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New Survey Shows Organizations Have Compensation Philosophies but Employees Rarely Understand Them

Aug. 23, 2016 — WASHINGTON, D.C. — More than 9 in 10 companies have a written or an unwritten compensation policy, but fewer than half of surveyed companies believe their employees understand it, according to new research released today from WorldatWork and underwritten by Aon Hewitt. The new study, Survey on Compensation Programs and Practices, also closely examines salary administration and compensation trends.

Percentage of Companies Using Bonus Programs

"With pay transparency in the news, it is surprising to see the large percentage of companies whose employees are either not familiar with their organization’s compensation policy or have minimal understanding of it," commented Kerry Chou, CCP, senior practice leader. "This new survey also looks at the amount of communication coming from organizations to employees and found it to be decreasing. This might be in response to the mistaken belief that with little change in salary increase budgets, additional communication is unnecessary."

The survey also reported a decreasing number of organizations using a formalized merit matrix or employee ranking to determine base salary increases. 13% of organizations reported that no guidance is provided other than the overall budget figure — a sharp increase from 1% in 2014. Additionally, 44% of respondents said their organization publishes a merit matrix that managers can use as a guide, but individual managers also have the choice to deviate from the matrix.

From 2010 to 2016, the number of organizations using bonuses increased from 59% to 81%, reflecting a shift in variable pay programs. Meanwhile, the number of employers using individual incentives (other than sales) dropped during the same time period, from 67% in 2010 to 39% in 2016.

"The number of incentive plans with a portion based on individual objectives is going down; one reason may be that those kinds of programs are labor intensive between tracking goals and their results. Add potential individual-manager biases into the mix, and the effort may not be worth the resources it takes to execute," Chou added.

Additional Findings Include:

  • The number of organizations providing minimal pay-related information continues to increase; 39% in 2014 to 46% in 2016.
  • 91% of organizations use market pricing to determine the value of jobs, slightly higher than 2012 and 2014, the prior years this survey was completed. 53% assess market value on an annual basis.
  • Management primarily uses employee turnover and retention data (61%) and employee satisfaction survey metrics (47%) to determine the effectiveness of salary programs.
  • More than 80% of organizations have a formal employee performance management program with a rating that is shared with the employee. However, 67% of companies do not rank employees based on performance.
  • For organizations with multinational operations, 82% have a compensation philosophy that is the same across the company. 53% have variable pay programs with flexibility for local countries to make limited adaptations or implement unique programs of nominal cost.

About the Survey:
In May 2016 WorldatWork invited a sample of its members to participate in the "Survey on Compensation Programs and Practices." The survey invitations were sent electronically to 5,404 U.S. and international WorldatWork members. The survey closed on June 3, 2016, with 660 responses, a 12% response rate. The dataset was cleaned and analyzed using statistical software. WorldatWork conducted similar compensation practices surveys in 2014, 2012, 2010, and 2003.



About WorldatWork®

The Total Rewards Association


WorldatWork ( www.worldatwork.org) is a nonprofit human resources association for professionals and organizations focused on compensation, benefits, work-life effectiveness and total rewards — strategies to attract, motivate and retain an engaged and productive workforce. WorldatWork and its affiliates provide comprehensive education, certification, research, advocacy and community, enhancing careers of professionals and, ultimately, achieving better results for the organizations they serve. WorldatWork has more than 70,000 members and subscribers worldwide; 80 percent of Fortune 500 companies employ a WorldatWork member. Founded in 1955, WorldatWork is affiliated with more than 70 local human resources associations and has offices in Scottsdale, Ariz., and Washington, D.C.

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