VARIABLE PAY
Focus remains on variable pay in United States
While there is projected to be a slight pick up in salary increases next year, U.S. companies will continue to place the greatest focus on variable pay, according to a survey by Aon Hewitt.
Key survey results
Variable pay plans, or performance-based award programmes where the award must be earned each year, reached an “all-time high” in the U.S. in 2011, with 92% of employers implementing this type of programme.
This is a significant increase compared with 2005, when just 78% of employers offered variable pay.
Economic pressures have had a slight impact on variable pay this year. Organisations had anticipated spending 11.8% of payroll on these programmes for salaried exempt employees. Instead, employers have earmarked 11.6% of payroll for variable pay this year. Spending in 2012 is expected to dip slightly to 11.5%.
The majority (86%) of employers will fund variable pay based on company performance, though some are funding it through lower merit increases and reductions in head count (5% each).
Just 2% of companies are budgeting for variable pay through reduced spending on benefits, while only 1% are doing so through pay freezes.
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A final word
"The growing use of variable pay, along with lower salary increases, represents the new normal in compensation practices for employers nationwide. This pay mix creates greater motivation for employees to be productive and greater flexibility for employers to compensate based on individual and company performance. However, this does create a need for performance discussions throughout the year, so employees know what they are doing well and areas for improvement in order to maximise productivity and potential pay opportunity." - Ken Abosch, Compensation group leader, Aon Hewitt.
Want to know more?
Title: U.S. Salary Increase Survey, Aon Hewitt, September 2011.
Survey sample: Aon Hewitt surveyed 1,494 large U.S. companies in June and July 2011.
Availability: To view the "multimedia assets" associated with this survey, click here. For more information on these findings visit www.aonhewitt.com.
Aon Hewitt is the “global leader in human resource consulting and outsourcing solutions”. The firm says that it “designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies”. It has more than 29,000 professionals in 90 countries. For more information visit www.aonhewitt.com.