WorldatWork Survey Shows Changes in Organizations’ Compensation Structures Due to Changing Market Conditions.
June 6, 2023 — Scottsdale, Arizona — WorldatWork’s 2023 “Compensation Structure Policies & Practices” study, produced with support from Deloitte Consulting LLP, delves into the evolving landscape of salary structures in organizations and their response to changing market conditions. The survey findings are organized into twelve topics, including: the types and characteristics of salary structures used, competitive positioning, frequency in adjustment of salary structures, strategy and design of salary structures, workplace changes, and more.
Noteworthy Shifts in Compensation Structures
According to the survey, there has been a significant decline in the number of organizations operating without compensation structures, decreasing from 17% in 2019 to a mere 9% this year. In contrast, the utilization of a single salary structure has witnessed a substantial increase, rising by 13% since 2019, becoming the most prevalent choice. While 54% of organizations reported having multiple compensation structures, this represents a slight decrease from the previous survey’s 59%.
Global Perspective on Compensation Structures
When examining organizations with employees in multiple countries, the survey reveals that 65% of respondents employ several global structures. The primary differentiating factors among global structures continue to be major geographic regions (68%) and job level (39%). Employing salary grades remains the most widespread method for developing global compensation structures (59%), although there has been a notable +13% increase in the use of bands and grades since 2019, to 32% this year.
Adapting to Changing Market Rates
After grappling with talent retention challenges resulting from the COVID-19 pandemic, organizations are gaining a better understanding of how to respond to the diverse pressures brought about by new employee expectations and evolving work practices. Despite this, companies continue to react and adapt. More than a third (36%) of survey respondents reported that they had modified their compensation structures due to significant changes in market rates. Among those that did make changes, methods varied. The largest segment of those who made changes (80%) shifted to a different compensation structure than previously used due to market rate increases. Whether motivated by external forces or pre-planned, more companies are embracing and implementing formal compensation structures. Organizations are also consolidating their structure numbers while incorporating administrative flexibility to address crucial workforce segments and competitive job functions. Keeping pace with market changes remains crucial as organizations widely rely on market data to tackle challenges and maintain internal and external competitiveness.
- The most predominant type of compensation structure continues to be Market Based, accounting for 65% of respondents, up from 55% in 2019. Fifty-four percent of respondents have more than one compensation structure in their organization, with 32% of participants citing the use of two to four structures.
- The top 5 reasons for compensation structure changes: 82% – rapid and/or significant increases in competitive market rates for jobs, 76% – tight labor market, 54% – inflation changes, 40% – remote work arrangements, and 27% – hybrid work arrangements
- Compensation structures continue to be tied to base pay, as indicated by 80% of respondents, a slight decrease from the previous survey as companies explore alternative approaches.
“Understanding the ever-evolving landscape of salary structures is crucial for organizations in today’s dynamic market conditions,” said Liz Supinski, Director of Research, and Insights at WorldatWork. “As employee expectations and work practices continue to evolve, this survey equips organizations with valuable insights to adapt and create effective compensation strategies. At WorldatWork, we are committed to providing actionable data and industry insights, and this survey serves as a vital tool for organizations navigating the complex world of compensation structures.”
“As organizations grapple with the challenges posed by changing market conditions, Deloitte Consulting is proud to support the 2023 Compensation Structure Policies & Practices survey” said Greg Stoskopf, Managing Director and leader of Deloitte’s US Broad-based Compensation Consulting Practice. “By understanding the types of structures in use and the factors driving change, organizations can make informed decisions on changes to make to better attract, retain, and motivate their talent. As a trusted advisor to organizations worldwide, we recognize the importance of staying ahead of market dynamics, and this survey empowers organizations to navigate the complexities of compensation in a rapidly evolving business environment.”