Thursday, September 16, 2010
[IWS] WordatWork: COMPENSATION PROGRAMS AND PRACTICES [14 September 2010]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
WordatWork.org (Total Rewards Association)
COMPENSATION PROGRAMS AND PRACTICES [14 September 2010]
[full-text, 39 pages]
This report summarizes the results of a June 2010 survey of WorldatWork members to gather
information about current trends in compensation programs and practices. This survey focuses
on the prevalence of base and variable pay programs as well as common practices used to
administer and communicate these programs in today’s workplace. On June 16, 2010, survey
invitations were sent electronically to 5,232 WorldatWork members. Members selected for
participation were all participants from the WorldatWork 2010-2011 Salary Budget Survey and
randomly selected members who had designated compensation in their title. The survey
closed on July 2, 2010, with 1,618 responses, a 31% response rate. The final dataset was
cleaned, resulting in a final dataset of 1,381 responses.
Press Release 14 September 2010
Cost of Living Adjustments Unpopular Among U.S. Employers
September 14, 2010 – Washington – A new WorldatWork study, Compensation Programs and Practices, found that only a small percentage (11%) of U.S. employers award cost of living adjustments (COLA) to employees. The more prevalent types of pay increases are promotional (94%), merit (92%) and market adjustments (76%). See table below.
Table: “What types of salary increases and/or adjustments does your organization award to some or all employees?” (Please select all that apply.) (n=1,306)
Promotional increases (result of higher/greater level of responsibility)
Internal equity adjustments
Pay differentials (usually related to atypical schedule, hazardous or un-secure work environment, special skill set or responsibilities, etc.)
Temporary special assignment pay
General across-the-board increases not considered COLA or market adjustments
Cost-of-living adjustments (COLAs)
Source: WorldatWork Compensation Programs and Practices 2010
COLA refers to an across-the-board wage and salary increase designed to bring pay in line with increases in the cost of living to maintain real purchasing power. Cost of living still dominates many workers' perception of their raises, believing that these are given to cover a cost of living increase, rather than to reward them for job performance.
“From a rewards perspective, it doesn’t make sense to base pay raises solely on the Consumer Price Index,” said Kerry Chou, CCP, compensation practice leader at WorldatWork. “Pay raises are a tool to motivate and retain employees. How motivating can it be for a top performer to receive the same base pay increase as a low or average performer?”
When asked how base salary increases are determined, a vast majority (89%) of respondents selected individual performance against job standards and/or Management By Objectives (MBO) without selecting general increase (where everyone receives the same increase regardless of job performance).
“Eight out of 10 employers assess performance either formally (65%) or informally (15%),” said Alison Avalos, research manager for WorldatWork. “Given the prevalence of tying pay to performance, we expect the number of employers awarding COLA to stay flat if not dwindle in the coming years.”
About the Survey
Data for the WorldatWork Compensation Programs and Practices survey was gathered from June 16 to July 2, 2010 among members employed in the HR, compensation and benefits departments of mostly large U.S. corporations. Of the 1,381 responses, 44 percent came from companies with 5,000 or more employees.
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