4 Key Compensation Trends in 2017

A year-end look at compensation developments that are making news

Stephen Miller, CEBS By Stephen Miller, CEBS December 13, 2017
4 Key Compensation Trends in 2017

From the rising share of compensation that's tied to achieving performance goals to prohibitions on asking about salary history, these articles on pay topics were some of the most-read all year on SHRM Online. They describe developments that will have a continuing impact in 2018: 

Variable Pay on the Rise—and Its Repercussions

With salary increase budgets expected to remain at 3 percent for 2018, more employers are focusing on variable pay to differentiate rewards for high-performers. Comprehensive variable reward programs emphasize incentive-reward payouts for meeting individual, team and organizationwide goals, and de-emphasize—or eliminate—raising salaries annually to reward performance. One consequence of this trend is that variable pay plans are pushing aside holiday bonuses.

Employers that are wary of jettisoning annual raises in favor of variable performance-driven payouts have another option—use current salary increase budgets more effectively. 

Improving—or Removing—Performance Reviews

Employers are also trying better ways to measure and reward performance by improving performance management and pay practices. Nobody seems to have much love for performance reviews: 34 percent of Millennials say they have been driven to tears during a performance review, and 25 percent of men and 18 percent of women of all ages have cried because of a review. One consultant advises making annual reviews "an experience that celebrates an employee," and having "hard conversations" about performance take place during just-in-time coaching. 

[SHRM members-only toolkit: Building a Market-Based Pay Structure from Scratch] 

Living with Salary History Bans

More states and localities are banning job interviewers from asking candidates about their current or previous salary, in large part to address pay inequality that keeps women earning less than men. To comply with bans on salary history queries, recruiters, hiring managers and HR are advised to "get together to determine the value of the role and what will drive a higher or lower compensation package, and then base interview questions on those topics." Also be aware that banning these questions and taking no other steps probably won't improve pay equity

Preparing for Compliance Changes and Challenges

The Fair Labor Standards Act (FLSA) overtime rule revision supported by the Obama administration won't be enacted, but here's what a new FLSA overtime rule may look like—with a new proposal likely next year. Also in 2018, public companies will begin to disclose the ratio of CEO pay to median employee pay in their proxy statements. Recent guidance will ease—but won't delay—CEO pay ratio reporting. Minimum-wage rates are also going up in many cities, counties and states, raising the amount employers must pay to many low-earning nonexempt employees.

Related SHRM Article:

5 Big Benefits Trends Going into 2018, SHRM Online Benefits, December 2017


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