Survey

2020 Pay Practices & Compensation Strategy Survey

Current state of compensation management practices
salary.com
The Survey

The Survey questionnaire was crafted to capture the current state of compensation management practices so that practitioners can plan for programmatic improvements. The results are used by our clients to establish benchmarks to assess the execution of their internal HR strategies.

This report represents 21 industries and multiple ownership types including public, private, joint venture, non profit, and government. Organizations ranged in size from small US based businesses with fewer than 99 employees to global organizations with greater th an 100,000 employees. Responses were prepared by HR Managers and above (61%) and by HR Professionals.

Key Takeaways

Philosophy

Most participants (62%), stated they have a compensation philosophy and 52% of them directly communicate it to employees. The number of organizations stating they have a compensation philosophy has increased by 4% compared to last year. It’s important to keep in mind there are different levels of transparency and you need to decide what is best for your company, but more and more employees are expecting some level of transparency, especially in times of change, so they understand how their pay is determined. Still, while the majority of organizations communicate their pay philosophy, it is interesting to note that nearly 50% are not communicating about their compensation programs to employees. This is concerning as compensation programs are to the employee the much needed details around how they are paid. If employees feel they are not fairly paid , that is internally equitable and externally competitive, or if they do not understand their pay program, we believe this could have dramatically negative effect on their engagement

Pay for Performance

Eighty eight percent of participants said they provide merit pay increases to distribute funds set aside for pay even though only 63% of organizations stated that they have a pay for performance methodology as a part of their compensation philosophy. To us, these statistics mean there is a wide measure of discretion in how funds are distributed. That said, organizations are still finding the value in differentiating rewards based on employee performance, with almost 90% of participants at least somewhat differentiating between high and low performers. Merit pay continues to be the most used form of pay to reward top performers. The use of recognition and variable pay programs has increased slightly, with 76% of participants offering 1 to 4 forms of a variable pay.

Sources of Data

It is interesting that in this year’s survey results, less than half of HR professionals do not believe crowd sourced data is accurate and trustworthy. Moreover, only 32% said they would consider using employee reported data as a gut check in pricing one job if it were one of many sources. Compensation professionals continue to rely upon employer reported data because employers are motivated to provide accurate and honest data so they can pay employees competitively, while employees have various motives for the pay data they provide. So it is not surprising that, only 28% of employers indicated that they would use employee reported data as merely a data point in an overall market assessment. However, when it comes to total rewards analysis only 17% of respondents would use crowdsourced data tools. Most organizations (91%) continue to use employer reported salary surveys to conduct total rewards analysis. In any event, market compensation data is largely gathered and processed electronically.

About the Publisher

salary.com

Salary.com is the leading SaaS provider of compensation market data, software, and analytics, bringing more of the trusted data and intuitive software organizations need to get pay right. Founded in 1999, the company serves over 25,000 survey participant organizations, over 8,000 business to business software subscribers, and over 30 million employees globally. For more than 20 years, Salary.com has empowered confident decisions by aligning compensation practices with recruiting, performance, and development initiatives through easy to access data and meaningful insights.

Publish Date

November 2020