Salary.com, the global leader in compensation data, software, and AI, today released the 2026 State of Pay and Compensation Practices Report, its annual data-driven examination of how organizations manage, structure, and communicate compensation. The report draws on survey responses from 525 HR and compensation professionals across 23 industries and surfaces a significant, measurable disconnect: HR professionals are far more confident in their pay programs than they believe their employees are, and the data suggests the gap has structural roots that communication alone cannot close. This marks the first year Salary.com has made the full report findings available to the public.

The report’s central finding: 74.8% of HR professionals believe employees at their organization are paid fairly. However, only 44% believe employees actually share that view. That 31-point “confidence gap” is the organizing insight of the report and reflects not a failure of effort, but a lack of structural foundation and communication.

You Can’t Communicate What You Haven’t Built

The report finds that the analytical infrastructure of compensation management is largely in place. Most organizations conduct market analyses and operate within documented processes and performance frameworks. What is significantly underdeveloped, the data shows, are the structural and communication layers that make those efforts legible to employees.

• Only 51.4% of organizations have a formal job architecture in place. Roughly 30% are planning or actively building one, meaning a significant share of organizations are making pay decisions without a consistent structural framework connecting roles to the market and to each other.
• 22% of organizations do not use job leveling to inform their pay structure, making it nearly impossible to apply pay equitably across comparable roles or to explain to employees why their pay sits where it does.
• Only 34.3% of organizations are transparent with employees about how pay is determined, fewer than one in three.

“The organizations that struggle most with employee trust in pay are often not the ones with bad intentions. They’re the ones that haven’t yet built the foundation that would make a good explanation possible,” said Amy Dwyer, CHRO at Salary.com. “You can’t communicate what you haven’t built. When job architecture is missing or job leveling is inconsistent, transparency can become noise instead of clarity.”

Customers who have invested in building that structural foundation are seeing tangible and sustainable results. “Salary.com helps solve the complexity of aligning internal job titles and career architecture with external market data,” said Betty Brown, Human Resources Officer at Strata Information Group. “It provides a structured framework for leveling roles, building salary bands, and evaluating pay competitiveness across multi-state teams. This benefits us by creating consistency, reducing compensation risk, and supporting long-term talent strategy.”

Are We Setting Managers Up to Fail?

The report identifies a structural training gap at the point where pay philosophy meets employee experience: manager-led pay conversations.

• 69.2% of organizations train managers to conduct performance evaluations. Only 51.6% provide formal training on how to discuss compensation; the topic employees are likely to raise the moment a performance review ends.
• Nearly 21% of organizations rely mostly or entirely on manager discretion for pay decisions, leaving room for perceptions of unfairness to flourish in organizations that don’t take a structured approach.

Most organizations have put real work into the mechanics of fair pay. Market analysis, job description management, performance frameworks, and more. But these processes alone do not build employee trust, and the data reveals that without the structural foundation to support them, even well-designed pay programs remain invisible to the people they’re meant to serve.

Employees Don’t Understand Their Total Rewards

The report reveals that even when organizations pay competitively, most employees never receive a complete picture of what their employer is actually investing in them. Total rewards statements, which surface the full value of compensation including benefits, retirement contributions, paid time off, and other non-salary elements, remain the exception, not the norm.

• Only 46% of organizations provide total rewards statements to employees, meaning more than half of all workers lack a complete view of what their compensation is worth.

If less than half of employees receive them, managers are certainly ill equipped to explain them. Without this visibility, employees evaluate their pay based on their base salary alone, often underestimating their total compensation by a significant margin.

Additional Findings

The report also surfaces several additional data points with significant strategic implications for HR and compensation leaders:

• Remote employees show dramatically lower turnover. Organizations with remote workers report 7.4% average total turnover for those employees versus 16.4% for the overall workforce — one of the most underutilized levers for workforce stability in the data.
• AI adoption in HR is concentrated in talent acquisition and has not yet extended meaningfully to compensation management. 64.5% of organizations are using or about to use AI in HR, with talent acquisition (54.4%) leading adoption. Compensation and benefits rank near the bottom at just 22%, despite being one of the most data-intensive functions in HR.
• Being a high payer does not substitute for being a good communicator. Organizations paying at higher market percentiles show no meaningful correlation with stronger compensation communication practices.

The Path Forward Is Structural Before It Is Conversational

The report closes with a sequenced set of recommendations, emphasizing that organizations pursuing communication solutions before building structural foundations will find themselves explaining pay decisions they cannot yet make coherent. Key recommendations include:

1. Build job architecture and consistent job leveling first, the prerequisite for every downstream effort towards pay transparency.
2. Train managers on compensation and performance conversations as a package, not separately.
3. Expand transparency to pay ranges and market definitions; trust and credibility won’t come if employees don’t have the right context.
4. Deploy total rewards statements to give employees a full view of compensation value.
5. Leverage purpose-built AI in compensation analysis, where it can surface compression and equity gaps before they become retention problems.

“Organizations have invested heavily in the mechanics of fair pay,” said Dwyer. “What many haven’t built yet is the foundation that makes those mechanics reliable, scalable, and visible to the people they’re meant to serve.”