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Organizations that pay in minimum-wage range were affected by statutory changes at the local, state or federal level in 2021.
This is according to WorldatWork’s 2021 “Compensation Programs & Practices Survey,” which found that 41% of the 920 organizations surveyed have jobs in the minimum-wage range, with 56% of those organizations reporting they’ve been affected by changes in minimum-wage laws.
The survey also revealed that rewarding group performance, instead of individual incentives, saw a dramatic increase during the past two years. Roughly 60% of respondents said they use performance sharing in the variable pay plans, up 19 percentage points from the previous survey two years ago. Meanwhile, the use of individual incentives dropped dramatically from 68% to 45%.
Those changes could well be pandemic-related as many organizations realized they may have a hard time identifying individual performers while also recognizing that surviving the pandemic-stricken economy took a team effort, pointed out Sue Holloway, CCP, CECP, WorldatWork’s director of executive compensation strategy content management.
The 168-page biannual “Compensation Programs & Plans Survey” provides a decade of background of data that can help compensation and benefits professionals determine whether a number is an anomaly or part of a trend, Holloway said.
“This survey is very comprehensive with a lot of data. When organizations are looking to change plans, there is data that can help support it,” she said.
Additional key findings:
- 77% of organizations vary base pay increases between top and bottom performers with bonuses (85%) being the most popular form of variable pay. Moderate variation (1.5 times average base pay increases for top performers) has dominated over the past several years and continues to be the most prevalent degree of variation in 2021 (39%), though it is losing ground to the rise in base pay increases that aren’t based on performance. This year, 12% of organizations are determining base pay increases on something other than individual performance, a 10-percentage point spike from 2018.
- 16% of respondents say their organization used a ratingless performance review system in 2021, double the percentage in 2016. That’s instead of a more traditional system, most of which rate employee performance on a numerical scale such as 1 through 5.
- 88% reported having a formal compensation philosophy — 62% written and 28% unwritten. That’s one of the most consistent trends through the decade of survey data gathering. Yet, 41% said most of their employees do not understand their organization’s compensation philosophy, another fairly consistent number. However, the survey did not ask employees about their level of compensation plan understanding. When information about the pay program is communicated, it is most often through individual discussions with supervisors. That dropped this year, possibly because of pandemic-driven remote work with more communication via such tools as email and the company website.
One of the survey’s main strengths is that it breaks down many categories of the data by organization size and industry, Holloway added.
“That can help the data be more relevant to the user,” Holloway said. “This is a survey rich in trend data. It is very comprehensive. When organizations are looking to change compensation plans, the data can help support it.”
About the Author
Jim Fickess is editor of The Journal of Total Rewards.