Pay parity refers to the principle of ensuring employees receive equal pay for equal or substantially similar work, regardless of gender, race, ethnicity, or other protected characteristics.
Imagine you're chatting with your coworker at happy hour only to find out they're making 20% more than you in the same position! Makes that first round they bought kind of pale in comparison.
Pay parity is a cornerstone of workplace equity, tied to both legal compliance and organizational values. Don't forget, pay parity goes beyond salary! It includes bonuses, benefits, and other forms of total compensation. If you're getting paid the same as your peer but they get a hefty stock package, that isn't parity.
Why pay parity matters
Legal compliance
Pay parity is the law in many countries. Regulations like the U.S. Equal Pay Act, U.K. Gender Pay Gap Reporting, and the EU Pay Transparency Directive require employers to ensure fair compensation across their workforce. Noncompliance may trigger hefty fines, costly lawsuits, and reputational damage. For this reason, among many, pay parity is a business-critical priority for any organization operating internationally.
Equity and inclusion
When you compensate people fairly regardless of gender, race, or background, you're showing your team that everyone is valued equally. Equal pay for equal work creates the kind of inclusive culture where diverse talent wants to work at your company and, once hired, stay and thrive. If that isn't enough, research shows that companies with strong equity practices and diverse teams consistently outperform their competitors financially.
Talent retention and reputation
Pay parity sends a clear message: your team's compensation is based on their skills, effort, and results, not their gender, nationality, or other personal characteristics. When employees know that they and their colleagues are rewarded fairly for their talent and performance, they are more likely to stick around. A 2025 Payscale report showed that Employees who work for organizations with high levels of pay transparency are 59% less likely to leave relative to non-transparent organizations. Meanwhile, companies with equitable approaches to pay see more engagement per Gallup's research.
Pay parity across the globe
Different regions impose varying levels of reporting, transparency, and enforcement requirements.
U.S.
In the U.S., pay parity is governed by the federal Equal Pay Act of 1963, which requires employers to provide equal pay for equal work regardless of sex. "Equal work" refers to jobs that require "substantially equal skill, effort, and responsibility and [are] performed under similar working conditions within the same establishment."
But federal law is just the starting point. Many states have passed their own equal pay laws that go further, expanding protections to cover race, ethnicity, and other characteristics, and replacing "equal work" with broader "substantially similar work" standards. States like California, Connecticut, and Delaware have also banned salary history inquiries, making it harder to perpetuate historical inequities.
For multi-state employers, navigating this patchwork of federal and state requirements means staying sharp on where teams are located and what rules apply in each jurisdiction.
U.K.
Pay parity regulations in the U.K. are driven by a 2017 mandatory gender pay gap reporting law for larger employers. Companies and public sector organizations with 250 or more employees must publish annual gender pay gap reports that include metrics like the mean and median hourly pay gap, bonus pay gaps, and the proportion of men and women in pay quartiles. Organizations must publish such reports on their website and an official government platform.
EU
The EU is taking a bold approach to pay parity with its Pay Transparency Directive, which requires all member states to implement the rules by June 7, 2026. Employers with 100+ employees must report gender pay gaps annually or every three years (depending on company size). These reports are required to offer detailed data about mean and median pay gaps, bonus gaps, and pay breakdowns by job category. Also under the directive, employees gain new rights to request their own pay information and average pay levels by gender for similar roles, and employers can no longer enforce pay secrecy clauses or ask candidates about salary history.
If a company's gender pay gap exceeds 5% and can't be justified by objective criteria, it must conduct a joint pay assessment with employee representatives, then develop a plan to close the gap.
Australia
In Australia, national pay parity laws, including the Fair Work Act and Workplace Gender Equality Act, mandate that employers with 100 or more employees actively monitor, analyze, and report on "six gender equality indicators," including "equal remuneration between women and men." If pay gaps are identified, employers must develop strategies for closing identified pay gaps, creating real accountability and transparency. In addition, pay secrecy clauses have been banned since 2023. This means that employees have the right to freely discuss their compensation with others.
Canada
Canada's pay parity legislation operates at both federal and provincial levels, with the Pay Equity Act requiring federally regulated employers with ten or more employees to identify and correct "gender-based discrimination" regarding pay. Ontario, Quebec, and other provinces have their own mandates for regular pay equity reviews and reporting, too.
Steps to achieve pay parity
Here are five practical steps you can take to close pay gaps and build a workplace where everyone gets fair pay for equal work.
1. Conduct regular pay audits
To conduct a pay audit, review salaries, bonuses, and benefits across demographics at set intervals (e.g., quarterly or annually). If pay gaps are identified, address them promptly.
How does this look in action?
A multinational company conducts a global pay audit and adjusts salaries for women and underrepresented groups performing the same roles as male peers.
2. Install transparent pay structures
Define salary ranges by role, level, and location, and clearly communicate these pay bands to employees.
How does this look in action?
An organization implements standardized pay bands. This ensures that, say, managers cannot exceed agreed-upon ranges without executive approval.
3. Use standardized job evaluations
Use the same criteria to evaluate work of equal value. By assessing roles with clear, consistent criteria (like skills, responsibilities, and complexity), organizations help ensure that employees doing work of equal value are paid equitably. This process prevents bias and subjectivity from creeping into role classification or compensation decisions.
4. Regularly monitor and report out
Track compensation metrics by gender, ethnicity, and other categories. Advanced analytics tools now enable companies to monitor both controlled pay gaps (comparing people in similar roles) and uncontrolled gaps (looking across the entire organization), which provide insight into where inequities exist and shed light on what's causing them.
Meanwhile, public reporting requirements, like those in the U.K., EU, and Australia, add another layer of accountability. Public reporting requirements in certain regions reinforce accountability.
How does this look in action?
A company introduces annual diversity, equity, and inclusion (DEI) reporting, which they publish on their website, to measure their progress on closing pay gaps.
5. Standardize inclusive HR practices
To limit bias and ensure opportunities and rewards are distributed fairly, apply consistent criteria for new employee recruitment and current employee performance reviews. Beginning with an employee's application for a job, structured interviews, transparent scoring systems, and defined career pathways help prevent unconscious favoritism and promote objective, skills-based decisions.
Forward-thinking employers also embed DEI goals into leadership key performance indicators (KPIs). The outcome? Managers are held accountable for building diverse teams and advancing equitable pay, so fairness is an expectation, not an aspiration.
Ready to put pay parity into practice?
Pay parity is one of those things that can slip through the cracks-don't let it. Partner with the experts at Pebl.
We bring together compliant hiring, payroll services, and benefits across 185+ countries worldwide. expertise allows you to navigate local laws and deliver transparent, skills-based compensation, so you can scale globally without the payroll headaches.
Contact us when you're ready to perfect your pay parity..
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.
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