research
Compensation Programs
and Practices 2012
A report by WorldatWork,
October 2012
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WorldatWork 1
Compensation Programs and Practices 2012
Introduction & Methodology
This report summarizes the results of a June 2012 survey of WorldatWork members to gather
information about current trends in compensation programs and practices. This survey focuses
on the prevalence of base and variable pay programs as well as common practices used to
administer and communicate these programs in today’s workplace. On June 20, 2012, survey
invitations were electronically sent to 5,290 WorldatWork members. Members selected for
participation were randomly selected members with the word “compensation” in their titles. The
survey closed July 13, 2012, with 1,080 responses, a 20% response rate. The data set was
cleaned, resulting in a final data set of 1,001 responses.
To provide the most accurate data possible, data was cleaned and analyzed using statistical
software. Duplicate records were removed. Data comparisons with any relevant, statistically
significant differences are noted within this report.
The frequencies or response distributions listed in the report show the number of times or
percentage of times a value appears in a data set. Due to rounding, frequencies of data
responses provided in this survey may not total 100%.
WorldatWork conducted similar compensation practices surveys in 2003 (“Survey of
Compensation Policies and Practices”) and in 2010 (“Compensation Programs and
Practices.”). Where possible, historical comparisons from data gathered in the previous
surveys are shown.
WorldatWork 2
Compensation Programs and Practices 2012
Table of Figures
Demographics
Figure 1: Sector…………………………………………………………………………………………….…………
4
Figure 2: Organization size……………………………………………………………………………….…………
4
Figure 3: Industry……………………………………………………………………………………………………..
5
Figure 4: Annual voluntary turnover ………...……………………………………………………………………..
5
Compensation Philosophy
Figure 5: Compensation philosophy ……………………………………………………………………….………
8
Figure 6: Employee understanding of the compensation philosophy …………………………….……………
8
Competitive Positioning
Figure 7: Labor market comparison …………………….……………………………………………….…………
9
Figure 8: Relative value of jobs …………………….…………………………………………………....…………
9
Variable Pay Programs
Figure 9: Variable pay prevalence…………………….……………………………………………………………
10
Figure 10: Types of variable pay plans ……………..………………………………..……………………………
10
Figure 11: Variable pay labor market comparison…….…………………………………………………………
11
Determination of Base Salary Increases
Figure 12: Base salary increase determinations …………………………………………………………………
11
Pay for Performance
Figure 13: Employee rating systems …………………………………………………………….………………..
12
Figure 14: Typical variation in salary increases 2012 ………………………..………………………….………
13
Figure 15: Increases based on performance, method for determining the actual increase ……………….
13
Figure 16: Number of performance ratings levels/categories….……………………….………………………
14
Figure 17: Employee distribution across performance categories……………………..……………….………
14
FLSA Classification (U.S.)
Figure 18: FLSA requirements exemptions………………………………………….……………………………
Figure 19: Portion of U.S. positions/jobs that maintain FLSA exemption status ….………….………………
Figure 19a: Nonexempt positions/groupings by organization size……………………………..………………
15
15
16
Figure 19b: Exempt positions/groupings by organization size …………………………………………………
16
Salary Structure Design and Administration
Figure 20: Assessment of the market pricing of jobs……………………………………….……………………
17
Figure 21: Adjustment of base salary structures for employees…………………………..……………………
17
Figure 22: Multiple salary structures………………………………………………………………..………………
18
Figure 22a: Formal salary structures……………………………………………………………..………………
18
Figure 23: Number of separate structures ………………………………………………………...………………
19
Figure 24: Separate structures defined/identified…………………………………………………………………
19
Figure 25: Salary grades and/or broad bands…………………………………………..…………...……………
20
Figure 25a: Typical range spread for hourly positions.………………………………..…………...……………
20
Figure 25b: Typical range spread for salaried positions.………………………………..………….……………
21
Figure 25c: Typical range spread for executive positions.………………………………..………….…………
21
WorldatWork 3
Compensation Programs and Practices 2012
Types of Increases
Figure 26: Types of salary increases and/or adjustments awarded………………………….…………………
22
Pay Communication
Figure 27: Individual salary information shared with employees…………………………………….…………
22
Figure 28: Employee communications about the pay program (last 12 months)……………. ………………
23
Figure 29: Frequency of employee communications about individual pay……………….……………………
23
Figure 30: Approach to communicating individual pay increases ………………………………………………
24
Evaluation of Salary Policies and Practices
Figure 31: Salary program effectiveness ……………………..………………………………….……………….
24
Global Analysis
Figure 32: Responsibility and global regions ……………………..……………………….…….……………….
25
Figure 33: Compensation philosophy and variations by global regions ……………………..………………..
25
Figure 34: Administration of variable pay programs and global regions ……………………..………………..
26
Figure 35: Types of variable pay programs and global regions ……………………..…………..……………..
26
Figure 36: Performance-management programs consistency by global regions ……………………………..
27
Additional Analysis Figures
Comparisons by Type of Compensation Philosophy
Figure 37: By year………………………….………………………………………………………………………
Figure 38: By sector………………………….………………………………………………………………………
Figure 39: By understanding of compensation philosophy……………………...…….…………………………
28
29
29
Comparisons by Level of Compensation Philosophy Understanding
Figure 40: By year……………………….…………………………………………………………………………
Figure 41: By sector……………………….…………………………………………………………………………
Figure 42: By type of pay information shared with employees…………………….…………………………
Figure 43: By pay communication approaches………………………….………………………………………
Figure 44: By annual turnover………………………………………………………………………………………
30
31
31
32
32
Comparisons by Annual Turnover
Figure 45: By base salary practice………………….…………………………….…..……………………………
Figure 46: By total cash target (or goal) ………………….…………………...……..……………………………
Figure 47: By variable pay practice or payout………………….………..…………..……………………………
Figure 48: By variation in salary increase for 2012………………….…………….……..………………………
Figure 49: By type of pay information shared with employees…………………..…………………..…………
Figure 50: By pay communication approaches………………….…………………..……………………………
33
33
34
34
35
35
Comparisons by Sector
Figure 51: By determination of base salary increases…………………………..………………...……..………
Figure 52: By formal employee performance rating system prevalence……………………………………….
Figure 53: By variation in salary increases for 2012…………….………………………………...……..………
Figure 54: By types of pay information shared with employees…………….………….………...……..………
36
37
37
38
WorldatWork 4
Compensation Programs and Practices 2012
Demographics
Figure 1: “Your organization is:” (n=941)
Private sector - publicly
traded
45%
Private sector - privately
held
23%
Non-profit/Not-for-profit
(education/academic…
16%
Public sector
(local, state, federal…
0%
15%
10%
20%
30%
40%
50%
Figure 2: “Please choose the total number of full-time employees (FTEs) your
organization employs worldwide:” (n=941)
Option
Less than 100 employees
Percent
0%
100 to 499
3%
500 to 999
6%
1,000 to 2,499
13%
2,500 to 4,999
18%
5,000 to 9,999
21%
10,000 to 19,999
15%
20,000 to 39,999
10%
40,000 to 99,999
10%
100,000 or more employees
5%
WorldatWork 5
Compensation Programs and Practices 2012
Figure 3: “Please choose one category that best describes the industry in which your
organization operates:” (n=940) 1
Option
Percent
Finance and Insurance
13%
All Other Manufacturing
12%
Health Care and Social Assistance
10%
Utilities, Oil and Gas
8%
Consulting, Professional, Scientific and Technical Services
6%
Retail Trade
6%
Information (includes Publishing, IT Technologies, etc.)
4%
Educational Services
4%
Computer and Electronic Manufacturing
4%
Public Administration
3%
Pharmaceuticals
2%
Transportation
2%
Other Services (except Public Administration)
2%
17%
Other
Figure 4: “What is the approximate annual voluntary turnover for employees?” (n=883)
Option
1
Percent
0-5%
23%
6-10%
40%
11-15%
19%
16-20%
8%
21-26%
4%
27-40%
3%
41% or more
3%
Industries with less than 1% of respondents are not shown in this table.
WorldatWork 6
Compensation Programs and Practices 2012
Executive Summary
Compensation Philosophy
Despite the fact that the percentage of organizations having a written compensation philosophy now
exceeds two-thirds, the percentage of organizations in which most or all employees understand the
philosophy is only 28%, suggesting an ongoing need to employ more effective communications
techniques (Figure 6). For those multinational organizations, more than three-quarters (76%) have a
common philosophy worldwide (Figure 33). Employers with a written philosophy are statistically more
likely to have their employees understand it (Figure 39).
Competitive Positioning
Most organizations target base pay (86%) and total cash compensation (71%) at the median of the
market. However in practice, fewer organizations achieve this objective for either base pay (67%) and
total cash compensation (54%). Although only 6% target base pay below median, 19% actually pay
below median. With respect to total cash compensation, 5% target pay below median, but a full 20%
actually pay below median (Figure 7). It should be noted that a higher percentage of organizations pay
above median than is targeted as well, although the differences between practice and targets are much
less pronounced.
Job Evaluation Methods
Market pricing far exceeds all other job evaluation methods in prevalence. 88% of organizations use
market pricing to some degree; 50% use market pricing exclusively. The point-factor approach, once
the most common method a few decades ago, is far behind at 20% (Figure 8).
Variable Pay Prevalence and Practices
Variable pay continues to be used at most organizations, with 84% of participants indicating they use
this pay practice (Figure 9). More than three-fourths of organizations award bonuses and two-thirds
award recognition payments such as spot awards. With regard to incentive plans, a majority of
organizations use individual or performance-sharing plans. Profit-sharing plans are used by just 19% of
respondents (Figure 10). 47% of organizations with multinational operations say all employees
generally participate in the same programs. Some flexibility is provided to countries or regions either to
make limited adaptations to corporate programs or to install local programs of nominal cost (Figure 35).
Pay for Performance
Virtually all organizations (99%) assess employee performance. Although the most common criterion
for determining pay increases continues to be based on individual performance against job standards,
its use has dropped since 2010. The use of individual performance against management objectives or
personal objectives has gained substantially (58%). This trend suggests that performance goals and
objectives are being set in a more deliberate and employee-specific manner as opposed to using
generic performance objectives that may be found on boiler-plate position descriptions.
Position in salary range and the market value of the positions also are factors considered by 56% and
50% of organizations, respectively (Figure 12). Most organizations strive to differentiate increases
based on performance, with 70% of respondents indicating that increases for high performers are at
least 50% higher than average performers, and a full quarter saying increases for top contributors are
at least twice that of average contributors (Figure 14). In terms of the guidance that organizations
provide their managers on awarding increases to employees, 31% mandate a particular percentage or
range of percentages that managers must award. The remaining organizations may provide guidance
but allow managers latitude to determine increases for employees (Figure 15). 85% of multinational
respondents indicate that their performance management program is applied worldwide (Figure 34).
WorldatWork 7
Compensation Programs and Practices 2012
Salary Structure Design and Administration
A full 85% of organizations have a formal salary structure(s) (Figure 22a). 59% of organizations review
their salary structures on an annual basis; an additional 20% review them on an “as needed” basis
(Figure 20). The use of traditional salary structures has increased, with 86% of organizations indicating
their use. Broadbands, which enjoyed a proliferation in the late 1980s and early 1990s, is now used by
only 8% of respondents (Figure 25). 65% of salary structures for hourly positions have range spreads of
at least 40%, indicating that somewhat more flexibility in potential pay levels for hourly employees is
being offered than in the past (Figure 25a). 80% of structures for salaried positions have range spreads
between 45% and 75% (Figure 25b).
Pay Communications
More than one-third (34%) of organizations indicate they share “minimal” pay-related information to
employees. Moreover, the same percentage indicates actively sharing the organization’s compensation
philosophy with employees. More encouraging is that 46% of participants indicated that they do share
specific design elements of company pay programs (e.g., link to performance, who is considered to be
part of market data) (Figure 27). Also encouraging is the survey result that nearly 8 in 10 respondents
(79%) indicated that supervisors have individual discussions with employees regarding pay programs
(Figure 28). In terms of communications methods, brief written or verbal communications are the most
prevalent, although these methods are statistically less effective methods than using more detailed pay
communications (Figure 30). Not surprisingly, employees are much less likely to understand the
organization’s compensation philosophy when minimal pay information is shared (Figure 42).
WorldatWork 8
Compensation Programs and Practices 2012
Results and Analysis
Compensation Philosophy
See Figures 36-43 for additional comparisons of findings by compensation philosophy.
Figure 5: “Does your company have a compensation philosophy for paying
employees?”
Option
2012
2010
(n=996) (n=1,381)
2003
We have a written compensation philosophy
67% 2
61%
62%
We have an unwritten compensation philosophy
26%
29%
29%
We do not have a compensation philosophy
7%
9%
7%
Other
1%
1%
2%
Figure 6: “To what extent do employees understand the company’s compensation
philosophy?”
Participants who answered, “We do not have a compensation philosophy” in Figure 4 did not receive
this question.
2012
(n=921)
2010
(n=1,237)
2003
Virtually no employees understand the compensation
philosophy
6%
7%
6%
Most do not understand the compensation philosophy
38%
35%
32%
About half of employees understand the compensation
philosophy
28%
29%
28%
Most employees understand the compensation philosophy
26%
26%
31%
Virtually all employees understand the compensation
philosophy
2%
3%
4%
Option
2
A statistically significantly higher number of organizations reported having written compensation philosophies in 2012 (67%)
compared with 2010 (61%).
WorldatWork 9
Compensation Programs and Practices 2012
Competitive Positioning
Figure 7: “Compared to the relevant labor market, what is your organization’s:”
The scale for the 2012 figure differed from the scale used in 2010. Historical comparisons are not
possible.
25th
percentile
or below
Above
25th but
below
50th
percentile
50th
percentile,
or median
Above
50th but
below
75th
percentile
75th
percentile
or above
1%
5%
86%
8%
2%
1%
18%
67%
13%
1%
1%
4%
71%
20%
4%
1%
19%
54%
22%
4%
Base salary target
(or goal) (n=958)
Base salary practice
(n=951)
Total cash target or
goal (n=843)
Current total cash
practice (n=844)
Figure 8: “How does your organization determine the relative value of jobs (job
evaluation method)?” (Please select all that apply.) (n=989)
This question is a new addition in 2012. Historical comparisons are not possible.
Option
2012
Market pricing
88%
Ranking
15%
Classification
17%
Point factor
20%
Other method
7%
No method in place (exclusive option)
2%
Additional Findings:
• Half of participants (50%) selected only “market pricing” and no other option listed.
WorldatWork 10
Compensation Programs and Practices 2012
Variable Pay Programs
Figure 9: Does your organization currently use variable pay (not including sales
commission plans)?”
Yes
80%
2010
No
20%
(n=1,347)
No
16%
Yes
84%
2012
(n=989)
0%
20%
40%
60%
80%
100%
Figure 10: “Which of the following types of variable pay plans does your organization
use for some or all employees?” (Please select all that apply.) 3
Participants who answered “No” in Figure 7 did not receive this question.
2010
(n=1066)
Individual incentives
(other than sales incentives)
67%
59%
Recognition
(e.g. spot award)
60%
66%
Bonuses
(e.g. sign-on, retention)
59%
Performance sharing
(based on other financial or
nonfinancial goals)
57%
58%
76%
19%
19%
Profit sharing
0%
3
2012
(n=820)
20%
40%
60%
80%
A statistically significantly higher number of participants in 2012 reported using recognition (66%) and bonus (76%) variable
pay plans compared with 2010, while a statistically significantly higher number of participants in 2010 reported using individual
incentives (67%).
WorldatWork 11
Compensation Programs and Practices 2012
Figure 11: “Compared to the relevant labor market, what is your organization’s:”
Variable pay target (or goal) (n=719)
Variable pay practice or payout (n=720)
80%
70%
70%
60%
53%
50%
40%
30%
20%
16%
20%
21%
8%
10%
2% 3%
4%
3%
0%
25th percentile
or below
Above 25th but
below 50th
percentile
50th percentile,
or median
Above 50th but
below 75th
percentile
75th percentile
or above
Determination of Base Salary Increases
Figure 12: “How are base salary increases typically determined for employees?”
(Please select all that apply.)
2012
(n=979)
2010
(n=1,337)
Individual performance against job standards
66%
73% 4
Individual performance against MBOs or similar personal objectives
58% 5
44%
Position in range
56%
54%
Market value of the position
50%
55%
Skill or competency acquisition
20%
25%
General increase – everyone receives the same increase
12%
11%
Years of service
9%
13%
Education/certifications
9%
10%
Other
4%
4%
Option
4
A statistically significantly higher number of participants cited using individual performance against job standards for base
salary increases in 2010 (73%) compared with the same method in 2012 (66%).
5
A statistically significantly higher number of participants cited using individual performance against MBOs or similar personal
objectives in 2012 (58%) compared with the same method in 2010 (44%).
WorldatWork 12
Compensation Programs and Practices 2012
Additional Findings:
• 2% of participants selected only “General increase – everyone receives the same
increase” and nothing else out of all answers listed. This is the same percentage as
2010.
• 92% of participants selected individual performance against job standards and/or MBO.
This is an increase from 90% in 2010.
• 84% of participants selected individual performance against job standards and/or or
MBO without selecting the general increase option. This is a decrease from 89% in
2010.
Pay for Performance
Figure 13: “Do you have a formal employee performance rating system, resulting in a
performance metric or score?”6
2010
(n=1335)
2012
(n=979)
We have a rating system with a
performance score that is tied to
salary increases
65%
71%
We have a rating system with a
performance score that is not tied
to salary increases
20%
17%
14%
We assess performance, but do not
have a performance score
11%
2%
No, we don’t assess performance
1%
0%
6
20%
40%
60%
80%
A statistically significantly higher percentage of participants cited having a rating system with a performance score that is tied
to salary increases in 2012 (71%) compared with 2010 (65%).
WorldatWork 13
Compensation Programs and Practices 2012
Figure 14: “If salary increases are based on performance, what is the typical variation in
salary increases for 2012?”
Only participants who answered, “We have a rating system with a performance score that is tied to
salary increases” in Figure 11 received this question.
Option
Base salary increase is based on something other than individual
performance
Everyone receives approximately the same increase
Small variation (increase for top performers is 1.25 times the
average)
Moderate variation (increase for top performers is 1.5 times the
average)
Considerable variation (increase for top performers is 2 times the
average)
Extreme variation (increase for top performers is at least 3 times the
average)
2012
(n=679)
2010
(n=836)
2003
2%
1%
1%
4%
4%
5%
24%
24%
20%
45%
43%
43%
23%
25%
28%
2%
2%
4%
Figure 15: “If your organization allocates annual increases based on performance,
indicate the method for determining the actual increase:”
Only participants who answered “We have a rating system with a performance score that is tied to
salary increases” in Figure 11 received this question. This question is a new addition in 2012. Historical
comparisons are not possible.
Option
A merit matrix (position in range and performance rating) is published that
managers MUST follow in which a specific percentage increase is published for
each box of the matrix
A merit matrix is published that managers MUST follow in which a specific
RANGE of increases is published for each box of the matrix
A merit matrix is published that managers use as a GUIDE, but they have
discretion to deviate if deemed appropriate
A specific guide providing one increase percentage or a range of increase
percentages for each level of performance (position in salary range is not
considered) is published that MUST be followed
A specific guide providing one increase percentage or a range of increase
percentages for each level of performance (position in salary range is not
considered) is published as a GUIDE only
Other type of guidance is provided
No guidance is provided other than the overall budget figure
2012
(n=677)
12%
11%
51%
8%
10%
5%
3%
WorldatWork 14
Compensation Programs and Practices 2012
Figure 16: “How many performance ratings levels/categories are used when assessing
individual performance? (Please do not including levels such as "Too New to Rate,"
"New Hire," etc.)” (n=1,126)
Only participants who answered “We have a rating system with a performance score that is tied to
salary increases” or “We have a rating system with a performance score that is not tied to salary
increases” in Figure 11 received this question.
2012
(n=844)
2010
(n=1126)
60%
57%
54%
50%
40%
27%
23%
30%
20%
12%12%
7% 7%
10%
0% 0%
0% 1%
0%
None
Two
Three
Four
Five
Six or
more
Figure 17: “How were employees distributed across these performance categories for
2011 or last performance period?” (n=1,112)
Only participants who answered “We have a rating system with a performance score that is tied to
salary increases” or “We have a rating system with a performance score that is not tied to salary
increases” in Figure 11 received this question.
2010
(n=1112)
2012
(n=839)
54%
Most people fell into the middle with a bellshaped distribution around the middle
54%
39%
Spread is skewed toward higher
performance ratings
41%
1%
Spread is skewed toward lower
performance ratings
1%
1%
Employees are spread approximately
evenly across performance ratings
0%
5%
Do not track this information
5%
0%
20%
40%
60%
WorldatWork 15
Compensation Programs and Practices 2012
FLSA Classification (U.S.)
Figure 18: “What portion of your organization’s U.S. positions/jobs is exempt from Fair
Labor Standards Act (FLSA) requirements?”
Only participants who answered “We have a rating system with a performance score that is tied to
salary increases” or “We have a rating system with a performance score that is not tied to salary
increases” in Figure 11 received this question. Answer options in the survey questionnaire were listed
in 10% increments.
2010
(n=998)
40%
2012
(n=709)
36%
38%
32% 32%
30%
26% 27%
20%
10%
4%
3%
1%
1%
0%
0% (None)
10% to 30%
40% to 60%
70% to 90%
100% (All)
Figure 19: “For what portion of your organization’s U.S. positions/jobs do you maintain
FLSA exemption status documentation?”
Only participants who answered “We have a rating system with a performance score that is tied to
salary increases” or “We have a rating system with a performance score that is not tied to salary
increases” in Figure 11 received this question. Answer options in the survey questionnaire were listed
in 10% increments and a definition for “documentation” was not provided in the questionnaire.
Exempt positions (n=612)
30%
Nonexempt positions
(n=611)
29%
30%
28%
25%
21%
20%
16%
16%
14%
11% 10%
10%
0%
0% (None)
10% to 30%
40% to 60%
70% to 90%
100% (All)
WorldatWork 16
Compensation Programs and Practices 2012
Figure 19a: Portion of nonexempt positions/jobs for which FLSA exemption status
testing documentation is maintained, by organization size.
0%
10%
to 30%
40%
to 60%
70%
to 90%
100%
Less than 100 (n=0)
0%
0%
0%
0%
0%
101 to 999 (n=49)
39%
18%
14%
8%
20%
1000 to 4,999 (n=205)
32%
16%
11%
13%
27%
5,000 to 19,999 (n=211)
31%
13%
9%
17%
31%
20,000 and above (n=138)
20%
20%
11%
15%
34%
Organization Size
Figure 19b: Portion of exempt positions/jobs for which FLSA exemption status testing
documentation is maintained, by organization size.
0%
10%
to 30%
40%
to 60%
70%
to 90%
100%
Less than 100 (n=1)
100%
0%
0%
0%
0%
101 to 999 (n=51)
28%
28%
16%
14%
16%
1000 to 4,999 (n=197)
26%
20%
13%
14%
27%
5,000 to 19,999 (n=220)
27%
19%
9%
18%
28%
20,000 and above (n=135)
19%
22%
11%
17%
32%
Organization Size
WorldatWork 17
Compensation Programs and Practices 2012
Salary Structure Design and Administration
Figure 20: “How often do you assess the market pricing of jobs (i.e., pricing
benchmarks or all jobs with salary survey data)?”
2010
(n=1315)
2012
(n=956)
7%
Multiple times per year
6%
55%
Once a year
59%
13%
Once every two years
11%
5%
Less than once every two years
4%
1%
Never
0%
19%
As needed based on market
conditions
20%
0%
20%
40%
60%
Figure 21: “How often do you typically adjust base salary structures for employees?”
2010
(n=1280)
Not consistently adjusted
OR as needed based on market
conditions
2012
(n=929)
30%
31%
3%
Less than once every two years
4%
9%
Once every two years
9%
58%
Once a year
55%
0%
Multiple times per year
0%
0%
20%
40%
60%
WorldatWork 18
Compensation Programs and Practices 2012
Figure 22: “Does your organization have more than one salary structure?”
Yes
59%
2010
No
41%
(n=1285)
Yes
72%
2012
(n=940)
0%
20%
40%
No
28%
60%
80%
100%
Figure 22a: “Does your organization use a formal salary structure(s)?”
This question is a new addition in 2012. Historical comparisons are not possible.
Yes
85%
No
15%
WorldatWork 19
Compensation Programs and Practices 2012
Figure 23: “How many separate structures are in place?”
Only participants who answered “Yes” in Figure 22a received this question.
2
25%
2010
3
21%
4
12%
5 or more
42%
(n=751)
2
18%
2012
(n=626)
0%
3
18%
20%
4
13%
40%
5 or more
51%
60%
80%
100%
Figure 24: “How are the separate structures defined/identified?”
(Please select all that apply.)
Only participants who answered “Yes” in Figure 22a received this question.
2012
(n=627)
52%
2010
(n=836)
45%
By FLSA exemption status or other regulatory classification
33%
35%
By business unit/subsidiary
31%
25%
By job category/roll/type/function
23%
32% 7
By bargaining unit/union affiliation
5%
7%
Other
4%
4%
Option
By geographic region
7
A statistically significantly higher number of participants in 2010 defined separate structures by job category, roll, type or
function (32%) compared with 2012 (23%).
WorldatWork 20
Compensation Programs and Practices 2012
Figure 25: “Does your salary structure(s) consist of salary grades or broadbands?”
Only participants who answered “Yes” in Figure 22a received this question.
90%
80%
2010
(n=1284)
86%
2012
(n=628)
73%
70%
60%
50%
40%
30%
14%
20%
8%
10%
13%
6%
0%
Salary grades
Broadbanding
approach
Other
Figure 25a: “For hourly positions, what is the typical range spread
[(maximum/minimum) -1] of ranges in your structure(s)?” (n=609)
Only participants who answered “Salary grades” in Figure 25 received this question.
This question was asked in 2012 only. There is no history on this specific data.
50%
41%
40%
30%
24%
20%
12%
10%
8%
11%
3%
0%
Less than 10% to
20% to
30% to
40% to
10%
less than less than less than less than
20%
30%
40%
50%
50% or
more
WorldatWork 21
Compensation Programs and Practices 2012
Figure 25b: “For salaried (except executive) positions, what is the typical range spread
[(maximum/minimum) -1] of ranges in your structure(s)?” (n=645)
Only participants who answered “Salary grades” in Figure 25 received this question.
This question was asked in 2012 only. There is no history on this specific data.
30%
30%
25%
20%
15%
11%
9%
10%
7%
4%
0%
Less than 25% to
35% to
45% to
55% to
65% to
25%
less than less than less than less than less than
35%
45%
55%
65%
75%
75% or
more
Figure 25c: “For executive positions, what is the typical range spread
[(maximum/minimum) -1] of ranges in your structure(s)?” (n=561)
Only participants who answered “Salary grades” in Figure 25 received this question.
This question was asked in 2012 only. There is no history on this specific data.
19%
20%
18%
19%
19%
10%
10%
7%
7%
0%
Less than 35% to
45% to
55% to
65% to
75% to
35%
less than less than less than less than less than
45%
55%
65%
75%
85%
85% or
more
WorldatWork 22
Compensation Programs and Practices 2012
Types of Increases
Figure 26: “What types of salary increases and/or adjustments does your organization
award to some or all employees?” (Please select all that apply.)
2012
(n=946)
97%
2010
(n=1,306)
94%
Merit increases
94%
92%
Market adjustments
77%
76%
Internal equity adjustments
Pay differentials (usually related to atypical schedule, hazardous or unsecure work environment, special skill set or responsibilities, etc.)
Temporary special assignment pay
General across-the-board increases not considered COLA or market
adjustments
Cost-of-living adjustments (COLAs)
69%
64%
49%
42%
39%
36%
13%
12%
12%
11%
Other
4%
4%
Option
Promotional increases (result of higher/greater level of responsibility)
Pay Communication
Figure 27: “How much information about the pay program is shared with employees
about their individual salaries?” (Please select all that apply.)
2012
(n=940)
2010
(n=1,300)
46%
49%
44%
43%
The organization's compensation philosophy
34%
52%
Minimal pay-related information is shared
34%
32%
Base salary ranges for all pay grades or jobs
18%
19%
Actual pay levels for all employees
2%
1%
Other
5%
4%
Option
Information regarding the design of the pay program
(e.g., strategy, compensation markets, link to performance, etc.)
Base salary range for the employee’s pay grade
WorldatWork 23
Compensation Programs and Practices 2012
Figure 28: “In the past 12 months, how did employees receive communications about
the pay program?” (Please select all that apply.)
2012
(n=940)
79% 8
2010
(n=1,299)
Information is posted on a company website
41%
42%
Memos, emails
37%
41%
Individual discussions with human resources/compensation department
29%
30%
Employee meetings
23%
27%
Employee handbook or orientation manual
20%
21%
No pay communications
7%
7%
Other
7%
6%
Option
Individual discussions with their supervisor
73%
Figure 29: “How often did employees receive communications about their individual pay
in the past 12 months?”
Participants who answered “No pay communications” in Figure 28 did not receive this question.
2010
n=1297
76%79%
80%
2012
(n=872)
70%
60%
50%
40%
30%
20%
10%
12%12%
6% 5%
3%3% 1%0% 2%2%
0%
Never
8
At least
once
Twice
3 times
4 times
5 times
or more
A statistically significantly higher number of participants in 2012 cited using individual discussions with their supervisor to
communicate pay programs to employees (79%) compared with 2010 (73%).
WorldatWork 24
Compensation Programs and Practices 2012
Figure 30: “The approach to communicating individual pay increases is:”
(Please select all that apply.)
2010
(n=871)
2012
(n=871)
54%
Brief written communication
54%
49%
Brief verbal communication
51%
24%
Detailed verbal communication
25%
22%
Detailed written communication
25%
2%
We never communicate pay
information
1%
0%
20%
40%
60%
Evaluation of Salary Policies and Practices
Figure 31: “How does management determine if the salary program is effective?”
(Please select all that apply.)
2012
(n=922)
63%
2010
(n=1,258)
59%
Employee satisfaction survey metrics
50%
46%
Business/operating results
29%
32%
Senior leadership tells us that it is working
21%
21%
Management does not evaluate salary program effectiveness
20%
22%
Employees tell us that it is working
19%
18%
Employee productivity metrics
16%
17%
Labor cost is controlled/lowered
15%
15%
Other
4%
3%
Option
Employee turnover or retention
WorldatWork 25
Compensation Programs and Practices 2012
Global Analysis
The following questions were included in the 2012 fielding of this survey only. No historical data is
available.
Figure 32: “For which regions of the world do you have responsibility?” (Check all that
apply.) (n=1001)
United States/Canada
99%
Asia-Pacific
22%
Western Europe
21%
19%
Latin America
Eastern Europe
14%
Middle East
12%
10%
Africa
0%
20%
40%
60%
80%
100%
Figure 33: “If you have a compensation philosophy, is it universal companywide or
does it vary by country?” (n=223)
Only survey participants selecting more than one country in Figure 32 received this question.
Universal
companywide
76%
Varies
by
country
24%
WorldatWork 26
Compensation Programs and Practices 2012
Figure 34: “If you have employees in multiple countries, how are your variable pay
programs designed and administered?” (n=235)
Only survey participants selecting more than one country in Figure 32 received this question.
Option
2012
Variable pay programs are designed primarily at the corporate level, and all
employees generally participate in the same programs with flexibility for local
countries to make limited adaptations or implement unique programs of
nominal cost
47%
Variable pay programs are designed exclusively at the corporate level, and all
employees worldwide participate in the same programs
33%
Variable pay programs are designed with significant input from local HR and/or
line management. One or a few core variable pay programs exist
companywide, however different countries have significant latitude to
implement additional local programs based on local practice and competitive
factors
17%
Variable pay programs are designed and administered primarily at the local
level to ensure they are meeting the unique needs of local employees
3%
Figure 35: “Which of the following types of variable pay plans does your organization
use for some or all employees based on the regions you are responsible for?” (Please
select all that apply.)
Only survey participants selecting more than one country in Figure 32 received this question.
Profit
sharing
Performance
sharing
(based on
Individual
other
incentives
financial or (other than
nonfinancial
sales
goals)
incentives)
Bonuses
(e.g.,
sign-on,
retention)
Recognition
(e.g., spot
award)
United States/Canada
24%
57%
61%
76%
75%
Africa
14%
54%
55%
67%
71%
Asia-Pacific
13%
51%
59%
65%
66%
Eastern Europe
14%
60%
54%
64%
67%
Western Europe
15%
54%
58%
65%
69%
Middle East
16%
51%
58%
71%
70%
Latin America
20%
53%
58%
61%
62%
WorldatWork 27
Compensation Programs and Practices 2012
Figure 36: “Is your performance management program applied consistently to all
countries?”
Only survey participants selecting more than one country in Figure 32 received this question.
Yes
85%
No
15%
WorldatWork 28
Compensation Programs and Practices 2012
Additional Analysis
Comparisons by Type of Compensation Philosophy
This section provides a detailed analysis of an organization’s compensation philosophy status:
• Written compensation philosophy
• Unwritten compensation philosophy
• None/other compensation philosophy
This summary is intended to provide an overview of how organizations with a written
compensation philosophy may differ from organizations with an unwritten compensation
philosophy9.
Figure 37: By year 10
70%
67%
2010
n=1381
61%
60%
2012
n=996
50%
40%
29%
30%
26%
20%
10%
10%
8%
0%
Written compensation
philosophy
Unwritten
compensation
philosophy
None/other
compensation
philosophy
Legend (n=996):
9
Selected statistically significant differences are noted.
In 2012 a statistically significantly higher percentage of organizations have a written compensation philosophy (67%)
compared with 2010 (61%).
10
WorldatWork 29
Compensation Programs and Practices 2012
Written compensation
philosophy
67%
Unwritten compensation
philosophy
26%
None/other compensation
philosophy
8%
Figure 38: By sector
Written
Public sector (n=143)
Private sector (n=640)
Nonprofit/Not-for-profit (n=153) 11
62%
65%
76%
Unwritten None/other
28%
10%
27%
8%
18%
5%
Figure 39: By understanding of compensation philosophy
Written
Most or all employees understand the compensation
philosophy12 (n=406)
About half of employees understand the compensation
philosophy (n=262)
Virtually all or most employees DO NOT understand the
compensation philosophy (n=253)
Unwritten None/other
89%
11%
0%
77%
22%
0%
57%
41%
1%
Comparisons by Level of Compensation Philosophy Understanding
11
Nonprofit/not-for-profit sectors are significantly more likely to have a written compensation philosophy (76%) than the public
sector (62%) and the private sector (65%).
12
Where most, all or half of the employees understand the organizations compensation philosophy, these organizations are
statistically significantly more likely to have a written compensation philosophy.
WorldatWork 30
Compensation Programs and Practices 2012
The following section provides a detailed analysis of employee understanding of organizations’
compensation philosophies:
• Virtually all or most employees do not understand the compensation philosophy
• About half of employees understand the compensation philosophy
• Most or all employees understand the compensation philosophy.
This summary is intended to provide an overview of how an organization’s compensation
philosophy may vary with an employee’s understanding of the compensation philosophy.
Figure 40: By year:
2010
(n=1237)
2012
(n=921)
42%
Virtually none or most employees DO
NOT understand the compensation
philosophy
44%
30%
Most or all employees understand the
compensation philosophy
28%
29%
About half of employees understand
the compensation philosophy
27%
0%
Legend (n=921):
20%
40%
60%
WorldatWork 31
Compensation Programs and Practices 2012
Most or all employees
understand the
compensation philosophy
27%
About half of employees
understand the
compensation philosophy
28%
Virtually all or most
employees DO NOT
understand the
compensation philosophy
44%
Figure 41: By sector:
Most/All
Half
Few/None
Public sector (n=131)
27%
27%
45%
Private sector (n=592)
28%
28%
44%
Nonprofit/Not-for-profit (n=146)
25%
34%
41%
Figure 42: By type of pay information shared with employees:
Most/All
Half
Few/None
Minimal pay-related information is shared (n=273)
13%
18%
68% 13
Information regarding the design of the pay program is shared
(e.g., strategy, compensation markets, link to performance,
etc.) (n=414)
38%
35%
27%
Base salary range for the employee's pay grade is shared
(n=397)
32%
35%
33%
Base salary ranges for all pay grades or jobs are shared
(n=158)
37%
30%
32%
Actual pay levels for all employees are shared 14 (n=17)
24%
18%
59%
The organization's compensation philosophy is shared (n=319)
40%
34%
25%
13
Organizations where minimal pay information is shared reported at statistically significantly higher rates that employees
within the organization did not understand the compensation philosophy (68%) compared with organizations that share the
design of the pay program (27%), the base salary range for the employees pay grade (33%), base salary ranges for all pay
grades or jobs (32%), and the organization’s compensation philosophy (25%).
14
Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
WorldatWork 32
Compensation Programs and Practices 2012
Legend (n=921):
Most or all employees
understand the
compensation
philosophy
27%
About half of
employees understand
the compensation
philosophy
28%
Virtually all or most
employees DO NOT
understand the
compensation philosophy
44%
Figure 43: By pay communication approaches:
Most/All
Half
Few/None
0%
27%
38%
24%
40% 17
33%
28%
31%
32%
29%
67%
45% 16
31%
44%
31%
15
We never communicate pay information (n=3)
Brief written communication (n=447)
Detailed written communication (n=208)
Brief verbal communication (n=417)
Detailed verbal communication (n=212)
Figure 44: By annual turnover:
15
Most/All
Half
Few/None
0%-5% (n=198)
35% 18
26%
38%
6%-10% (n=325)
31%
30%
39%
11%-15% (n=159)
21%
26%
54%
16% + (n=136)
16%
32%
52%
Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
Organizations that reported communicating with brief written communication (45%) were statistically significantly more likely
to report that virtually all or most employees do not understand the organization’s compensation philosophy over organizations
providing detailed written communication (31%) and detailed verbal communications (31%).
17
Organizations that reported communicating pay information through detailed verbal communication were statistically
significantly more likely to report that most or all employees understand the organization’s compensation philosophy (40%)
over organizations providing brief verbal communications (24%).
18
Organizations where most or all employees understand the compensation philosophy were statistically significantly more
likely to report a voluntary turnover rate (VTO) between 0%-5% (35%) compared with a VTO of 11%-15% (21%) or 16%+
(16%).
16
WorldatWork 33
Compensation Programs and Practices 2012
Comparisons by Annual Turnover
The following section provides a detailed analysis of the approximate annual turnover for
employees:
• 0% - 5%
• 6%-10%
• 11%-15%
• 16%+
This summary is intended to provide an overview of how pay practices may differ by annual
turnover.
Legend (n=883):
0% - 5%
23%
6%-10%
40%
11%-15%
20%
16%+
17%
Figure 45: By base salary practice:
0% - 5%
6% - 10%
11% - 15%
16+%
Less than 25th percentile14 (n=11)
0%
46%
27%
27%
Above 25th but below 50th percentile (n=143)
50th percentile, or median (n=573)
Above 50th but below 75th percentile (n=112)
11%
24%
31%
37%
40%
43%
26%
18%
15%
26%
17%
11%
75th percentile or above14 (n=10)
40%
30%
30%
0%
0% - 5%
6% - 10%
11% - 15%
16+%
Less than 25th percentile14 (n=7)
0%
57%
14%
29%
Above 25th but below 50th percentile (n=139)
15%
39%
22%
24%
50th percentile, or median (n=410)
24%
40%
17%
20%
Above 50th but below 75th percentile (n=164)
27%
38%
21%
13%
75th percentile or above14 (n=29)
28%
45%
17%
10%
Figure 46: By current total cash practice
WorldatWork 34
Compensation Programs and Practices 2012
Legend (n=883):
0% - 5%
23%
6%-10%
40%
11%-15%
20%
16%+
17%
Figure 47: By variable pay practice or payout
0% - 5%
6% - 10%
11% - 15%
16+%
Less than 25th percentile (n=20)
15%
50%
5%
30%
Above 25th but below 50th percentile (n=134)
22%
35%
20%
22%
50th percentile, or median (n=342)
Above 50th but below 75th percentile (n=134)
75th percentile or above15 (n=20)
24%
22%
30%
38%
47%
55%
18%
17%
10%
20%
14%
5%
0% - 5%
6% - 10%
11% - 15%
16+%
25%
50%
25%
0%
28%
31%
21%
21%
23%
39%
19%
19%
24%
37%
19%
19%
27%
43%
19%
12%
10%
50%
20%
20%
Figure 48: By variation in salary increase for 2012:
Base salary increase is based on something other than
individual performance16 (n=8)
Everyone receives approximately the same increase16
(n=29)
Small variation
(increase for top performers is 1.25 times the average)
(n=153)
Moderate variation
(increase for top performers is 1.5 times the average)
(n=281)
Considerable variation
(increase for top performers is 2 times the average)
(n=134)
Extreme variation
(increase for top performers is at least 3 times the
average)16 (n=10)
WorldatWork 35
Compensation Programs and Practices 2012
Legend (n=883):
0% - 5%
23%
6%-10%
40%
11%-15%
20%
16%+
17%
Figure 49: By type of pay information shared with employees:
Minimal pay related information is shared (n=296)
Information regarding the design of the pay program is
shared (e.g., strategy, compensation markets, link to
performance, etc.) (n=408)
Base salary range for the employee’s pay grade is
shared (n=381)
Base salary ranges for all pay grades or jobs are
shared (n=161)
Actual pay levels for all employees are shared17 (n=18)
The organization's compensation philosophy is shared
(n=296)
0% - 5%
6% - 10%
11% - 15%
16+%
14%
34%
27%
25%
25%
46% 19
17%
13%
29% 20
44%
15%
12%
36% 21
39%
18%
8%
33%
22%
28%
17%
25%
45%
16%
14%
Figure 50: By pay communication approaches:
We never communicate pay information 22
(n=5)
Brief written communication (n=445)
Detailed written communication (n=207)
Brief verbal communication (n=415)
Detailed verbal communication (n=204)
19
0% - 5%
6% - 10%
11% - 15%
16+%
20%
40%
20%
20%
23%
28%
40%
42%
21%
17%
16%
13%
21%
28%
40%
37%
21%
17%
18%
17%
Organizations sharing Information regarding the design of the pay program have statistically significantly higher percentages
of employee voluntary turnover between 0% - 5% (46%) compared with organizations where minimal pay related information is
shared (14%).
20 Organizations sharing base salary range for the employee’s pay grade have statistically significantly higher percentages of
employee voluntary turnover between 0% - 5% (29%) compared with organizations where minimal pay related information is
shared (14%).
21 Organizations sharing base salary ranges for all pay grades or jobs have statistically significantly higher percentages of
employee voluntary turnover between 0% - 5% (36%) compared with organizations where minimal pay related information is
shared (14%).
22 Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
WorldatWork 36
Compensation Programs and Practices 2012
Comparisons by Sector
The following section provides a detailed analysis of the organization type:
• Public sector
• Private sector
• Nonprofit/Not-for-profit
This summary is intended to provide an overview of how an organization’s compensation
philosophy may vary by sector.
Legend (n=941):
Public sector
15%
Private sector
68%
Nonprofit/
Not-for-profit
16%
Figure 51: By determination of base salary increases:
Public
Individual performance against job standards (n=618)
Individual performance against MBOs or similar personal
objectives (n=535)
15%
68% 23
17%
14%
75% 24
11%
Skill or competency acquisition (n=186)
Years of service (n=87)
Position in range (n=524)
15%
70% 25
15%
23%
13%
18%
49%
74% 26
59%
28%
12%
23%
14%
70% 27
15%
27%
39%
35%
Education/certifications (n=82)
Market value of the position (n=471)
General increase — everyone receives the same
increase (n=109)
23
Private Nonprofit
Private-sector organizations are statistically significantly more likely to determine base salary increases from individual
performance against job standards (68%) compared with years of service (49%) or a general increase (39%).
24 Private-sector organizations are statistically significantly more likely to determine base salary increases from individual
performance against MBOs or similar personal objectives (75%) compared with years of service (49%), education or
certifications (59%) or a general increase (39%).
25 Private-sector organizations are statistically significantly more likely to determine base salary increases from skill or
competency acquisition (70%) compared with years of service (49%) or a general increase (39%).
26 Private-sector organizations are statistically significantly more likely to determine base salary increases from position in
range (74%) compared with years of service (49%), education or certifications (59%) or a general increase (39%).
27 Private-sector organizations are statistically significantly more likely to determine base salary increases from the market
value of the position (70%) compared with years of service (49%) or a general increase (39%).
WorldatWork 37
Compensation Programs and Practices 2012
Legend (n=941):
Public sector
15%
Private sector
68%
Nonprofit/
Not-for-profit
16%
Figure 52: By formal employee performance rating system prevalence:
Public
We have a rating system with a performance score that is
tied to salary increases (n=663)
We have a rating system with a performance score that is not
tied to salary increases (n=160)
We assess performance, but we do not have a performance
score (n=105)
No, we don’t assess performance19 (n=12)
Private Nonprofit
14%
71% 28
15%
18%
64%
18%
21%
57%
22%
8%
67%
25%
Public
Private Nonprofit
Figure 53: By variation in salary increases for 2012:
Base salary increase is based on something other than
individual performance 29 (n=10)
40%
50%
10%
Everyone receives approximately the same increase19 (n=30)
37%
43%
20%
16%
60%
24%
10%
76%
14%
11%
82% 30
7%
9%
73%
18%
Small variation
(increase for top performers is 1.25 times the average)(n=160)
Moderate variation
(increase for top performers is 1.5 times the average)(n=301)
Considerable variation
(increase for top performers is 2 times the average)(n=145)
Extreme variation
(increase for top performers is at least 3 times the average)19
(n=11)
28
Private-sector organizations are statistically significantly more likely to have a rating system with a performance score that is
tied to salary increases (71%) over organizations that assess performance, but do not have a performance score (57%).
29
Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
30 Private-sector organizations are statistically significantly more likely to have considerable variation in typical salary increases
(82%) compared with all employees receiving approximately the same increase (43%).
WorldatWork 38
Compensation Programs and Practices 2012
Figure 54: By types of pay information shared with employees:
Public
Minimal pay-related information is shared (n=314)
Information regarding the design of the pay program is shared
(e.g., strategy, compensation markets, link to performance, etc.)
(n=429)
Base salary range for the employee’s pay grade is shared
(n=409)
Base salary ranges for all pay grades or jobs are shared
(n=171)
19
Actual pay levels for all employees are shared (n=18)
The organization's compensation philosophy is shared (n=322)
Private Nonprofit
13%
76%
11%
13%
70%
18%
15%
65%
20%
30%
42%
28%
39%
14%
50%
65%
11%
21%