Every year about this time, the EA conducts the annual pay range and adjustment survey. Many employers use the survey results for planning compensation budgets for the upcoming year. While the EA has been conducting this survey for many years, there are national adjustment surveys conducted as well. For example, WorldatWork, the world's leading not-for-profit professional association dedicated to knowledge leadership in compensation, benefits, and total rewards, recently released its Salary Budget Survey results for 2004, and they report the news is good.
According to their survey, organizations are indicating 87 percent of employees will receive an increase in base pay this year, up from 83 percent in the 2003 WorldatWork Salary Budget Survey. This news bodes well for rank-and-file employees given that 2004 salary budgets were generally static. Another finding of the survey is an increasing number of employers are linking pay to performance. Anne Ruddy, executive director of WorldatWork, said, "We're encouraged to see employers link pay to performance, which will be instrumental in retaining key employees as the economy improves and employees start looking around."
In today's competitive business environment, many companies are changing their way of thinking when it comes to compensating employees. They're finding carefully designed and thoroughly communicated compensation programs are the key ingredients for motivating employees and increasing profitability. Because of this, many are abandoning an antiquated mentality of keeping employees in the dark and telling them nothing constructive about their compensation programs. Being up front with employees on your compensation practices is the first step in creating an employer-of-choice culture.
Money is a motivator when it comes to recruitment and retention of a talented workforce. If you're unfamiliar with compensation processes-or have just avoided the issue because it seems too complicated-here's a simplified version:
Define your compensation philosophy. This should explain who you see as labor competitors, how the organization prefers to set pay levels for various job titles compared to the market, the balance between internal and external equity, and what roles incentives play in the organization.
Identify the base pay of employers. Every organization must decide how much to pay each of it employees.
Identify incentive pay plans. This component of compensation represents the best, most consistent method to pay for performance, enabling an organization to deliver targeted results while rewarding those employees responsible.
Manage the process. Creating a compensation plan and not communicating it to employees, or, worse yet, not keeping it up do date, can have the opposite effect on what you set out to accomplish in the first place: improved productivity leading to greater profitability.
Now is the time to look at your people practices, which include compensation. Don't wait until the war for talent has taken its toll on your workforce. IBI