Diversity, equity, and inclusion (DEI) face a pushback in the United States, with some companies set to scrap or roll back their programs. A surge in DEI programs in 2020 was followed in June 2023 by a U.S. Supreme Court ruling preventing American universities from taking race into account in their admissions processes. That decision led to lawsuits against several large companies.
More recently, on his return to office in January, President Trump issued a series of executive orders, including to halt DEI programs within federal agencies. He also removed the legal underpinning for contractors’ affirmative action programs on race, ethnicity, and gender. The administration has promised further steps that may affect the private sector. Nonetheless, many other governments continue to promote DEI as well as pay transparency, signaling these remain crucial initiatives.
Pay inequality
Public knowledge of pay inequality can potentially damage a company’s reputation. This type of scandal often draws unwanted press attention and, in some cases, a public backlash, political scrutiny, or both. For companies that find themselves in the spotlight, class actions, employment tribunals, monetary settlements, or policy changes sometimes follow. Getting the pay transparency balance right, in contrast, tends to attract talented job candidates, build trust with employees, and promote a more equitable and inclusive workplace.
Pay transparency laws aim to level the playing field; they help reduce pay disparities and prevent discrimination. The laws often focus on gender-based pay discrimination but can help combat discrimination based on age, race, disability, and other protected characteristics as well. Broadly, the laws require larger employers to report gender pay gaps and to share pay information with job applicants and sometimes employees. Penalties for non-compliance vary by jurisdiction – for example, “naming and shaming” in the United Kingdom or fines of up to US$250,000 for each violation in New York City.
New laws to take effect
This year in the United States, pay transparency laws take effect in Illinois and Minnesota (from 1 January), in New Jersey (from 1 June), Vermont (from 1 July), and Massachusetts (from 31 July), adding to laws in place in other states. These laws generally require employers to disclose in job advertisements and/or postings salary ranges and, in certain states, benefits such as bonuses and commissions. Employees are pursuing litigation to test the limits of the requirements, especially in states offering monetary compensation for breaches.
With different laws in various states, multi-state employers face an extra compliance burden, as do companies that hire remote workers. Washington State’s pay transparency law covers employers with 15+ employees, including out-of-state employers, if they advertise a role that could be filled by a Washington resident. From 1 July, Washington also bans employers from discriminating on pay across all protected classes, not only gender.
Across the EU
EU member states have until 7 June 2026 to transpose the EU Pay Transparency Directive into national laws. The Directive will help harmonize the approach to pay transparency in the EU. From June 2027, employers with 250+ employees will report annually on their gender pay gap, and employers with 150 to 249 employees will report every three years. From June 2031, those with 100 to 149 employees will also report every three years. Companies with fewer than 100 employees don’t need to report, though member states may include them under local regulations.
The rules require companies to disclose pay information to job applicants and workers on request. Companies must also take steps to close unjustified gender pay gaps. Employers that flout the rules could face fines and/or uncapped compensation claims. And victims of gender-related pay discrimination are entitled to recover back pay, bonuses, and related payments.
Although employees have similar rights under equal pay laws, pay transparency rules should make it easier to tell if employers are observing the right to equal pay for equal work. Recent attempts to achieve this haven’t always succeeded. In the Netherlands, there’s been a proposed Law on Equal Pay for Women and Men for some time. This would give employees the right to information about the pay of colleagues in similar roles. It would also force employers with 250+ employees to obtain independent certification every three years that they are paying women and men equally. Employers with between 50 and 250 employees would have to provide information to the works council about pay differentials between employees in comparable positions. And all employers with 50+ employees would have to include information about pay disparities in their annual report. It seems likely the government will now amend the proposal to reflect the Directive’s requirements.
Beyond gender discrimination
Although the focus in the United States and much of Europe is on pay transparency and gender-based discrimination, other regions take a more wide-ranging approach. The United Kingdom doesn’t have pay transparency laws requiring employers to tell employees about pay levels, but it has equal pay and gender pay gap reporting legislation.
The Employment Rights Bill builds on the existing framework by requiring employers with 250+ staff to prepare plans explaining how they’ll tackle their gender pay gap (and how they support employees during the menopause). These large employers should also expect the government’s anticipated Equality (Race and Disability) Bill to extend pay gap reporting to ethnicity and disability and potentially to extend the equal pay framework to race and disability as well as sex.
Like the United Kingdom, Spain is expanding its requirements beyond gender discrimination, to improve the rights of LGBTI people. Law 4/2023 requires employers with 50+ employees to have a plan to promote equality and prevent harassment in the workplace. It’s still unclear whether employers need separate plans for LGBTI employees or if they can be included within existing gender equality plans. Penalties include fines of up to €150,000.
There have also been developments in the law on disability discrimination in Spain. Employees are no longer automatically dismissed by law if the National Institute of Social Security declares them permanently disabled. This was a breach of EU discrimination rules. Employers now have to find the employees alternatives, such as other roles and changed working hours. It’s unclear whether an employer could justify dismissal if suitable alternatives can’t be identified.
Progress on equality
Legal reforms in Saudi Arabia, Indonesia, and Japan center on women’s rights, and there are different reasons for this. In Saudi Arabia, reforms reflect wider social and cultural reforms. Until recently, employers in Saudi Arabia needed official permission for mixed working spaces and had to meet conditions such as separate entrances for men and women. Those rules have been relaxed and mixed workplaces are common, even in government departments. The country has an equal pay law and anti-discrimination protection covering gender, disability, religion, nationality, and age.
Japan is acting to address the challenges of an aging population by making it easier for women to remain in the workforce. From April 2025, employers in Japan are required to offer flexible working, such as remote work or shorter work hours, to employees with pre-school-age children. Unpaid leave entitlements are increasing to allow parents to attend school events. Large employers will be required to establish targets for the number of employees taking leave. The government wants 50 percent of fathers to take paternity leave by 2025.
Another priority is helping older employees remain in employment. Most companies in Japan set a mandatory retirement age of 60, but pension payments in principle begin at age 65. Employers are required to re-employ workers who reach retirement age (and employers can do so in a different role/different terms). Until now, there have been exceptions, meaning the employer isn’t obliged to re-employ until age 65 if an employee doesn’t meet rehiring conditions. Those exceptions are being phased out and will end in April.
Other countries in the region are also improving family-friendly rights. In Indonesia, Law No. 4 of 2024 aims to improve equal rights for mothers and children. It entitles working mothers to three to six months’ paid maternity leave and fathers to two to five days’ paid paternity leave. And as part of a government initiative in Singapore, new laws on parental leave take effect in April 2025. Mandatory paid paternity leave increases to four weeks in all cases. A new shared parental leave scheme entitles parents to share six weeks’ paid parental leave, increasing to 10 weeks in April 2026. The leave will be shared equally between both parents, who have the flexibility to reallocate the leave to each other. The scheme also applies to parents on short-term contracts.