Career development opportunities, rather than salary, have the biggest impact on employees' perceptions of fairness, reveals a new research report released today by WorldatWork; Hay Group; and Loyola University Chicago professor of human resources, Dow Scott, Ph.D.
According to the report, the top five concerns in reward fairness are career development opportunities, merit increases, base pay amounts, non-financial recognition, and employee development and training.
"Reward professionals view career development opportunities as the top reward fairness concern because growth opportunities are in high demand by employees, while at the same time, career development processes are not particularly developed in many organizations," says Tom McMullen, Hay Group's North American reward practice leader. "Career development concerns are also the No. 1 retention issue for employees, according to our employee opinion database."
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However, variable pay, which includes bonuses and incentives, was not one of the top-five concerns in reward fairness, the report reveals.
"Variable pay is likely not ranked as a top concern because a decent portion of these plans are based on corporate or business unit performance measures, as opposed to individual performance measures," says Dr. Scott. "There are also fairly systematic reporting processes in place in organizations that provide periodic communications as to how these programs are performing, resulting in less ambiguity."
The report also recognized the top-three benchmarks that impact reward fairness as individual performance, work responsibilities and overall organization performance. Standards that are not ranked as highly are team department performance, seniority and tenure, time with an employer and the individual employee's potential.
"HR organizations would be well-served to establish effective processes around job design and organization design, work measurement systems, person-role fit assessments and performance assessment processes," says Hay Group's Tom McMullen. "Improving these HR infrastructure processes should substantially enhance the perception of fairness in organizations."
When asked what improves perceptions of reward fairness, respondents cited effective reward communications, followed by external benchmarking, reward strategy and design, and non-financial recognition programs.
"Communication is king in improving perceptions of reward fairness," says WorldatWork's Kerry Chou, CCP, compensation practice leader of WorldatWork. "The best organizations focus not only on the core messages to be communicated but also the most effective messengers and channels. In addition, these organizations devote significant energy to determining how to sustain core messages and equip managers to effectively communicate them."
The research study also asked respondents what erodes perceptions of reward fairness, and the top response was the poor economic environment, such as pay freezes, layoffs and pay cuts.
"While some factors, such as the economy, are outside of our control, equipping managers to more equitably distribute and communicate rewards can have a huge impact on the perceptions of fairness within an organization," Dr. Scott says.
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