Making Sense of Dollars

For employers hoping to keep employees around, it turns out money can buy love.

But while employee love — or retention — is the most popular indicator in the view of human resources practitioners of compensation program success, they seldom take into account a program’s actual return on investment.

When measuring the success of a compensation program, only 12 percent of HR practitioner respondents look to return on investment, according to a survey by Human Capital Media Advisory Group, the research arm of Talent Management magazine.

This survey, issued in January 2015, polled 227 human resources professionals from companies of various sizes and industries across the world. Most (84 percent) of the organizations participating in this study are located in the United States, and 42 percent are director level or above.

The most popular way companies measure the success of the programs is based on rates of retention (72 percent), according to the survey. Another 64 percent observe employee satisfaction, and 41 percent see employee engagement.

The most popular rewards for service are arguably also the most traditional.

Of programs offered, most organizations (62 percent) offer pay for performance. Others offer length-of-service awards (57 percent) and spot recognition awards (52 percent). Meanwhile, only 18 percent of these companies have programs for stock options. Points programs and annual reports each are offered by 8.5 percent of respondents, according to the survey.

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Things might be looking up for employees hoping to make more money (Figure 1). Of those polled, 57 percent say their organization plans to increase compensation in 2016. Eighty percent said the rewards are based on individual performance, and only 6 percent of companies plan to decrease compensation, the survey showed.

When it comes to benefits, 21 percent plan to increase offerings; only 9 percent plan to decrease benefits. The remaining 70 percent said they plan to maintain the current offerings.

When planning rewards compensation packages, businesses are looking to increase the typical benefits and pay, among other perks.

The majority (89 percent) of companies plan to offer more salary as a reward. Health care is considered as a bonus to 76 percent of survey respondents. Following salary and health care are paid leave and retirement, each considered by 65 percent of companies.

The least popular of these programs include work culture, rewards programs and job privileges, the survey showed, all of which are planned out by about 33 percent of the HR practitioners polled.

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Regarding what’s most important to employees, 86 percent of respondents feel that salary and pay are integral. Another 60 percent see health care as most important (Figure 2).

Surprisingly, work culture came out as more important than 401(k) and retirement benefits, according to the survey.

Rewards and recognition programs, meanwhile, are each thought to be crucial by about 7 percent of respondents. Only 6 percent felt that family benefits are of the most importance to their staff.

When considering work culture, 24 percent feel it’s most important. Planning for work culture is on par with the planning of both rewards programs and job privileges, all of which are considered by about 33 percent of respondents.

Of the rewards offered to employees, different factors come into play when considering compensation.

The majority (80 percent) said it is based on individual performance. Other rewards come from team performance (37 percent), tenure (33 percent) and specific project completion (30 percent). Only 12 percent of rewards are based on the meeting of development goals.

When it comes to who gets rewarded, it seems that either a small portion of the staff or nearly everyone is eligible for incentives.

Of those polled, 39 percent say that less than 15 percent of staff is eligible for incentive-based pay. In 26 percent of companies, more than 90 percent of staff is eligible, according to the survey.

Respondents were also asked about the integration of design, planning and implementation of the compensation, rewards and recognition programs at their organizations. Many of these programs are somewhat integrated (42 percent), and another 25 percent are moderately integrated.

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A somewhat equal percentage of respondents said their companies’ compensation programs were not at all integrated and completely integrated (Figure 3).

Succession planning especially is not very well integrated with compensation planning, according to the survey. Only 9 percent have succession planning completely integrated with compensation planning; 44 percent said the two are not at all integrated.

Business strategy and performance management are the most integrated into compensation planning, with 14 and 23 percent of respondents, respectively, saying their programs are “completely integrated.”

 When looking at the customizing abilities of compensation packages, most respondents (60 percent) say theirs are somewhat uniform. Only 3.6 percent said their packages are completely customizable.