A recent survey from the American Society of Employers (ASE) revealed that small employers are less likely to adopt critical pay administration practices like pay structures or written compensation philosophy statements. By not embracing these compensation systems they are putting themselves at greater risk of employee attraction and retention issues.
Nearly 60% of companies with 100 or fewer employees reported having no wage or base pay structure, an increase of 15% from 2013. Whereas only approximately one third of employers with more than 100 employees reported having no wage or base pay structure. Nationally, WorldatWork’s biannual Compensation Programs and Practices Survey released in August of 2016 reports that only 16% of employers of all sizes and industries do not use a formal salary structure. Similarly between ASE and WorldatWork, both surveys reported that roughly two thirds of employers are typically adjusting their base salary structures every 12 months.
56% of employers reported that they do not have a written compensation policy. Despite seeing large numbers of small and mid-size employers across all industries not having a written compensation policy, employers with more than 500 employees have reported that only one quarter do not have a written compensation policy. 17% of employers that have a compensation policy reported that their compensation policy is shared with employees through several different methods, such as during onboarding or available on the intranet. The lack of transparency by the other 83% of employers with a written compensation policy could cause their employees to become frustrated and disengaged leading to decreased productivity.
Across the nation most employers (91%) reported that market pricing is used to determine the relative value of their jobs. Looking more granular, the majority (approximately 50%) of Michigan employers reported that market pricing is the basis of their compensation programs for all employee classifications except for Production Union employees. Production Union employees’ compensation programs are typically based on a step system. Zeroing in on Michigan’s employers with 100 or fewer employees shows that most employers base their compensation programs on market pricing, however it is to a lesser extent than Michigan employers as a whole.
Despite compensation systems sometimes having a negative reputation, a flexible, data-driven system will provide HR professionals with the foundation needed to obtain organizational buy-in. The end result will be an increase in effectiveness, competitiveness, and the ability for employees to understand their pay.
To obtain copies of ASE’s 2017 Pay Administration Survey, members should visit their Dashboard on the ASE website or contact ASE’s Compensation and Benefits Surveys department at [email protected] or 248.223.8051. This survey is available free of charge to ASE members and for $525 to non-members.
Sources: American Society of Employers, WorldatWork, McLean & Company