More organizations are adopting a formal base pay structure amid a tight labor market and increasing focus on pay transparency and equity.
This was a main finding from WorldatWork’s 2022 “Compensation Programs & Practices Survey,” which found nearly 90% of the 1,064 organizations surveyed use a formal base pay structure and almost half of those without a structure are considering putting one in place. Additionally, 16% of organizations report increasing the frequency of adjusting pay structures in the past 12 months and 67% of organizations reported they are adjusting base pay structures once per year, which is a five-percentage point increase from 2021.
“The world is changing because of significant factors like a competitive labor market, inflation, pay transparency and fairness,” said Sue Holloway, CCP, CECP, director of compensation content at WorldatWork. “Organizations are responding by putting more structure and rigor into their pay programs.”
The WorldatWork survey, which was first conducted in 2010, gathers information about trends in compensation programs and practices, focusing on the prevalence of base and variable pay programs, as well as common practices used to administer and communicate these programs in today’s workplace.
The survey revealed an uptick in market pricing, as 38% of organizations have increased the frequency of market pricing jobs in the past 12 months. It also revealed an increase in base pay variation, as 20% of organizations cite an increase in the variation in pay increases between top and bottom performers in the past 12 months.
Minimum wage has become a hot topic in compensation of late, as more large organizations have announced minimum wage increases in the ongoing battle for talent. In confirmation of this movement, the survey found that the number of organizations reporting they have jobs at or near statutory minimum wage rates declined significantly from 41% to 29%. Additionally, 66% of organizations said they have been impacted by statutory minimum wage increases within the past 12 months.
Additional key findings:
- Limited variability for multinationals. Only 25% of organizations vary their compensation philosophy application by country or region and just 21% do so for performance management application.
- More pay program evaluation. Only 8% of organizations say management does not evaluate pay program effectiveness, a 50% decrease in just one year.
- Minimum wage compression. 52% of organizations said they address pay compression as a result of implementing statutory minimum wage increases on an as needed basis, while 15% said they reduce compression over time by making incremental pay adjustments.