Ten months since our previous article on the topic, compensation is still a big piece in the puzzle of employee retention.
With 48% of employees citing financial stress as the top factor impacting their mental health, surpassing COVID-19 and the nationwide employee turnover rate being 18%, compensation remains an important subject for employers to address.
In January of this year, we published an article detailing three compensation trends slated for 2023. We took a look at trends concerning pay raises, total compensation and rewards, and pay transparency. In April we hosted an in-person event to hear directly from Senior HR leaders and today we continue to assist companies as they navigate through challenges related to compensation.
Since the topic seemingly remains unresolved, we’re revisiting the article to answer the question; did the experts hit the mark?
1. Pay Raises
At the beginning of this year, most research concluded that median pay raises would increase to somewhere between 4% and 5% in the wake of high inflation, with higher increases being suggested to meet the new standard.
A survey by Payscale reveals that most employers hit the lower part of that spectrum at 4% with 3.8% being projected for 2024. With inflation coming down considerably since 2022 to 3.2% as of this July, these lower-than-forecasted pay raises look appropriate. The predictions made earlier this year were ultimately off in terms of what has happened since then.
However, what the experts got right is that employers are certainly not in the clear when it comes to their employees’ satisfaction with their pay. In Payscale’s Retention Report, 76% of surveyed employees say that they strongly disagree with the statement; “I feel that I am paid fairly” and Mercer research found that 61% of companies anticipate increased salary demands from their talent.
While the standards set by inflation are lower than projected, employers should still consider implementing higher pay raises to ensure employee satisfaction and retention.
2. Total Compensation and Rewards
Beyond pay raises, benefits, and rewards are a close second as most employees’ number one priority. While 35% of people say salary is the most important factor in staying at their company, PTO/vacation days follow closely behind with insurance coverage also making up a considerable 56%.
Companies are attuned to this as represented by Mercer’s Global Talent Trends Study which revealed that 77% of companies are adjusting their rewards approach in lieu of inflation, 29% of which implement a bonus/pay adjustment across the entire workforce.
HR leaders are also seriously weighing flexibility and hybrid work against traditional benefits as a means of ensuring employee retention with two-thirds of finance workers saying they would quit if flexible working arrangements were taken away.
Since January, the trajectories of trends pertaining to total compensation have remained the same across the board.
3. Pay Transparency
The wave of development concerning pay transparency shows no signs of stopping. We are witnessing huge changes in how businesses are approaching pay transparency in the wake of new legislation and employee demands.
As for legislation, California has passed a law that requires companies with over 15 employees to put pay ranges in their job ads, and Nevada requires that job applicants be told the pay range of the position at the end of the interview process. This just scratches the surface of states that are passing new laws pertaining to pay transparency.
Since January, the majority of organizations that are accepting of the legislation largely outnumber the minority that rejects it. With 67% of organizations already having adapted or rushing to adapt their pay equity, data, and structures to new legislation and 11% resisting it, having robust pay transparency is the new norm.
Embracing pay transparency still has a multitude of benefits, including the ability to attract the next generation of workers, foster company culture and trust, and leverage it as a means of recruiting and retaining valuable talent.
In 2023 and beyond, pay transparency is here to stay and it is a net positive for employees as much as it is for employers.
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