If you’re wondering about the compensation practices of organizations during this difficult economy, a new WorldatWork survey report provides some answers. For example, nine of out 10 respondents said that their organization has a compensation policy, with 61% having a written policy and 29% having an unwritten policy, according to the report.
The report, released in September 2010, was based on a survey conducted between mid-June to early July. Most of the 1,381 respondents were from large U.S. corporations, according to the report, and 44% were from companies with 5,000 or more employees.
Salary Increases, Adjustments
The types of salary increases and adjustments implemented by employers in 2010 were:
- Promotional increases (result of higher/greater level of responsibility)—94% (of respondents)
- Merit increases—92%
- Market adjustments—76%
- Internal equity adjustments—64%
- Pay differentials (usually related to atypical schedules, hazardous or unsecure work environment, special skill set or responsibilities, etc.)—42%
- Temporary special assignment pay—36%
- General across-the-board increases not considered cost-of-living adjustments (COLA) or market adjustments—12%
According to the survey report, “Cost of living [adjustments] still dominate many workers’ perception of their raises.” Many workers believe “that these are given to cover a cost of living increase, rather than to reward them for job performance.”
“From a rewards perspective, it doesn’t make sense to base pay raises solely on the Consumer Price Index,” said Kerry Chou, CCP, compensation practice leader at WorldatWork. “Pay raises are a tool to motivate and retain employees. How motivating can it be for a top performer to receive the same base pay increase as a low or average performer?”
The survey found that 25% of respondents noted that they award their top performers twice the average increase; 40% awarding top performers with an increase of approximately 1.5 times the average increase; and 24% awarding 1.25 times the average.
Base salary increases are determined by rating employees’ individual performance against job standards and/or Management by Objectives (MBO) by 89% of the respondents, according to the report.
Market Pay Rate Positions
Looking at the market positions of the respondents’ organizations within their industries, 9% of the organizations set their base pay practice between the 40th and 60th percentiles of the market, according to the report. The report also states that “[m]ore than one-fourth (27%) pays exactly at the 50th percentile and only 10% pay at the 60th percentile or above.” In addition, “including total cash—base and variable pay, 68% pay between the 40th and 60th percentile, with 23% paying exactly at the 50th percentile.”
Also, 58% of the organizations adjust their salary structures annually, with 30% doing so on an “as needed” basis and 9% every 2 years.
The complete report, “Compensation Programs and Practices,” can be accessed online.