Dive Brief:
- While employees identify pay as the No. 1 reason they join and remain with a company, only roughly half of employers surveyed said they were effectively delivering on their pay programs, according to a report released Oct. 23 by financial services firm WTW.
- WTW said the disconnect is likely the result of the talent shortages, generational shifts, new work models, the global pandemic and high inflation that have affected the workplace the past few years. Part of the problem, too, could be ineffective communication, the report found. Fewer than 1 in 4 of the nearly 1,900 companies surveyed said they do well at explaining how worker pay is determined.
- “Organizations likely haven’t been able to focus on the factors that drive pay program effectiveness for the past few years given the recent dynamics of the labor market,” Lori Wisper, managing director and work and rewards global solutions leader at WTW, said in a statement.
Dive Insight:
The WTW report identified six core objectives related to pay program effectiveness: driving employee attraction, upping employee retention, promoting fair compensation internally, providing competitive compensation, aligning with business strategy and rewarding employees for performance.
As economic conditions have improved and labor market pressures have lessened, companies should make changes to address the factors that play into pay program effectiveness, Wisper said.
One such problem the report identified was salary compression, which more than half of employers said is an issue and about the same share of employers said will be a problem over the next few years.
“Companies should start with updating their compensation philosophy, because it is critical for pay program effectiveness and can contribute to improved retention of key talent, employee productivity, and financial performance,” Wisper said.
Companies that have updated their compensation philosophy in the past five years did so to attract and retain workers, improve the employee experience and make gains on pay transparency, among other reasons, per the report.