Pay still drives employee attraction and retention, but current pay programs fall short
NEW YORK, Oct. 23, 2024 (GLOBE NEWSWIRE) -- About half of global employers report they are effectively delivering on each of the six individual core objectives of pay programs, despite pay being the most commonly cited reason employees join and stay with an employer. This is according to the 2024 Pay Effectiveness and Design Survey by WTW (NASDAQ:WTW), a leading global advisory, broking and solutions company.
The survey found that of the six core objectives related to pay program effectiveness — driving employee attraction, driving employee retention, promoting fair compensation among employees, promoting competitive compensation compared to employees at other organizations, aligning with business strategy, and rewarding employees for current-year performance — about half of employers report that they are effective at two of these objectives and fewer than half are effective at each of the other four.
Yet, related research shows that 48% of employees cite pay as one of the main drivers for attraction and retention — the most commonly cited factor for both, and more than half of employees (56%) would consider another job offer for better pay.
This disconnect is likely in part due to changes that have affected the nature of work over the past several years. Labor market conditions, such as talent shortages, generational shifts, and new work models, have contributed as well as socio-economic trends like the global pandemic and high inflation.
In addition to these external factors, lack of communication internally impacts overall pay effectiveness. Fewer than one in four say they are effective at communicating how employee pay is determined. Moreover, over half of employers (58%) think that salary compression is an issue and a similar percentage think it will be a problem in the next few years.
"Organizations likely haven't been able to focus on the factors that drive pay program effectiveness for the past few years given the recent dynamics of the labor market," said Lori Wisper, Managing Director and Work & Rewards Global Solutions Leader, WTW. "As current economic conditions have eased the labor market pressures, companies should take the opportunity to make the necessary changes to address those factors. Companies should start with updating their compensation philosophy, because it is critical for pay program effectiveness and can contribute to improved retention of key talent, employee productivity, and financial performance."
Among companies that have updated their compensation philosophy in the last five years, the most commonly cited reasons for those changes are to enhance attraction or retention (69%) and to enhance the employee experience (51%). Other reasons include ongoing or regularly scheduled review and refresh (47%), building employee understanding (45%), and enhancing pay transparency (44%).
"With salary-increase season approaching, it's an ideal time for companies to assess how their pay programs support values, ensure they align with the business strategy, and start improving the effectiveness of these programs to future-proof their workforce," added Wisper.
About the survey
The 2024 Pay Effectiveness and Design Survey was conducted from May to June of 2024. Nearly 1,900 companies, representing more than 30 million employees across 65 countries, responded. In the U.S., 332 organizations responded.
About WTW
At WTW (NASDAQ:WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.
Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you. Learn more at wtwco.com.
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