REWARD MANAGEMENT
Advice on curbing compensation costs
Have you been asked to keep the lid on wage costs in the year ahead? If you are struggling for ideas, you may find some inspiration from the results of a recent survey by the Institute of Management & Administration, based in New York.
IOMA polled several hundred HR professionals in the USA to discover their most successful ways for keeping compensation costs in check.
The survey reveals that a wide array of tactics are used by American employers to batten down wage costs (see table below):
The most popular approach, cited by a third of HR professionals, is to change the mix of the salary and bonus structure.
Just under three in 10 have moved to reduce merit increases. For many, this was prompted by a need to curb costs. But others were keen to prevent an entitlement mentality — where employees expect, and rely on, merit payments in the same way as they used to expect automatic salary increases — becoming entrenched within the business. Instead of consolidated merit awards, many organisations canvassed by IOMA were introducing lump-sums and variable pay.
The third most popular cost-cutting approach, mentioned by 27.8% of respondents, was to introduce some method of paying for performance. As IOMA points out: This plan can ease employees' unhappiness at declining merit increases or stagnant base salaries. For companies, it allows a stronger emphasis on paying more for a job well-done than just for showing up for work.
Besides these three methods of controlling costs, all the other tactics were cited by less than a quarter of respondents.
Most successful areas in controlling compensation costs
|
| 2000 | 1999 |
| Changed mix of salary and bonus structure | 31.4% | 31.8% |
| Reduced size of merit increases | 29.3% | 29.0% |
| Instituted pay for performance | 27.8% | 26.4% |
| Established/expanded salary benchmarking | 24.2% | 20.5% |
| Hired more part-time employees | 19.2% | 21.4% |
| Changed top executive pay structures (ie made more performance-oriented) | 18.9% | 16.6% |
| Added to benefits package while holding line on compensation | 14.9% | 13.9% |
| Reduced size of bonuses | 13.9% | 7.8% |
| Instituted broadbanding | 9.8% | 9.2% |
| Offered company stock as bonus option | 9.1% | 7.2% |
| Instituted skill-based pay and/or group incentives | 5.3% | 7.2% |
| Changed/strengthened board of director's compensation committee | 3.8% | 3.7% |
| Switched to base-only type plan | 0.5% | 1.5% |
| Other | 8.6% | 6.3% |
Source: Institute of Management & Administration.
Want to now more?
Title: The setting and managing 2000 compensation costs: a reference guide from IOMA's Report on Salary Surveys.
Post: Subscriber services, Institute of Management & Administration, 29 West 35th Street, 4th floor, New York NY 10001, USA.
Tel: 001 212 244 0360
email: subserve@ioma.com
website: www.ioma.com