U.S. companies are still cautiously managing salary increases despite the ongoing economic recovery. But they are more likely to bust out the bonuses for top performers as the battle for talent continues to heat up.
Such was the report from a survey by WorldatWork of 5,759 company representatives to questions about their budget for this year and next.
WorldatWork reported an across-the-board average salary hike of 3 percent in 2016 for all categories of employees, with a possible uptick to 3.1 percent in 2017.
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But, for the first time in many years, companies reported a growing trend toward handing out bonuses to the golden boys and girls of the organization.
The number of employers reporting the use of variable pay vehicles (read: achievement-based bonuses) increased from the longstanding 80 percent to 84 percent in 2016.
How are companies that dole out bonuses handling bonus allocations? The majority of awards are based on individual, business unit and organizational performance. The breakdown is as follows:
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70 percent use a combination based on organizational, unit and individual performance.
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28 percent use organizational awards.
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23 percent use individual incentive awards.
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17 percent use unit awards.
Companies use various formulae for determining combination bonus awards, Kerry Chou, senior practice leader in compensation for WorldatWork, told the Society for Human Resource Management.
"Probably the most important is answering the question, 'What do we want to accomplish with our variable pay programs?' In some organizations, different employee groups are motivated by different rewards strategies, so the same variable pay programs applied to all doesn't make sense," Chou says. "In other cases, a company may have an overriding culture of winning or failing together, in which case a common incentive program for all employees will support that."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
