PayScale’s 2016 Compensation Best Practices Report is here! This year, for the first time ever, we compare top performing companies—defined as those who were first in their industry and exceeded revenue projections in 2015—to all respondents, revealing a correlation between modern pay practices and business success. The chart below shows how top performers’ pay practices compare to average companies:
Top 10 Pay Practices That Set Top Performers Apart
#1 Pay Transparency
47% of Top Performing companies intend to be transparent about pay. There has been a lot of buzz about pay transparency, everything from employer driven initiatives to employees taking it into their own hands. Employees increasingly expect transparency around pay from their companies. Take the time now to get your house in order so that when you are ready to make the decision to get more transparent about your pay practices, you’ll be ready.
#2: Effective Conversations
While 82% of employees feel okay about low pay, as long as the rationale is explained, only 17% of companies are confident enough in their managers’ ability to have those tough conversations about pay. Your managers are your eyes and ears, especially when it comes to sentiment about pay. The ‘why’ matters! Managers have to be able to communicate the why and rationale behind pay decisions, which they can’t do if you either don’t know or haven’t explained to them yet. One of your most helpful tools is a Total Comp Statement, or Total Rewards Statement, which details the cost of all the benefits and compensation you pay out to your employees. 47% of top performing companies share a Total Rewards Statement with their employees. The best time to learn how much the company pays for health insurance is while your people are still employees, not when it’s time for them to pay COBRA.
#3: Performance Management
44% of companies say they are shifting from an annual to an ongoing performance management process. Most companies really want to pay for performance, but the obstacle is in outdated modes of performance evaluation. Shift to something that is as nimble as your business goals. Linking performance with pay is still integral to driving both engagement and results, the trick is in identifying the more efficient way of measuring performance.
#4: Competitive Strategy
61% of top performing companies pay more for competitive jobs. If you want to compete in a rapidly changing global economy, you have to pay more for your hot jobs and your top talent. A peanut butter approach isn’t going to cut it anymore – don’t spread your pay too thin. Pay more where it matters, save where you can. It’s noteworthy that half of top performing companies increased their compensation budget for 2016; they actually seek to compensate their people, and to compensate them well.
#5: Creative Mix of Pay
81% of top performing companies use variable pay, including both team and individual incentives. They’re also more creative about the total rewards package, including learning and development opportunities, gym memberships, catered lunches, and more. Get to know your workforce better. What motivates them? Figure out the right mix for the right segments within your organization, and definitely get creative because your competitors are.
#6: Addressing Skills Gap
70% of top performing companies report that they have a skills gap in their positions that have been open for 6 months or longer. That number jumps up to 80% in science and engineering jobs. That said, only 23% of companies think their positions are remaining open due to pay, so it’s likely something else. Use your succession programs to identify key talent within your organization. Use your learning & development programs to build them into your future leaders.
#7: Millennial Strategy
35% of top performing companies will change their strategy for millennials. They are evaluating their PTO practices, as well as wellness, philanthropic, and diversity initiatives. In May of this past year, we tipped the point in the US to having Millennials comprise the majority generation in the workforce. Millennials aren’t coming, they’re here and they’ve been here. Get to know what millennials care about (fairness, flexibility, and advancement to name a few), and update your compensation strategy.
#8: Supervisor Skills
35% of employers said that animosity with their direct supervisor was among the top 3 reasons for employees leaving. While pay often comes up as a number one reason that employees leave organizations, 67% of employees believe that a good relationship with their manager is critical to their job satisfaction. When we combine this idea with the fact that most managers have gotten where they are because they are great individual contributors, not necessarily people with excellent management skills, it gets much clearer that companies that thrive will have to successfully train their supervisors in people and communication skills.
#9: Learning & Development Programs
86% of top performing companies believe that their people are their best asset. Motivating and engaging their best asset is key to achieving both individual performance and organizational results, as well as to having a high performance culture. 58% of employers plan to use learning and development programs to retain and recruit their employees.
#10: Fresh & Accurate Data
56% of top performing companies are open to either employer—or employee—submitted data, as long as it’s accurate and fresh. You’re no longer competing with yourself or the company across town. In a global economy, you’re competing with people all over the world. You need data that moves as fast as your business does so that you can retain the top talent to help you accomplish your goals.