Engaged WorkforcePerformance Management & Rewards

Four Compensation Trends During Lean Economic Times

Study finds the majority of companies are using compensation reduction tactics.
by The HR Specialist
The global financial crisis has thrown a wrench into those rosy salary predictions from last summer. The trend in pay raises is down—but not out. About 75 percent of U.S. workers will see raises this year, but those increases will be the smallest in three decades, according to a new World-atWork survey. The study predicts average increases of 3.1 percent, down from last year’s average of 3.8 percent.

But many employees will see far less. Nearly half of 1,169 organizations surveyed forecast raises will average just 2.3 percent. Surveys from Hewitt Associates and Mercer show similar numbers. The Mercer survey revealed that one in four midsize to large employers had instituted salary freezes as of January, and another 20 percent were considering it. Still, noted Jason Kovac, compensation practice leader for WorldatWork, the numbers show that “there are still increases for a large portion of the employee population. A number like 2.3 percent isn’t much, but it’s better than a pay freeze or a layoff.” Some emerging strategies include:


  • Pay for performance gains traction. Fewer organizations are granting automatic raises to all employees. Instead of giving average raises to everyone, more are rewarding their superstars with above-average bumps, which leaves less-valuable workers with small raises—or none at all.
  • Variable pay remains popular, even as levels fall for the first time since 2003. Organizations that are shying away from raising base salaries are using one-time bonuses to reward employees.
  • Executive pay dips drastically. More than 77 percent of organizations in the Hewitt survey said they will cut their executive salary budgets this year. In fact, the Mercer study noted, executives are less likely than rank-and-file workers to get a raise in 2009.
  • Flexibility is the consolation prize. While most employees say they prefer a pay raise, some organizations are offering them opportunities to work compressed weeks, telecommute, or otherwise flex their schedules in lieu of more money.

Percentage of organizations using compensation reduction tactics

Rewards for Each Generation
Most organizations choose employee rewards based on budgets, tradition, and management choices. But nearly one-third  of HR professionals plan to alter their total rewards programs with generational preferences in mind, according to the new Top Five Total Rewards Priorities survey by Deloitte LLP and the International Society of Certified Employee Benefit Specialists. That percentage is likely to increase significantly in the future because the workforce is becoming more multigenerational.

Here are the different rewards that consultants say best motivate the four generations:

  • Millennials, born between 1981 and 1999, value extra break time, recognition from clients, and transportation reimbursement.
  • Gen Xers, born 1965 and 1980, want flex-time, working from home, performance bonuses, tuition reimbursement, and annual salary increases.
  • Baby Boomers, born between 1946 and 1964, value recognition, cash rewards, bonuses, free daycare, and training seminars.
  • Matures, born before 1946, want salary increases, 401(k) matches, bonuses, profit sharing, and cash rewards.

For example, Prudential benefits support adult caregivers. After 38 percent of Prudential Financial’s employees identified themselves as adult caregivers in a 2004 company survey, the firm ramped up its elder care benefits. The company subsidizes access to a geriatric care specialist,

financial advisors, and elder-law specialists who help workers deal with aging parents’ issues.

Eli Lilly pays childcare costs for business travelers. Or the child can go on the trip on the company’s dime. The same goes if an employee has to work unscheduled hours. The 10-year-old benefit puts parents and nonparents “on equal footing in terms of opportunities” for jobs that require travel, says Carlos Campoy, director of global workforce diversity.

The HR Specialist appears in
HRO Today
with permission from Business Management Daily.

Tags: Engaged Workforce, Performance Management & Rewards

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