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Tighter labor market puts pressure on pay budgets
Employers are preparing to pay more in 2017 to retain high-performing and high-potential employees, as well as those with in-demand skills, as the labor market continues to tighten.
Fifty-three percent of respondents to Xerox HR Services'
Compensation Planning for 2017 survey indicated that one of their biggest labor concerns in the coming year is to retain top talent. The survey, completed in October, collected data on pay practices from 172 organizations across the U.S. representing both small and large companies.
While the survey, conducted annually, showed that average merit-based pay raises across the board are expected to remain at 3 percent next year, a trend that's been consistent since 2012 (and
on par with other 2017 pay forecasts), 37 percent of employers also will consider market-based pay adjustments for high-performing and high-potential employees with the goal of keeping their pay competitive—and keeping them onboard.
Planning for an Unpredictable Year
"On first look, very little has changed since last year," the survey report notes. However, pressures resulting from economic growth "may have a meaningful impact on company budgets in 2017."
"Attracting and retaining top talent is increasingly critical, and organizations need to continue—or start—finding creative ways to do so," said John Gentry, president of Xerox HR Services. For instance, "offering career development opportunities as a retention tool for top performers was a priority for over 60 percent of participants this year. In addition, companies are applying specific criteria to determine and adjust market-based pay for high-potential employees."
[SHRM members-only toolkit: Building a Market-Based Pay Structure from Scratch]
Among the key survey findings:
[SHRM members-only how-to guide: How to Establish Pay Ranges]
Pay Communication Philosophy
Respondents recognized the importance of communicating with employees about compensation, and most say they are:
Employers were less likely to share with employees the full pay structure for jobs within the same class or group (30 percent) or possible pay increases associated with particular levels of performance or steps within a pay structure (22 percent).
Nevertheless, "Organizations are acknowledging employees' desire for more transparency around total rewards," Gentry said. "Providing information on compensation philosophy and strategy, as well as business results, helps employees understand the effect on their pay and the value or their contributions to the organization."
Related SHRM Articles:
Bonus Binge: Variable Pay Outpaces Salary,
SHRM Online Compensation, August 2016
Salary Budgets Expected to Rise 3% in 2017,
SHRM Online Compensation, July 2016
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