52% Of Organizations Are Planning More Funding for Merit Increases in 2022 According to Annual Pay Practices Survey From Salary.com

  • This Represents a 174% Increase From 2021

Faced with a persistently competitive labor market, half of organizations (52 percent) in Salary.com Annual Pay Practices and Compensation Strategy Survey are increasing funding for merit increases. This is a significant jump from the 19 percent of organizations that did so in 2020. The survey of 881 organizations, conducted in the fall of 2021, also reported a bump in bonus funding: 39 percent of organizations are increasing funding for bonuses and short-term incentives, compared to 29 percent in the last survey.

“The highly competitive nature of today’s labor market has made it more important than ever to keep employees happy and this dramatic increase in merit funding demonstrates that companies are willing to pay more to convince their employees stay put,” said Chris Fusco, senior vice president of compensation at Salary.com. “The increase is also an indication that employers are considering cost of living adjustments to offset the rapid rise in inflation rate, which now stands at 7 percent.”

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Forty percent of organizations are incorporating premiums into base salaries and 33 percent are providing hiring bonuses. Hot skills continue to reap rewards, as 81% of organizations compensate employees with hot skills.

Performance Management and Employee Recognition

Individual incentives remain popular and are used by 61 percent of organizations. The percentages of participants using referral bonuses (64 percent) and hiring bonuses (62 percent) have increased 24 percent since last year’s survey. Sixty-seven percent of organizations use three or more bonus programs.

Hybrid Work Gaining Sense of Permanence

As the pandemic continues to disrupt the workplace, 52 percent of organizations are leveraging a hybrid work environment where some employees remain remote, and some are returning to the office. One-quarter of organizations have employees working fully remotely, while one-quarter will be asking employees to eventually come back to the office.

Regardless of the workplace model, compensation remains the same, with 84 percent of organizations reporting they are not changing the way they pay their remote and hybrid employees.

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“With more than half of companies embracing a hybrid work model, companies are clearly responding to employee calls for increased workplace flexibility while balancing the need for an office presence,” said Fusco. “The unpredictability around what this virus will do next will continue to try companies’ patience, but employees can take comfort in knowing it is likely their compensation won’t be impacted.”

Fair Pay and Compliance

  • 69% of organizations agree or strongly agree their employees are paid fairly
  • 78% of participants use market or survey data to ensure pay is externally competitive.
  • 48% organizations tie base increases to performance ratings and another 22% use rankings to influence base pay increases.

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