From Secrecy to Clarity: Pay Transparency, Fairness, and Employee Outcomes in German Organizations

ABSTRACT Recent regulatory developments, particularly the revised EU Pay Transparency Directive, have reshaped debates about compensation in German organizations. This study examines the psychological implications of pay transparency, focusing on perceived fairness as a mediating resource in employees' experiences. Drawing on the Job Demands‐Resources model (JD‐R), organizational justice theory (OJT), and related studies, it develops an innovative model. Empirical data were generated from 200 employees in German companies using validated scales for pay transparency, perceived fairness, affective commitment, psychological strain, and emotional exhaustion. Partial least squares structural equation modeling (PLS‐SEM) was used to examine whether perceived fairness mediates the relationships between pay transparency and employee‐related outcomes, including affective commitment, psychological strain, and emotional exhaustion. The results show that pay transparency significantly enhances perceived fairness, which in turn positively mediates the relationship between pay transparency and affective commitment and reduces emotional exhaustion. Contrary to expectations, neither direct nor mediated relationships were observed between pay transparency and psychological strain. These findings suggest that transparency initiatives—when coupled with perceptions of fairness—can strengthen employee commitment and well‐being while reducing emotional exhaustion associated with compensation comparisons. The study advances theoretical understanding by highlighting perceived fairness as a crucial employee resource and offers practical recommendations for HR practitioners implementing pay transparency in complex regulatory environments. With the results affecting affective commitment, psychological strain, and emotional exhaustion, the study has major implications for strategic HR transformation.