new normal, up from what had been the standard 3%. 

While the median increase did stay at 4% this year — a rate it has been at since 2022 — a drop in average increases suggests that companies aren’t afraid to ride the slope down to pre-pandemic levels in the 3-3.9% range. Salary.com’s data tracks with WTW’s findings from July, which showed employers planned a median salary increase of 3.9% for 2025.

Some employers may be relieved by the leveling out in the salary budget, but workers still have high expectations set by the past few years — and HR is feeling the pain. A Payscale analysis from March found that despite shifts in the economy, employees still expected competitive pay, and HR ranked compensation as their greatest challenge. And more recently, employers told WTW they weren’t delivering effectively on their pay programs, including on elements like recruiting, retention and rewarding employees for performance.

Despite the broader shift in median salary, some industries saw bigger median increases, particularly construction and the education, government and nonprofit sectors. In contrast, hospitality and transportation saw median pay increases below the average. Employers are also still navigating pay strategies for remote employees, Salary.com noted.

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While employees identify pay as the No. 1 reason they join and remain with a company, only roughly half of employers surveyed said they were effectively delivering on their pay programs, according to a report from financial services firm WTW. 

WTW said the disconnect is likely the result of the talent shortages, generational shifts, new work models, the global pandemic and high inflation that have affected the workplace the past few years. Part of the problem, too, could be ineffective communication, the report found. Fewer than 1 in 4 of the nearly 1,900 companies surveyed said they do well at explaining how worker pay is determined. 

“Organizations likely haven’t been able to focus on the factors that drive pay program effectiveness for the past few years given the recent dynamics of the labor market,” Lori Wisper, managing director and work and rewards global solutions leader at WTW, said in a statement.

The WTW report identified six core objectives related to pay program effectiveness: driving employee attraction, upping employee retention, promoting fair compensation internally, providing competitive compensation, aligning with business strategy and rewarding employees for performance. 

As economic conditions have improved and labor market pressures have lessened, companies should make changes to address the factors that play into pay program effectiveness, Wisper said. 

One such problem the report identified was salary compression, which more than half of employers said is an issue and about the same share of employers said will be a problem over the next few years. 

“Companies should start with updating their compensation philosophy, because it is critical for pay program effectiveness and can contribute to improved retention of key talent, employee productivity, and financial performance,” Wisper said.

Companies that have updated their compensation philosophy in the past five years did so to attract and retain workers, improve the employee experience and make gains on pay transparency, among other reasons, per the report.

Tipping is on the tip of everyone’s tongue these days. For one, the term “tipflation” has been coined to describe disdain at the rising cost of living, including increased social pressure to tip. 

Likewise, President-elect Donald Trump said earlier this year that he plans to end taxes on tips — a stance Kamala Harris also adopted. But where does the rest of America stand when it comes to this aspect of compensation? How does this affect employers?

The customer experience

The majority of people in the U.S. feel “uneasy” or “uncomfortable” about the number of businesses requesting tips, per a Paylocity study done in partnership with The Harris Poll. 

Notably, there is a slight age difference in sentiments around tipping. Baby boomers tend to be more uncomfortable than Generation Z; compare 74% to 66%, respectively. Overall, consumers feel like tipping should be “reserved for specific businesses,” with baby boomers agreeing more so (79%) than Gen Zers (62%).

Restructuring pay

According to the report, employers can do more than just learn that consumers are annoyed with tipping culture.

“The growing discomfort with tipping suggests a need for businesses to reconsider their tipping policies,” Paylocity researchers said. “Employers might explore alternative compensation models that reduce reliance on tips.”

Moreover, 83% of tipped workers said they would prefer a higher wage without tips, rather than a lower base pay supplemented by tips, Paylocity found.

The employer branding piece

Paylocity researchers said that ensuring fair wages is crucial for both employee experience and “public perception.”

Even though the majority of respondents were against the current tipping culture, most people are also against paying tipped workers less: 61% opposed paying tipped employees less, with 28% in strong opposition.

Naturally, front-line workers agreed: 58% opposed and 25% strongly opposed paying tipped workers less.

Looking ahead to the future of tipping

During a June 2024 rally in Las Vegas — a city where the hospitality industry is king — Trump said ending taxes on tips would be “the first thing” he did if re-elected. 

He noted that tip taxation had been “a point of contention for years and years and years,” and highlighted hotel and restaurant workers in particular.

The Consumer Financial Protection Bureau was hit with a barrage of public comments regarding its earned wage access rule proposal ahead of a deadline for that feedback.

Much of the commentary fell along the same battle lines that have been drawn for months, since before the federal agency issued its interpretive rule proposal in July labeling earned wage access payments as loans. Many companies in the industry have long argued that their services don’t constitute lending and therefore lending laws shouldn’t apply.

The federal agency took action after studying an array of on-demand pay tools that have emerged in the market, and said it aimed to help companies offering the services understand how the bureau would apply existing laws to the nascent industry. 

“Paycheck advance products are often marketed to and designed for employers, rather than employees,” CFPB Director Rohit Chopra said when the rule proposal was issued. “The CFPB’s actions will help workers know what they are getting with these products and prevent race-to-the-bottom business practices.”

For their part, most earned wage access providers and their trade associations, including the American Fintech Council, have opposed the proposed rule. Some companies, including DailyPay, urged the CFPB in their comments to withdraw the rule. Others, including Wagestream, also criticized the agency for its rulemaking approach, saying it wasn’t meeting “fairness standards” for transparency and public comment.

The Fintech council also noted that the CFPB’s position now, under President Biden, diverged inappropriately from prior guidance issued during the Trump administration.

“Earned wage access is not a loan, and it shouldn’t be regulated as such,” the council’s CEO, Phil Goldfeder, said in an interview last month. “We’re obviously deeply disappointed with not just the CFPB’s position, but their dramatic 180 from the guidance they released in 2020.”

Over the past decade, companies that offer services that let workers tap their earned wages before regularly scheduled paydays have proliferated, with dozens of competitors now in the market catering to what they say are millions of users. 

Those EWA providers have a variety of ways in which they sell their services and earn revenue. Some partner with employers and charge them for offering the service to employees. Others exact fees from workers who tap the service, either through employers or by offering the service directly to consumers. Some also draw fees when workers use prepaid or debit cards that they are issued in conjunction with an EWA service.

Several EWA providers, including FlexWage, argued the agency should revise the proposal to distinguish between companies that provide services through employers, especially those that don’t assess certain fees, and those that offer services directly to consumers. 

Generally, the companies argued that the rule should be better tailored to the EWA industry, explaining that lending laws aren’t a good fit.

Some groups, speaking on behalf of employers, including the National Automobile Dealers Association, also chimed in with input for the CFPB. That association said it shared concerns about the rule proposal raised by the U.S. Chamber of Commerce. 

“While NADA appreciates the CFPB’s intent to protect employees, the Proposed Interpretive Rule lacks clarity and disregards the benefits of certain earned wage access services,” according to an Aug. 31 comment letter from Kaye Lynch-Sparks, NADA’s director of regulatory affairs.

Nonetheless, consumer protection organizations, including the National Consumer Law Center, The Center for Responsible Lending, and the Consumer Federation of America, applauded the CFPB’s effort to put guardrails on the industry and better protect consumers. 

“We believe this rule will provide much needed clarity around the regulation of these credit products and give consumers the transparency in costs that they are entitled to but have been deprived of to date,” the groups contended in a joint Aug. 30 letter. 

The three organizations also said the agency should be on alert for potentially “unfair and deceptive practices” by some companies in the market, and provided examples in their letter.

One consumer, Tammy Hawn of Columbia, South Carolina, filed a comment with the CFPB saying she was pleased the federal agency was stepping in after she saw relatives using EWA services to their detriment. She explained that once their paycheck was actually deposited in their accounts, so many fees had been taken out of their checks that they ended up needing to borrow money again. “They got caught up in this endless cycle of borrowing,” Hawn said.

“I believe that you should force these banks/financial institutions to disclose the cost of these programs upfront to customers,” Hawn wrote in her July 19 comment letter. “They prey on those that do not have very much to begin with and once they start borrowing money many find themselves forced to continue to borrow more. This type of lending needs to be stopped.”

Her state of South Carolina is one of a handful of states that over the past year has enacted laws to track EWA providers by requiring them to register with the state and provide certain records on a regular basis. 

The new state laws, which were backed by industry trade groups, don’t treat EWA services like loans. So, contrary to the CFPB’s rule, the new state laws don’t force EWA providers to adhere to federal lending laws, like the Truth in Lending Act.

One South Carolina legislator who backed that state’s law earlier this year wrote to the CFPB to ask it to defer to the states in regulating earned wage access, expressing a sentiment contrary to Hawn’s.

“The recent (CFPB) interpretive rule classifying EWA as a loan threatens to harm South Carolina workers who rely on these services to manage unexpected expenses and avoid more expensive products,” William ‘Bill’ Sandifer, who is chairman of the South Carolina House Labor, Commerce and Industry Committee, said in his Aug. 28 letter.

Other state legislators have strong views about the issue. This year, bills cropped up in Washington, New York, Maryland and Hawaii, among other states, according to the American Fintech Council. 

Despite the CFPB’s position, the American Fintech Council will keep backing state legislation that doesn’t treat earned wage access services like loans, Goldfeder said.

Much of the nation’s attention during election week was likely focused on the results of Tuesday's presidential, congressional and gubernatorial elections — the HR implications of which are vast — but workforce issues also featured in statewide elections, creating an even more complex labor environment for employers.

Voters in at least a dozen states weighed in on perennial issues such as marijuana legalization and minimum wage increases as well as those related to more timely concerns, like reproductive rights and the unionization of gig workers. Below, HR Dive has provided a recap of these contests, all but one of which were completed by press time.

Voters mostly approve minimum wage increases, reject tipped wage reforms

After the 2022 midterm elections continued the trend of state and local governments increasing their minimum wage rates, several states put the issue on the ballot this year.

Voters in Alaska and Missouri greenlit such increases. Alaska’s minimum wage will increase to $15 per hour by July 1, 2027, while Missouri’s will incrementally increase to $13.75 per hour by next year before hitting $15 per hour by 2026. The two states were already among the 30 states that had minimum wages above the federal minimum according to the U.S. Department of Labor.

Both Alaska and Missouri’s ballot initiatives included additional clauses creating the opportunity for local workers to earn paid sick leave. The proposals have maximum accrual and usage that vary depending on an employer’s size.

These requirements are the same for both states. Employers will be required to provide one hour of paid sick leave for every 30 hours worked, but employees at employers with fewer than 15 employees may only accrue or use up to 40 hours of leave per year, while those at employers with 15 or more employees have a cap at 56 hours per year.

Nebraska voters joined in on the paid sick leave trend as well. Under the state’s approved ballot initiative, workers of employers with fewer than 20 employees may accrue and use up to 40 hours of leave per year, while those at employers with 20 or more employees may accrue and use up to 56 hours per year. The leave accrues at a rate of one hour per every 30 hours worked.

In California, voters had a chance to decide whether to increase the state minimum wage to $18 an hour, a proposal that had become a point of contention between local employers and advocates in recent years. True to that observation, the Associated Press judged the result too close to call at press time, per CalMatters, with votes for “no” on the increase holding a slim lead.

Voters in other states rejected ballot initiatives that would amend the rates at which tipped workers are paid. This was the case in Arizona, where voters blocked an effort to increase pay for tipped workers under certain conditions, as well as Massachusetts, where an effort to eliminate the state’s tipped employee minimum wage by 2029 — and replacing it with the standard state minimum wage — fell short.

Washington state voters rejected a proposal that would have allowed employees and self-employed individuals to opt out of paying state payroll tax as well as receiving benefits from the WA Care Fund, a long-term care insurance program run by the state.

Alaska, New York update anti-discrimination statutes

The same Alaska ballot initiative that approved an increase to the state’s minimum wage and the creation of a paid sick leave guarantee also contained a third component: it prohibited employers from taking adverse action against employees who refuse to attend employer-sponsored meetings on political or religious matters.

Per the initiative, “political matters” include elections for political office, political parties, candidates, proposed legislation or regulations, and the decision whether or not to join or support a political party, or political, civic, communal, fraternal, or labor organization. “Religious matters” include those relating to religious affiliation and practice and the decision of whether to join or support a religious organization or association.

New York state voters approved an amendment to the state’s bill of rights prohibiting discrimination on a variety of bases — including “pregnancy, pregnancy outcomes, and reproductive healthcare and autonomy,” a noteworthy addition given national debates on reproductive health rights following the U.S. Supreme Court’s overturning of Roe v. Wade.

A mixed bag on marijuana, drug decriminalization

Consecutive election cycles in 2020 and 2022 resulted in changes to state drug use laws, none more than those pertaining to recreational and medical marijuana use. But 2024 ballot initiatives on the subject cut both ways.

Efforts to legalize recreational marijuana use in Florida, North Dakota and South Dakota failed Tuesday, while a proposal to legalize medicinal use for adults passed in Nebraska. Both North Dakota and South Dakota voters previously rejected recreational legalization in 2022. South Dakota initially approved a 2020 legalization initiative before the state Supreme Court declared the proposed amendment unconstitutional.

Separately, Massachusetts voters voted against a proposal to legalize growing, possessing and using certain psychedelic substances. The result follows a successful 2022 ballot initiative in Colorado to decriminalize certain psychedelic plants and fungi.

Industry-specific unionization efforts gain ground in two states

On a related note, cannabis companies in Oregon will now be required to submit labor peace agreements when they apply for or seek to renew their business licenses thanks to a successful ballot initiative. Such agreements will require businesses to, at a minimum, remain neutral with respect to a bona fide labor organization’s representatives communicating with employees about their rights under state law.

Legal cannabis production has increasingly become an industry of opportunity for unionization efforts, sources previously told HR Dive.

Another niche unionization proposal passed in Massachusetts, which approved a requirement allowing “transportation network drivers” — which encompasses ride-share drivers for services such as Uber and Lyft — to unionize and collectively bargain with the companies for whom they drive. The proposal stipulates that any collective bargaining agreements must be approved by at least a majority of drivers who have completed at least 100 trips during the previous quarter.