2013 Status of Employee Compensation: For Better or For Worst

Friday, May 31, 2013

 

Nearly a year ago, WorldatWork, an international nonprofit human resources association for professionals and organizations, released the “WorldatWork 2012-2013 SalaryBudget Survey”, on July 10, 2012.  The Top Level Results projected that US organizations would have, on average, a 3% salary budget.  This compared to a 2.8 to 3% actual salary budget for 2012.  While the 2013 salary is only marginally changed from 2012 and 2011, it is an improvement over the results for 2010 which were in the range of 2.4 to 2.7%.  While an organization’s salary budget is a planning tool, it does not necessarily translate directly into wage and earning increases for employees.  Significant changes in the economy, business operations, governmental regulations, acquisitions & mergers, natural & man-made disasters, and even management changes can impact and organization’s deployment of its salary budget.

 

Since a “salary budget”, like any budget, is only a tool; it is only as good as its design and deployment.  Organizations should have in place a rationale as to how changes in pay are to be administered.  Large employers, who often delegate to line managers discretion in pay matters may be at risk of either over or under spending their salary dollars.  While employees who are underperforming are often, and should be excluded from any increase; overly conservative managers may even under reward their best performers.  By some misguided effort to “save” their employer money, such managers withhold or reduce rewards.  Others, out of a self-serving effort will under reward thinking that getting “more with less” will gain them favor in the eyes of their own managers.

 

A balance must be struck between rewarding performers and maintaining the welfare of the organization and its share holders.  Holding each manager accountable for their individual departmental salary budget is one way.  This places the locus of control with that individual who has the most direct knowledge of the individual’s performance and who is ultimately responsible for production of products and services.  However, managers must be provided with training associated with the organization’s performance evaluation system and its compensation philosophy, if both are to be effective at motivating and retaining top performers.  For non-performers, either they are managed to improve or released from the organization.

 

Even for those employees who are performing at an “acceptable” level, increasingly there is a focus on the very top performers (A & B list).  While this may seem severe, organizations are finding that to complete in an ever expanding global marketplace they must source, recruit, and retain employees who are their key performers.  The consequence to organizations is that they may see increased turnover in the tier of employees just below the top performers (C List).  Thus, an employer must be prepared to deal with additional costs to source, recruit, and retain A & B employees.  However, over time, the organization’s overall performance is expected to rise.  But, isn’t that what we want?