For 2016, Career Paths and Variable Pay Are Priorities

With pay budgets stalled at 3%, managers are pressed to do more with less

By Stephen Miller, CEBS Jan 6, 2016
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U.S. employers cite cost management and talent retention as their main compensation focuses in the new year, according to results from Buck Consultants’ Compensation Planning for 2016 survey.

Since 2013, the growth of compensation budgets for annual merit increases has been stalled at 3 percent and that isn’t projected to change in 2016, leaving pay managers pressured to do more with less.

While 51 percent of employers pointed to the need to keep compensation budgets in check, 45 percent said that retaining top talent remains one of their company’s highest priorities. To keep top performers and those with in-demand skills from leaving:

59 percent of employers said they plan to create new career development opportunities to retain top performers.

35 percent plan on making pay adjustments to meet market standards and remain competitive with pay.

“Employers continue to be fiscally cautious due to the recent U.S. recession and current global financial instability,” said Tami Simon, practice leader for Buck Consultants’ career practice in Washington, D.C. “We’re seeing business decision-makers carefully consider which employees to invest in, with top performers getting much more than they did in the past and weak performers getting much less.”

To differentiate merit pay rewards, employers:

Plan to give top performers pay raises of 4.4 percent.

Expect to rate 9 percent of employees in the lowest two rungs on the performance-level scale in 2016, compared to only 6.5 percent of employees in 2014.

In addition, “performance bonuses are becoming the real raises in the workplace, allowing employers to reward top talent while controlling their fixed costs and maintaining flexibility for any challenging times in the future,” said Jim Sillery, principal and executive compensation leader at Buck Consultants in the Minneapolis-St. Paul area.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.

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