plan ahead: compensation strategies for 2022

Plan Ahead:Compensation Strategies for 2022

September 21, 2021

Have you increased salaries in 2021 in response to market pressure?

It’s poll time!

How will your 2022 salary increase budget compare to your 2021 budget?

It’s poll time!

4

Agenda

• Guiding Principles

• Total Rewards Focus

• Salary Increase Data and Trends

• Range of Pay

• Recommendations and Next Steps

Guiding Principles

What is your talent landscape?

• Are you able to successfully recruit to fill open roles?• If so, are you able to do so within

your current pay structure? Are there internal equity or compression issues with your current employees?

• Are you able to retain your current employees?

• Are you experiencing geographic/remote work pressures?

How have your budget and financials

changed this year?

• Does your organization have the financial ability to pay for additional market increases this year?

• If so, are they increases across your organization or more targeted?

8

More Guiding Principles

• What is the outlook for your industry and your talent pool?

• What is your total rewards philosophy? What is your compensation philosophy?

• What are your compensation priorities?• Pay equity, rewarding high performers, at risk talent

Total Rewards HaloTM

Salary Increase Data & Trends

The Pandemic & Salary Increase Budgets

Economic impact on businesses

Positive impact = 21%

Negative = 46%

No impact = 33%

Salary increase budget impact

Positive impact = 16%

Negative = 9%

No impact = 76%

Source: World at Work Salary Budget Survey 2021-2022

3.3%increase to the national

total salary budget increase

Source: World at Work Salary Budget Survey 2021-2022; Payscale 2021-2022 Salary Budget Survey

2.3%inflation as of June 2021

Source: World at Work Salary Budget Survey 2021-2022, Bureau of Labor Statistics

Growth in Salary Increase Budgets

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2009 2010-2014 2014-2018 2019 2020 2021 - Actual 2022 -Projected


Behind the Numbers

Type of Program What’s Changed?

Average Merit Increases 2.9% (up from 2.6%)

Percent of Employees Receiving an Increase 87% (up from 84%)

Average Promotional Increase 8.8% (same)

Use of Variable PayIncreasing – 81% to 89% of employees received a variable pay payment

Amount of Variable Pay PaymentsOrganizations are projected greater payouts than budgeted.


Do you have plans to adjust your salary structure for 2022?

It’s poll time!

2.1%projected salary structure increases

(a return to pre-pandemic levels)


22

Foundation – Median and Mean

MeanAverage (add all numbers and divide by the number of numbers)

MedianThe middle value in the set of numbers

Example5, 7, 8, 10, 10, 10, 10, 20, 25

• Mean = 105/9 = 11.67

• Median = 10

Industry Trends

Actual 2021 Projected 2022

Mean Median Mean Median

All Industries 3.0% 3.0% 3.3% 3.0%

Agriculture, Forestry, Fishing & Hunting

2.5% 2.5% 3.0% 3.0%

Construction 3.3% 3.0% 3.4% 3.0%

Finance & Insurance 2.8% 3.0% 3.2% 3.0%

Healthcare & Social Assistance

2.9% 3.0% 3.2% 3.0%

Manufacturing 3.0% 3.0% 3.3% 3.0%


Industry Trends



All Industries 3.0% 3.0% 3.3% 3.0%

Professional, Scientific, Technical Services

3.2% 3.0% 3.4% 3.2%

Public Administration 3.0% 3.0% 3.2% 3.0%

Retail Trade 2.4% 3.0% 2.8% 3.0%

Transportation and Warehousing

2.5% 2.8% 3.1% 3.0%


Geographic Trends

• Very consistent among state and metropolitan region• 3.5% in Seattle, Atlanta, and San Diego (higher

than total salary budget increase mean)

• 3.4% in Chicago, Cincinnati, Denver, Los Angeles, Miami, New York, Phoenix, Portland, San Jose, Tampa

• The rest are right around 3.3%

• Internationally, all countries reported higher salary increase budgets.


Geographic Trends



National 3.0% 3.0% 3.3% 3.0%

Indiana, Illinois, Ohio, Colorado, Missouri, New York

2.9% 3.0% 3.3% 3.0%

California 3.0% 3.0% 3.4% 3.0%


International Trends

Projected 2022 Actual 2021

Canada 3.0% 2.7%

Mexico 5.0% 4.7%

Brazil 4.9% 4.3%

United Kingdom 2.9% 2.5%

India 9.2% 8.7%

China 6.0% 5.5%

Japan 2.8% 2.5%

Russia 6.1% 5.5%


• Zeros are not included in international data (mean).

Organization Size Trends

Salary increase budgets continue to be greater in smaller organizations.


Number of Employees Mean Median Mean Median

1-499 3.2% 3.0% 3.5% 3.0%

500-2,499 3.1% 3.0% 3.3% 3.0%

2,500 – 9,999 2.9% 3.0% 3.2% 3.0%

10,000 – 19,999 2.9% 3.0% 3.2% 3.0%


How much does "pay-for-performance" factor into your salary increases?

It’s poll time!

Pay-for-Performance

Continued differentiation for high performers, even with smaller budgets in 2021

High Performers Middle Performers


% of employees estimated to be rated in this category in 2021

26% 20% 69% 70%

Average merit increase estimated for this 2021 performance category

4.0% 4.0% 3.0% 3.0%


Salary Budget Increases



General Increase/COLA 1.1% 0.8% 1.6% 2.0%

Merit Increase 2.6% 3.0% 2.9% 3.0%

Other Increase 0.8% 0.5% 0.9% 0.8%

Total Increase 3.0% 3.0% 3.3% 3.0%


• General increase/COLA, Merit and Other Increases do not add to the Total Increase because not every organization provides all three types of increases.• The amounts are generally consistent across employee types (nonexempt, exempt, executives).

Variable Pay Programs

85% of organizations are using variable pay

Nonexempt -Hourly

Exempt –Salaried

Officers -Executives

2021 – Avg % Budgeted 5.6% 12.6% 37.4%

2021 – Projected % Paid 5.9% 13.6% 39.5%

2022 – Projected % Budgeted 5.6% 12.7% 37.6%


• Numbers reported are the “mean.” Nonexempt does not include union employees.• Variable pay is defined as compensation that is contingent on discretion, performance or results achieved (“pay at risk” such as bonuses, commissions, incentives).

Do your managers (or those making compensation decisions) have a good

understanding of how to use the range of pay?

It’s poll time!

Range of Pay

How to Use Range of Pay

COMPAREthe job, looking at job

descriptions – not titles




DECIDEwhere you want to be in the

range (your philosophy)




PLANyour course of action, which may be a multi-year strategy

DECIDEwhere you want to be in the

range (your philosophy)

Evaluating “Market” for Pay

Consider the implicit meaning behind the full range of pay reflected in the benchmark data.

MINIMUM MIDPOINT MAXIMUM

Competitive Pay at Midpoint




Fully functional and consistently demonstrates skill and experience needed for the job.



Fully functional and consistently demonstrates skill and experience needed for the job.

> 1 year to many years to develop skills for success

Competitive Pay at Minimum




Someone new to the role and still developing skills and experience to be successful in the role.



Someone new to the role and still developing skills and experience to be successful in the role.

New to the org. or industry, no transferrable experience or recently promoted

Competitive Pay at Maximum




Experts in their role and paid top of the market



Experts in their role and paid top of the market

Highly tenured, high performers and key talent with critical skills or deeply relevant experience in the org.

Evaluating “Market” for Pay

Keeping your compensation philosophy and these factors in mind, determine the appropriate place with the range.


New to the role, industry or

organization

Demonstrates skill and experience

needed for the job

Tenured, high performers

and key talent

Do you have a defined compensation philosophy?

It’s poll time!

50

Guiding Principles

1. What is your talent landscape?

2. How has your budget and organization’s financials changed this year?

3. What is the outlook for your industry and your talent pool?

4. What is your total rewards philosophy? What is your compensation philosophy?

5. What are your compensation priorities?

Recommendations & Next Steps

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Recommendations

✓ Focus on high performers in competitive jobs first (e.g., IT and niche skills)

✓ Look at pay equity and adjust as needed

✓ Re-examine variable pay programs

✓ Use the entire range of pay – and educate your managers around the range of pay

✓ Get clear on your total rewards philosophy and employee value proposition

✓ Communicate and create transparency

Maximize Your Total Rewards Strategy

Leverage the Total Rewards Halo framework to meet your talent and business goals.

Schedule a call with me!We can help.

Megan Nail | VP, Total Rewards Practice

[email protected]

317-501-6164

linkedin.com/in/megannail

plan ahead: compensation strategies for 2022

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