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Greater emphasis is being placed on pay for performance
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U.S. compensation and benefits programs are returning to pre-recession levels, or at least to streamlined versions of what organizations traditionally have provided to employees, according to Buck Consultants’ Reviving and Inspiring the Workforce: 2011 Compensation Trends Survey.
Based on data supplied in February 2011 by U.S. organizations representing a range of industries and sizes, there has been a stark decrease in the special actions that organizations took to control or reduce their labor costs during the depths of the 2008-09 recession, the survey found. Only 9 percent of employers still had pay freezes, down from 48 percent in mid-2010 and 64 percent at the start of 2010. Moreover, 75 percent of respondents reported taking no special actions such as hiring freezes, temporary layoffs or furloughs, pay cuts and suspension of company matches to defined contribution plans in the previous 18 months. Instead, dollars were being invested in programs to attract and retain key talent.
However, what could be considered as a “normal” pay increase budget gradually has shifted lower, from a long-standing 4 percent level to a 3 percent level, according to the survey. This is still considerably higher than the median pay increase of 2.2 percent at the beginning of 2010 and 2.7 percent in mid-2010.
With pay increase budgets settling back into place, an even greater emphasis is being placed on pay-for-performance programs. Organizations are finding that they must get performance criteria and measurement right because merit increase dollars are scarcer than before.
For those employees participating in a bonus program, eight out of 10 can expect to receive a payout in 2011, the survey found.
Most organizations (44 percent) expect to pay 2011 bonuses that are at least 5 percent larger than in 2010, while nearly one-third (31 percent) expect bonus payments to be within 5 percent of 2010 amounts, and one-quarter (25 percent) expect bonus payments to trail 2010 amounts by 5 percent or more.
In 2011, 63 percent of organizations reported using hiring bonuses, and 41 percent used or were planning to use retention bonuses.
In addition, 66 percent of respondents reported having an employee referral bonus program (up from 59 percent in mid-2010). An employee referral bonus can have a multiplier effect of attracting strong performers and helping retain top performers.
“During the economic downturn, many employers reduced staff and asked remaining employees to do more with less. As the job market improves, these organizations are using tactics such as employee referral bonus programs to not only attract proven performers but also help retain the employees who make referrals,” said Kathi Myers, director at Buck Consultants. “Involvement in the hiring process engages employees and strengthens their ties to the organization.”
Among other compensation tactics organizations are using to retain top performers:
2011 Planned Pay Increases by Industry(as of February 2011)
Consulting and professional services
Energy and utilities
Health care providers and services
Manufacturing and materials/mining
Transportation and warehousing
Source: Buck Consultants, a Xerox company.
Stephen Miller, CEBS,is an online editor/manager for SHRM.
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