When I compare the economic climate during the 2008 financial crisis to now, I consider how each period of time had an impact on employee retention and pay. Eight years ago, U.S. unemployment rose significantly, and talent retention wasn’t an issue. Cost cutting became a core business strategy, and minimal increases in base pay were the norm.
Today, as the economy rebounds and job growth is on the upswing, companies are once again focusing on employee retention to stay competitive, according to data from our 2015 General Industry Salary Budget Survey Report – U.S. Employers recognize the negative impact to operations — and the high costs — associated with replacing talent, and they’re mending pay gaps to keep their most valuable employees.
Holistic salary budget planning
They’re also paying close attention to their attraction efforts and taking a more holistic approach to salary budget planning that includes:
Varying pay by performance
Salary budgets are still limited, and in response, many companies have taken salary differentiation to heart by granting higher pay increases to star employees. Last year, above average performers received an average increase of 4.6%, while average performers received an average increase of 3%, and below-average performers received an average increase of less than 1%.
Offering more annual short-term incentives
Many companies have found that, because employee performance can fluctuate year to year, linking performance to fixed increases in base salary doesn’t make sense. Instead, they focus on short-term incentives and annual bonus programs. Notably, more than eight in 10 exempt employees (85%) received a bonus in 2015, up from 81% in 2014, and 87% of exempt employees were eligible to receive an annual or short-term bonus in 2015, up slightly from 86% in 2014.
Moving beyond pay
Companies are realizing that it’s often the value of the total package —compensation, benefits and non-monetary rewards — that helps them keep key talent. And they’re implementing what their employees say they need and value most — from flex work schedules to learning and development opportunities, employee recognition plans, discounted memberships to gyms, and more — and creating or updating nonmonetary rewards programs that reflect this feedback.
Changes in the economy will always have an impact on employee pay. If the economy continues to gain momentum, companies will need to explore more ways to balance their salary budgets with talent needs and business objectives. Pay differentiation, greater use of incentives and a total package approach that includes nonmonetary rewards are just a few of the trends that are likely to continue through 2016 and beyond. We’ll continue to monitor changes, so you can develop competitive pay programs. To ensure you’re staying on top of the latest trends, participate in our current salary budget survey.
Going to the WorldatWork 2016 Total Rewards Conference in San Diego from June 6 – 8? Stop by booth #507, where we’ll be on hand to answer your compensation questions, discuss our survey offerings and give you a close-up look at our rich survey database.