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What’s at the Heart of this Compensation Conundrum?

New report finds employers are concerned about losing talent but are hesitant to increase base pay.
By: | February 12, 2019 • 2 min read
compensation

If employers are so concerned about seeing their best workers walk out the door in search of a bigger paycheck, then why won’t they just pay them more so they won’t leave in the first place?

That’s the big question raised by a new report that reveals a business world in which employers are more concerned than ever about retaining their people, but HR managers and senior leaders are reluctant to raise base pay in a significant way when faced with an uncertain economy.

PayScale Inc. just released the 2019 Compensation Best Practices Report: Will They Stay or Will They Go?, which reflects trends and attitudes about compensation, retention and employee engagement from more than 7,000 employers.

“Our research shows the most successful companies understand the importance of building a positive pay brand at their organization by addressing pay equity, fostering more transparent pay practices and ensuring managers are empowered to have meaningful conversations about compensation,” said PayScale Senior Vice President Tim Low.

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“We talk to our customers about the value of a positive pay brand because we’ve seen it drive better business outcomes,” said Low. “In order to entice employees to stay, however, companies should make sure they’re getting base compensation right first, so their employees feel good about their deal. Only then should employers turn their attention to bolstering the perks associated with the position.”

The key findings from the 2019 Compensation Best Practices Report include:

  • Increased concerns about keeping employees. More organizations (66 percent) in 2019 cited employee retention as a major concern compared to responses from the previous year (59 percent).

 

  • Employers will keep the purse strings tight when it comes to compensation. Despite robust corporate profits and lower taxes for businesses, few companies report planning a significant pay raise for most of their workforce; nearly 70 percent of respondents project base pay increases of 3 percent or less.

 

  • Not all raises are created equal. More than 40 percent of employers gave base-pay increases of 10 percent or more for some jobs at their organization. These substantial raises were typically for highly competitive jobs, such as IT positions, where it is more difficult to attract employees with the right skill set.

 

  • Companies will offer more benefits and perks in lieu of raises than in years’ past:
    • Fifty-nine percent of employers will invest more in training and development programs.
    • Forty-four percent plan to allow remote work (up from 39 percent last year) and 37 percent will offer flex time.
    • About one-third of companies will offer paid family leave in 2019, an increase when compared to the previous year.
    • Prevalence of unlimited PTO has nearly doubled in recent years (9 percent of employers offered it in 2018 compared to just 5 percent in 2016).
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  • Bonuses on the rise – for some employees – While increases in base pay are tepid, many organizations (66 percent) are planning to use bonuses in 2019 in an attempt to retain their top performers in competitive jobs. These bonuses are typically directly aligned with performance and broader company objectives.

Considering that the U.S. economy posted the most open jobs in December (7.3 million) in the nearly two decades that records have been kept, employers should already be feeling a strong incentive to make sure the talent they bring in now will stick around. Indeed, Tuesday’s JOLTS data also showed 3.5 million Americans quit their jobs in December.

“Workers can hope to get the best bump in wages when they switch jobs,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics, told Reuters.

Web Editor Michael J. O’Brien has been with HRE for more than a decade and holds a degree in economics from Boston College. He can be reached at [email protected]

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