As the job market opens up, a new report shows that now is the time for organizations to invest in their employees.

By Tim Low

Most companies are very concerned about attracting and retaining top performing employees finds the 2015 Compensation Best Practices Report (CBPR) from cloud compensation software provider Payscale. This creates serious questions about their ability to effectively compete in a rebounding economy. According to the report, the majority of companies (55 percent) added staff and realized greater profits in 2014, and most companies plan to grow in 2015 as well. However, these businesses will face more pressure than ever to attract and retain the right people.

In the five years following the great recession of 2008, doing more with less became a mantra for most American businesses, and news headlines such as’s Making Money, Not Hires were common. It’s hardly a secret the recession caused many employees to stay put in unsatisfying jobs rather than venture into a tough market. However, PayScale’s research shows that tide is turning.

“During the worst recession most employers have ever experienced, too many firms gave little thought to retention, compensation, and talent development. Managers felt that anyone who had a job would be content with that alone,” says Brian Sommer, founder of technology research firm Vital Analysis. “Unfortunately, that uninformed or nonchalant attitude is very out of sync with the current economic situation. Today, employees have options and they intend to exercise them. Business leaders must adopt new processes and technologies if they wish to remain competitive.”

When it comes to compensation, too many companies lack a structured approach. But there’s good news. A recent article in Forbes declared that HR departments are finally “getting serious about analytics.” According to the article’s author, Josh Bersin, founder of Bersin by Deloitte, they “understand the potential, they understand the problem, and they have the skills to get work done. And they are not just analyzing HR issues, they are analyzing the business.”

Analytics can play a major role in developing a compensation structure by leveraging a regular analysis of wage data reflecting real-time market trends. An organization’s ability to get compensation right – based on benchmarking competitors -is a prerequisite for achieving its growth projections. Yet, the CBPR found that nearly one third of companies don’t regularly perform market and compensation analysis to understand the changing dynamics of their respective talent markets. Many respondents are dissatisfied with their data, and most don’t train their managers to have tough conversations with employees about compensation.

“In our age of data overload, many businesses still take a ‘play it by ear’ approach when it comes to talent management,” says Michael Moon, human capital management research director at Aberdeen Group. “However, these results show that companies need to get very serious, very quickly about retention and compensation by adopting modern technologies and approaches if they want their businesses to not only survive, but thrive in the new economy.”


Top Concern: Retention

According to the CPBR, employees are most likely to leave their organizations in 2014 for personal reasons, more pay, and greater advancement opportunities.
In smaller and medium-sized companies, money was the primary cause of employers handing in their resignation letters.

This is driving organizations to remain concerned about retention. To date, however, most employers have been reluctant to address retention issues with financial incentives. According to PayScale’s U.S. Trends in Compensation Index, real wages are down 7.5 percent since 2006.

When these data are viewed in light of employer retention concerns and the reasons people are leaving jobs, now may be the time for employers to “open their wallets.” The CBPR finds that 60 percent of organizations intend to focus on learning and development opportunities as the means to retain the best and brightest and 89 percent have plans for raises.


Top Concern: Talent Scarcity

Half of all CBPR respondents agree with the statement: “there is a lack of qualified applications for our open job positions.” In 2014, IT, management, and engineering positions were the hardest to fill. In addition, companies report “attracting new talent” as a top objective for 2014, and medium and large companies report a willingness to pay more to attract it.

Top Concern: Employee Engagement

Employee engagement remains a hot topic, but many employers are still having a hard time wrapping their heads around the concept, let alone developing strategies for creating a more energized and emotionally connected workforce.

In fact, a February 2015 estimate of employee engagement by the Gallup group revealed that only 32.9 percent of U.S. employees are engaged. While this number is the highest monthly average Gallup has recorded in three years, it’s obvious employer efforts to engage employees have largely been unsuccessful. According to the CBPR, 32 percent of employers never conduct employment engagement surveys, and 24 percent conduct them “as needed.” While it’s true that employee surveys don’t create engagement, it’s equally true that you can’t improve what you don’t measure.

Moving Forward

Findings from the CPBR make it clear some employers are finally feeling confident enough in the market to invest a larger portion of profits in staff additions (55 percent) and increased compensation (89 percent). While companies are investing in ways to secure talent, most lack sufficient insight about the compensation needed to meet their goals: Only 41 percent of employers have a formal compensation strategy.

For those companies that haven’t yet made the decision to increase wages -that is, beyond the 3 percent that’s become the norm in the past few years -they will pay the price in higher turnover of their best employees and lowered engagement among those who remain.



Key Findings

PayScale’s 2015 Compensation Best Practices Report reflects current attitudes about compensation, business growth, hiring, and retention, based on data from more than 5,000 survey respondents. Stand-out findings from this year’s report include:

• About three-quarters of companies expect their financial situation to improve in 2015.

• In2014,85 percent of companies gave pay raises, and 89 percent say raises are in the plans for 2015.

• Three-quarters of respondents gave bonuses in 2014, more than in previous years.

• The primary reason people leave medium and large organizations is “seeking higher pay.”

• Retention woes remain at an all-time high with nearly 60 percent of respondents citing it as a top concern.

• The professional, scientific, and technology services industry is most concerned with employee retention.

• IT, management, and engineering positions were the hardest to fill in 2014.


Tim Low (@tlow) is vice president of marketing at PayScale. The full 2015 PayScale Compensation Best Practices Report is available for download at practices-report.html.

Tags: april-2015

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