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 year10
0%
9 Selected statistically significant differences are noted.
10In 2012 a statistically significantly higher percentage of organizations have a written compensation philosophy (67%) compared with 2010 (61%).
Written compensation philosophy
67%
Unwritten compensation philosophy
26%
None/other compensation philosophy
8%
Figure 38: By sector
Written Unwritten None/other Public sector (n=143) 62% 28% 10%
Private sector (n=640) 65% 27% 8%
Nonprofit/Not-for-profit (n=153)11 76% 18% 5%
Figure 39: By understanding of compensation philosophy
Written Unwritten None/other Most or all employees understand the compensation
philosophy12 89%
(n=406) 11% 0%
About half of employees understand the compensation
philosophy (n=262) 77% 22% 0%
Virtually all or most employees DO NOT understand the
compensation philosophy (n=253) 57% 41% 1%
Comparisons by Level of Compensation Philosophy Understanding
11Nonprofit/not-for-profit sectors aresignificantly 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.
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:
0% 20% 40% 60%
About half of employees understand the compensation philosophy Most or all employees understand the
compensation philosophy Virtually none or most employees DO
NOT understand the compensation philosophy
29%
30%
42%
27%
28%
44%
2010 (n=1237)
2012 (n=921)
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 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 shared14 (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%).
14Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
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 We never communicate pay information (n=3) 15 0% 33% 67%
Brief written communication (n=447) 27% 28% 45%16 Detailed written communication (n=208) 38% 31% 31%
Brief verbal communication (n=417) 24% 32% 44%
Detailed verbal communication (n=212) 40%17 29% 31%
Figure 44: By annual turnover:
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%
15Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
16 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%).
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) 11% 37% 26% 26%
50th percentile, or median (n=573) 24% 40% 18% 17%
Above 50th but below 75th percentile (n=112) 31% 43% 15% 11%
75th percentile or above14 (n=10) 40% 30% 30% 0%
Figure 46: By current total cash practice
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%
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) 24% 38% 18% 20%
Above 50th but below 75th percentile (n=134) 22% 47% 17% 14%
75th percentile or above15 (n=20) 30% 55% 10% 5%
Figure 48: By variation in salary increase for 2012:
0% - 5% 6% - 10% 11% - 15% 16+%
Base salary increase is based on something other than
individual performance16 (n=8) 25% 50% 25% 0%
Everyone receives approximately the same increase16
(n=29) 28% 31% 21% 21%
Small variation (increase for top performers is 1.25 times the average)
(n=153)
23% 39% 19% 19%
Moderate variation (increase for top performers is 1.5 times the average)
(n=281)
24% 37% 19% 19%
Considerable variation (increase for top performers is 2 times the average)
(n=134)
27% 43% 19% 12%
Extreme variation (increase for top performers is at least 3 times the
average)16 (n=10)
10% 50% 20% 20%
Legend (n=883):
Figure 49: By type of pay information shared with employees:
0% - 5% 6% - 10% 11% - 15% 16+%
Minimal pay related information is shared (n=296) 14% 34% 27% 25%
Information regarding the design of the pay program is shared (e.g., strategy, compensation markets, link to performance, etc.) (n=408)
25% 46%19 17% 13%
Base salary range for the employee’s pay grade is
shared (n=381) 29%20 44% 15% 12%
Base salary ranges for all pay grades or jobs are
shared (n=161) 36%21 39% 18% 8%
Actual pay levels for all employees are shared17 (n=18) 33% 22% 28% 17%
The organization's compensation philosophy is shared
(n=296) 25% 45% 16% 14%
Figure 50: By pay communication approaches:
0% - 5% 6% - 10% 11% - 15% 16+%
We never communicate pay information22
(n=5) 20% 40% 20% 20%
Brief written communication (n=445) 23% 40% 21% 16%
Detailed written communication (n=207) 28% 42% 17% 13%
Brief verbal communication (n=415) 21% 40% 21% 18%
Detailed verbal communication (n=204) 28% 37% 17% 17%
19Organizations 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%).
20Organizations 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%).
21Organizations 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%).
22Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
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 Private Nonprofit Individual performance against job standards (n=618) 15% 68%23 17%
Individual performance against MBOs or similar personal
objectives (n=535) 14% 75%24 11%
Skill or competency acquisition (n=186) 15% 70%25 15%
Years of service (n=87) 23% 49% 28%
Position in range (n=524) 13% 74%26 12%
Education/certifications (n=82) 18% 59% 23%
Market value of the position (n=471) 14% 70%27 15%
General increase — everyone receives the same
increase (n=109) 27% 39% 35%
23Private-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%).
24Private-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%).
25Private-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%).
26Private-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%).
27Private-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%).
Legend (n=941):
Public sector 15%
Private sector 68%
Nonprofit/
Not-for-profit 16%
Figure 52: By formal employee performance rating system prevalence:
Public Private Nonprofit We have a rating system with a performance score that is
tied to salary increases (n=663) 14% 71%28 15%
We have a rating system with a performance score that is not
tied to salary increases (n=160) 18% 64% 18%
We assess performance, but we do not have a performance
score (n=105) 21% 57% 22%
No, we don’t assess performance19 (n=12) 8% 67% 25%
Figure 53: By variation in salary increases for 2012:
Public Private Nonprofit Base salary increase is based on something other than
individual performance29 40%
(n=10) 50% 10%
Everyone receives approximately the same increase19 (n=30) 37% 43% 20%
Small variation
(increase for top performers is 1.25 times the average)(n=160) 16% 60% 24%
Moderate variation
(increase for top performers is 1.5 times the average)(n=301) 10% 76% 14%
Considerable variation
(increase for top performers is 2 times the average)(n=145) 11% 82%30 7%
Extreme variation (increase for top performers is at least 3 times the average)19
(n=11)
9% 73% 18%
28Private-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%).
29Count for group is less than 30; data corresponding to larger sample sizes will have stronger statistical power and validity.
30Private-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%).
Figure 54: By types of pay information shared with employees:
Public Private Nonprofit Minimal pay-related information is shared (n=314) 13% 76% 11%
Information regarding the design of the pay program is shared (e.g., strategy, compensation markets, link to performance, etc.) (n=429)
13% 70% 18%
Base salary range for the employee’s pay grade is shared
(n=409) 15% 65% 20%
Base salary ranges for all pay grades or jobs are shared
(n=171) 30% 42% 28%
Actual pay levels for all employees are shared19 (n=18) 39% 50% 11%
The organization's compensation philosophy is shared (n=322) 14% 65% 21%