COMPENSATION

BEST PRACTICES
REPORT

GREAT BALANCING ACT

THE YEAR OF THE

PAYSCALE PAYSCAL P PA AYSC AY A YS SC CA C AL A L RESEARCH RESEARC RE R ESE ES E SE S EA AR RC R C REPOR R RE REPORT E O EPOR OR R

EXECUTIVE SUMMARY
Each year since 2009, we at PayScale have conducted a survey of compensation best practices to take a look at what transpired in the year just ended and predict trends for the upcoming year. In analyzing this years survey results, we saw more encouraging economic signs than weve seen in recent years as companies are growing in size and offering raises to current employees. Yet this increased optimism comes along with a good dose of caution as most companies lack sufficient business insight to know what to pay to effectively attract and retain the right people. With the more competitive economy of 2014, companies will be challenged to balance growth with smart decisions about how to compensate talent.

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In 2014 companies expect growth and increased hiring. Competition for key talent is heating up. Growth and hiring surges are causing big concerns about retention as employees leave for greener pastures. Companies are operating in the dark without access to relevant market data and the smart ones are eagerly seeking ways to get wiser about managing performance and compensation structures with more reliable salary data and insights. In 2012, we saw businesses begin to feel optimistic again, and that upward trend continued in 2013. More organizations grew in 2013 than the three previous years and growth is expected to continue across the majority of businesses in 2014. In summary, the optimism reported by businesses of all sizes signals continued improvement in the economy, as more companies look to expand after a period of stagnation during the recession.

Flying High (but blind) in 2014

Companies are cautiously optimistic about 2014, with 72 percent expecting their financial situation to improve (up from 66 percent in 2013), and only 5 percent expecting it to weaken (down from 7 percent in 2013). Small companies are the most optimistic about their future financial performance (75 percent of respondents), beating out both large and medium companies, where 66 percent and 72 percent expect improvement in 2014. The information, Media & Telecommunications Industry is planning to fly the highest in 2014, with 84 percent of companies in this industry anticipating improved financial performance. Hiring is also up over recent years with 54 percent of companies reporting plans to continue expanding in 2014. Raises returned in 2012 and that trend continued with 83 percent awarding salary increases in 2013, and 88 percent planning to give raises in 2014. 3
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The High Wire Act

Competition is heating up and its becoming increasingly challenging to strike the balance between paying enough to retain top talent and adhering to the compensation budget. Talent retention continues to be the primary concern among businesses. In 2009 only 28 percent of companies listed retention as their top concern, but by 2013 that number more than doubled, increasing to nearly 60 percent.

Companies Who Considered Retention a Main Concern

28%

20%

47%

49%

59%

57% 59%

2009

2010

2011

2012

2013

2014

The skills gap also continues to be a top concern for most businesses. Half of companies surveyed cited they are struggling to fill skilled job positions with nearly two-thirds of companies in the Information, Media and Telecommunications industry and Manufacturing companies reporting concerns. While companies are striving to secure talent, they lack sufficient insight about effective compensation to attract and retain the right people. In our 2013 survey, a whopping 75 percent of respondents reported some degree of dissatisfaction with the compensation data and insights available to them. This underscores a huge need for access to better compensation data reflecting real time market trends.

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2013 Review
The skills gap continues to be a concern. Half of companies said they are having a difficult time filling skilled positions. Retention concerns increased. In line with organizational expansion, concerns over employee retention have continued in 2013, a trend that started in 2009. Nearly 60 percent reported it being a high or top concern and only 10 percent thought it not a concern at all. Few companies are confident in their data. Even though getting pay right is a crucial component to retention, only 26 percent of companies reported being very satisfied with the salary data they use to set compensation. Companies are growing. Of the 52 percent of organizations that reported increasing the size of their workforce, 46 percent reportly grew up to 10 percent. Medium companies are growing fastest. Medium sized companies were the most likely to increase workforce in 2013 (58 percent), with large companies close behind (55 percent) and small companies less likely (47 percent). Information, Media & Telecommunications Industry leads the way. Companies in Information, Media & Telecommunications were the most likely to have grown in 2013 (63 percent). Raises were common. In 2013, 83 percent of companies reported giving raises, and 77 percent gave raises to at least half of their workforce. The most common reason for raises was performance-based pay increases (54 percent). Bonuses are a popular option. In 2013, 75% of respondents awarded bonuses, up from 71% in 2012. The most common type of bonuses given were Individual Incentive Bonuses (50 percent). CEOs call the shots. Although the CEO is primarily responsible for setting comp budgets, the head of HR is primarily responsible for setting comp structures. Top performance matters. In 2013, 54 percent gave performance-based pay increases. Incentive-based bonuses were the most common type of bonus given.

83%
GAVE RAISES IN 2013

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2014 Plans and Expectations

Retention continues to be a top concern for 2014. This concern has increased steadily in importance since 2009, when most companies listed retention as only somewhat of a concern or not a concern at all. Employee retention is either a high or top concern for 2014 to 57 percent of companies, with that number jumping to 70 percent in the Information, Media & Telecommunications industry and 65 percent in Professional, Scientific & Tech Services Industry two industries where tech jobs are highly represented. Salaries will go up. For 2014, 88 percent of companies say they plan to give pay raises, with the average raise expected to be 4.5 percent. Optimism is high. Companies are generally optimistic about their financial performance, with 72 percent expecting improvements in 2014, and only 5 percent expecting weaker performance. In the Information, Media & Telecommunications Industry, 84 percent are optimistic. Small companies are looking up. Small businesses are most optimistic about financial performance in 2014 with 75 percent expecting improvement compared with 72 percent of medium companies and 66 percent of large companies. Theyre growing. More than 54 percent of respondents are expecting to increase in size in 2014. That number has been increasing steadily since 2012 when 38 percent expected growth. Some are in favor of passing The Fair Minimum Wage Act. Companies have mixed opinions about raising the minimum wage to $10.10, with 40 percent in favor of it, 30 percent against and another 30 percent unsure. Theyre making plans to attract and retain talent. Companies plan to recruit and retain high-performing employees with merit-based pay plans and additional learning and development opportunities. 6
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OF SMALL COMPANIES EXPECT IMPROVED FINANCIAL PERFORMANCE IN 2014

75%

2014 COMPENSATION BEST PRACTICES SURVEY RESULTS

A look back at 2013
Changes in Organization Size: 2013 and Comparisons to Previous Years
As shown in the chart below, more organizations grew in 2013 than in either 2012, 2011, or 2010. This change appears to show continued improvement in the economy, as more companies look to expand after a period of relative stagnation. 60%
53%

50% 40% 30% 20% 10% 0%

2010
28% 37%

49%

50%

52%

38% 32%

OF COMPANIES GREW IN 2013

52%

THEYRE GROWING!

19% 14%

18% 9%

2011
Increased

2012
Stayed the Same

2013
Decreased

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 When examining results by company size, the same general pattern emerges: the majority of respondents, regardless of company size, chose to either maintain or increase their organization size. Large companies (>1,000 employees) were the most likely to reduce workforce size, while medium companies (100 - 1,000 employees) were the most likely to increase their organization size.

Change in Organization Size in 2013 by Company Size

80% 60%
47% 58% 55% 44% 33% 34%

40% 20% 0%
INCREASED

63%
9% 9% 11%

STAYED THE SAME

Medium Companies

DECREASED
Large Companies

Small Companies

OF COMPANIES IN INFO, MEDIA & TELECOM REPORTED GROWTH 2013

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 Some additional industry highlights: Information, Media & Telecommunications companies were most likely to have increased in size, with 63 percent reporting organizational growth. The Finance and Insurance industry had a particularly turbulent year: 51 percent of respondents reported size increases, while 13 percent reported size decreases. Of the 52 percent of organizations reporting an increased workforce in 2013, 23 percent of respondents indicated their organization grew by 0-5 percent since January 2012; another 23 percent report growing 6-10 percent. Only 9 percent of small companies and 10 percent of medium companies reported growing 26-50 percent, while only 5 percent of large companies reported growing 26-50 percent Of the 9 percent of organizations that cited a reduced workforce in 2013, 22 percent of respondents reported 0-5 percent reductions and 26 percent reported 6-10 percent. Further insight into hiring decisions in 2013: Previous work experience is the leading factor that impacts hiring decisions (40 percent), with skill set not far behind (31 percent). Most respondents reported that school reputation is the least important factor in terms of hiring decisions (71 percent). These trends are consistent across all company sizes and industries.

SEEKING A BETTER PAY CHECK WAS ONE OF THE TOP REASONS EMPLOYEES LEFT THEIR JOBS IN 2013

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Reasons for People Leaving an Organization: 2013 and Comparisons to Previous Years
The top two reasons for people leaving an organization in 2013 are the same as 2012 and 2011: personal reasons and seeking higher pay elsewhere (21 percent). Relocation, retirement, and cultural fit remained stable as additional reasons for leaving an organization in 2013. Relocation remained at 5 percent, retirement likewise remained at 7 percent, and culture fit rose from 9 percent to 10 percent. For small companies, poor performance was the most important reason for someone leaving an organization (23 percent), and 56 percent of small companies said it was one of the top three reasons. For medium and large companies, seeking higher pay and advancement opportunities elsewhere were the two most common reasons. In Finance & Insurance and Information, Media, and Telecommunications, seeking advancement elsewhere was the most important reason for leaving. For Healthcare & Social Assistance and all other industries (combined together), personal reasons (family, marriage, etc.) were the biggest reasons for people leaving. 79 percent of respondents agree pay is often not the primary reason people first start looking for a new job. This percentage has remained consistent over the last four years.

CONCERNS ABOUT RETENTION HAVE MORE THAN DOUBLED SINCE 2009

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Employee Retention: 2013 and for Comparisons to Previous Years

Aligned with anticipated organization expansion, concerns over employee retention have increased in 2013; a trend that started in 2009. In 2009, most respondents felt employee retention was either somewhat of a concern, or not a concern at all, but that changed as the economy began to stabilize. In both 2010 and 2011, about 50 percent of respondents felt it was a high or top concern, and only 15 percent in 2010 and 17 percent in 2011 felt it was little or no concern. In 2012 and 2013, nearly 60 percent said employee retention was a high or top concern, and only 10 percent felt it was little or no concern. This level of concern was consistent across company sizes, although medium-sized and large-sized companies were most concerned with retention: 59 percent cited it as a high or top concern, compared to 54 percent of small companies.

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 Similarly, as shown in the chart below, concern about retention was largely similar across all industries: in the industry least concerned with retention, Finance & Insurance, 52 percent of respondents still indicated it was a high or top concern. The Information, Media & Telecommunications industry was most concerned: 70 percent said it was either a high or top concern, and only 8 percent reported it was a low concern or no concern.

BEST SELFCHOSEN TITLES:

SHE-RA, PRINCESS OF FINANCE PEOPLE YODA HEAD ZOOKEEPER HUMAN RESOURCES NINJA

2013 Employee Retention Concerns by Industry

Other Professional/ Technical Services Manufacturing Information/Media/ Telecommunications Healthcare/ Social Assistance Finance/Insurance 0% 10%
8% 65% 10% 53% 8% 70% 8% 63% 13% 52% 12% 53%

CHAMPION COMPENSATOR DIRECTOR OF HAPPINESS

80%

20%

30%

40%

50%

60%

70%

Little or No Concern

High or Top Concern

CHIEF CAT HERDER COMP WARRIOR DA BOSS THE DUDE FAIRNESS DIRECTOR RAIN MAKER

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What are companies compensation practices and how have they changed?
Setting Compensation
Who is Responsible for Setting Compensation Budgets?
60%
53%

50% 40% 30% 20% 10% 0%

O e O itte CE CF Co m m de Co
2% 15% 37% 32%

17%

5%

6%

Note: Multiple answers were allowed to be selected for this question which is why the percentages add up to more than 100 percent. Since 2009, the majority of respondents that chose the CEO as the individual responsible for setting compensation: at least 50 percent. The least popular choice in all years was outside compensation consultant, with 2 percent in 2013, and 3 percent or less of the responses in 2012 and 2011.

THE CEO OWNS THE BUDGET IN SMALL & MEDIUM COMPANIES, BUT IN LARGE COMPANIES, ITS THE HEAD OF HR

HR

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Co

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 The same pattern appeared across most industries and company sizes, except large companies, where the head of HR (48 percent) is usually responsible for setting compensation budgets, while CEOs and CFOs are second (38 percent and 39 percent respectively).

Compensation Structure
Although the CEO is primarily responsible for setting compensation budgets, the head of HR is primarily responsible for setting compensation structures.

Who is Responsible for Setting Compensation Structures?

60% 50% 40% 30%
23% 41% 49%

PERFORMANCE WAS THE MAIN DRIVER FOR ADJUSTMENTS IN

14% 10%

20%
14%

10%
4%

5%

OF COMPANIES
He ad

54%

0%
O p e HR O p m Co itte CE CF m Co m of m an M Hi rin g ag He ad de sid e Co en t er

Almost 50 percent of respondents reported the head of HR sets compensation structures at their organization, compared to only 41 percent of CEOs. This pattern is seen across all industries and medium to large companies, however, for small companies the CEO is primarily the one who sets compensation structures (78 percent).

14

De pa rtm

tsi

Co m

Ou

In

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Compensation Adjustments
Across all industries, the main reason why companies adjusted compensation was Performance-Based Pay Increases (54 percent) and second was Cost of Living Adjustments (20 percent). Small-sized companies were more likely to adjust compensation to encourage retention (11 percent) compared to medium-sized companies (6 percent) and large-sized companies (3 percent).

Compensation Objectives
The most important compensation objective guiding the respondents 2013 decisions was Retaining Top Employees, which was chosen by 66 percent of respondents (identical to 2012). This was true across all company sizes and industries. The second most common response was Attracting New Talent, with 11 percent of respondents choosing it as their primary objective, and 39 percent choosing it as the second most important objective. Managing internal pay inequities was the least important objective, chosen by only 6 percent of respondents as being a top objective.

Salary Ranges vs. Market Percentiles

Salary ranges per job group are common, but varying the target market percentile per job group is not. The majority of companies (79 percent in 2013 and 82 percent in 2012) use salary ranges to structure compensation programs, while in 2012 and 2013 only 6 percent use broad banding (very wide salary ranges covering a progression of similar jobs). The remaining respondents dont use either. 15
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Compensation Structure by Company Size

Each Job Has Its Own Salary Structure 47% 31% 19%

Company Size

By Grade

Broadband

No Structure

Small Medium Large

29% 50% 61%

4% 7% 10%

20% 12% 9%

The most common way for those who use grades to assign jobs to grades is to use market data (47 percent). This is true across company sizes.

RAISES BASED ON COLA WERE RARE IN 2013 NEARLY

Aligning different jobs or categories of employees with different market percentiles, e.g. 50th for professional and 75th for executives and key jobs was practiced by 36 percent of respondents in 2013, a slight decrease from company size. 2012 41 percent in 2012. See below for details on the trend by Small companies: 30 percent in 2013 vs. 36 percent in Medium companies: 39 percent in 2013 vs. 41 percent in 2012 2012 Large companies: 42 percent in 2013 vs. 51 percent in Varying the target market percentile per job is uncommon & Telecommunications industry, where 44 percent of

DIDNT GRANT THEM

70%

in most industries as well, except in the Information, Media, respondents align jobs with different market percentiles.

Overall, 35 percent of respondents last adjusted their salary salary structure 12-24 months ago.

structure 0-6 months ago and 28 percent last adjusted their

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 This trend is consistent across company sizes, but some industries such as Healthcare & Social Assistance and Manufacturing were more likely to adjust their salary structure in the last 6-12 months (36 percent and 40 percent, respectively).

Cost of Living
Cost of living increases remained rare in 2013. 68 percent of respondents say that they do not grant them, compared to 71 percent in 2012 and 69 percent in 2011.

Bonuses: Who Receives Them and What Type?

Bonuses were a popular option for employers in 2013, with 75 percent of respondents saying they gave variable pay incentives. In 2012, 71 percent gave bonuses and 70 percent of respondents gave bonuses in 2011. Among those giving bonuses, the two most likely recipients were directors and managers (72 percent) and executives (67 percent). In 2013, as in 2010, 2011, and 2012, individual incentive bonuses were the most common type given, with about half of all respondents reporting they awarded them. Respondents favored spot bonuses or other discretionary bonus programs more in small and medium-sized companies (37 percent and 41 percent respectively) than in large-sized companies (35 percent).

DIRECTORS AND MANAGERS WERE MOST LIKELY TO GET BONUSES IN 2013

72%

OF THEM DID

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 Small companies are less likely to offer variable pay incentives than medium-sized and large companies. The following lists the percentage of respondents who do not offer variable pay incentives. Small Companies: 26 percent Medium Companies: 23 percent Large Companies: 20 percent

Types of Bonuses Used in 2013 by Company Size

80% 70% 60% 50% 40% 30% 20% 10% 0%
10% 14% 8% 31% 24% 18% 25% 24% 27% 41% 37% 35% 53% 71% 64%

Retention Bonuses

Hiring Bonuses
Small Companies

Individual Incentive Bonuses

Team Incentive Bonuses

Spot Bonuses
Large Companies

PERFORM MARKET ANALYSIS ONCE OR TWICE A YEAR

60%

Medium Companies

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 Information, Media & Telecommunications and Professional, Scientific, and Technical Services were the most likely to grant individual incentive bonuses (71 percent and 68 percent of respondents, respectively).

Types of Bonuses Used in 2013 by Industry

80% 70% 60% 50% 40% 30% 20% 10% 0%
20% 13% 22% 12% 14% 14% 17% 13% 22% 15% 12% 23% 33% 26% 26% 25% 20% 28% 71% 67% 60% 53% 44% 38% 44% 36% 46% 68% 59%

35%

Retention Bonuses

Hiring Bonuses

Individual Incentive Bonuses

Team Incentive Bonuses

Spot Bonuses

Finance/Insurance Information/Media/Telecommunications Professional/Scientic/Technical Services

Healthcare / Social Assistance Manufacturing Other

ARE VERY SATISFIED WITH THEIR SALARY DATA

26%

ONLY

Formal Compensation Strategy and Market Analysis

More than 73 percent of respondents either have or are working on a formal compensation strategy. The likelihood of having or working on a formal compensation strategy increases with company size. Small Companies: 65 percent Medium Companies: 79 percent Large Companies: 81 percent 60 percent of respondents said they typically perform market and compensation analysis annually or bi-annually. The likelihood of conducting a compensation analysis

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at least once a year increases with company size. The following lists the percentage of respondents who conduct market and compensation analysis annually or bi-annually: Small Companies: 57 percent Medium Companies: 60 percent Large Companies: 66 percent 43 percent of respondents adjusted their salary structure within the last 6 months and 23 percent adjusted their salary structure between 6 and 12 months ago. 50 percent of companies reported using free salary data to price jobs; 43 percent use a local or regional salary survey; 32 percent participate in a nationwide salary survey; and 24 percent subscribe to an online salary data provider. 62 percent of respondents are somewhat satisfied with their current salary data, while 26 percent are very satisfied and 12 percent are not satisfied at all. Satisfaction increases with company size (34 percent of large companies are very satisfied while only 23 percent of small companies report being very satisfied).

Salary Increases
When we asked in 2012, 85 percent of companies said they planned to give pay raises in 2013, and 57 percent said they would give raises to at least half of their workforce. In 2013, 83 percent of companies reported giving raises, and 77 percent gave raises to at least half of their workforce. 55 percent of companies said they spent 0-5 percent of payroll on base salary increases, and 14 percent said they spent 6-10 percent. Overall, 17 percent of businesses did not give any pay raises in 2013, a slight reduction from 19 percent in 2012. Performance-based pay increases were the driver for pay raises in 2013, with 54 percent of companies citing it as the main reason for pay raises, in line with the 56 percent estimation in 2012. 20

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 Large-sized organizations were most likely to adjust compensation for more than half of their workforce; 83 percent of them chose this option compared to 69 percent of small companies and 81 percent of medium ones. Small companies were most likely to not give any raises in 2013; 24 percent of respondents reported this choice, compared to just 12 percent of medium and large organizations. Finance & Insurance and Manufacturing are the industries with the highest reported rate of giving at least 50 percent of their workforce pay raises, with 85 percent and 81 percent response rates, respectively. Healthcare and Social Assistance companies were least likely to give raises, with 22 percent of companies reporting no pay raises, and only 74 percent giving raises to at least half their workforce.

COMPANIES IN HEALTHCARE AND SOCIAL ASSISTANCE WERE LEAST OPTIMISTIC ABOUT 2014 WITH

8%

EXPECTING WORSE FINANCIAL PERFORMANCE

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OUTLOOK FOR 2014

Companies are optimistic about 2014, with 72 percent expecting their financial situation to improve (66 percent in 2013), and only 5 percent expecting it to weaken (7 percent in 2013). People are the most optimistic about their future financial performance at small companies (75 percent of respondents). These figures beat out the optimism at large and medium companies, where 66 percent and 72 percent, respectively, of respondents indicate they expect their companys financial performance to improve in 2014, respectively.

2014 Financial Outlook by Company Size

80% 70% 60% 50% 40% 30% 20% 10% 0%
IMPROVE
Small Companies

75%

72% 66%

20%

23%

28%

OF COMPANIES WOULD SUPPORT A $10.10 MINIMUM WAGE

5% 5% 6%

40%

STAY THE SAME

Medium Companies

WEAKEN
Large Companies

The most optimistic industries are Information, Media, & Telecommunications (84 percent think their financial performance will improve in 2014) and Professional, Scientific, and Technical Services (76 percent). The least optimistic industry is Healthcare and Social Assistance (8 percent expect their financial performance will weaken).

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Impact of Government
We asked United States respondents about the implementation of federal healthcare law (the Affordable Care Act (ACA), colloquially known as Obamacare) and whether a federal minimum wage should be raised to $10.10 (as proposed in The Fair Minimum Wage Act). In 2012, companies of all sizes told roughly the same story, with about 75 percent saying they expected no changes in their staffing plans due to the implementation of federal percent reported they would hire fewer workers in 2013.

healthcare law, 7 percent planned cutting back hours, and 14 In 2013, 84 percent anticipated no impact on staffing plans, 5 be hiring fewer full-time workers in 2014.

EXPECT TO GIVE RAISES IN 2014

88%

percent would be cutting back on hours, and 8 percent would

The healthcare industry experienced the biggest change in their plans between 2012 and 2013, with 77 percent of respondents saying there were no

changes expected (60 percent in 2012), while 7 percent said they would cut back hours (12 percent in 2012), and 12 percent said they would hire fewer full-time workers (15 percent in 2012). Response rates for the federal minimum wage were consistent across all company sizes, with proposed minimum wage, 30 percent against, and 30 percent indicating they were unsure or didnt know. The responses across industries were more

roughly 40 percent reporting being in favor of the

varied, with Healthcare & Social Assistance and Professional, Scientific, and Technical Services and 45 percent, respectively). giving the highest response in favor (46 percent

Manufacturing was the most against the answering against.

proposed minimum wage, with 37 percent

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Salary Increases
For 2014, 88 percent of companies intend to award pay raises, with 77 percent of respondents anticipating the average raise will be less than ten percent. 83 percent of small companies, 91 percent of medium companies, and 91 percent of large companies plan to give raises in 2014. Among the top five industries, Finance & Insurance have the highest reported rate of planning to give raises (92 percent), followed by Information, Media, & Telecommunications (91 percent), and Manufacturing (90 percent). The average raise in 2014 is expected to be 4.5 percent Small companies - 4.9 percent. Medium companies - 4 percent. Large companies - 4.4 percent.

4.5%
IS THE AVERAGE EXPECTED RAISE IN 2014

Workforce Size
Companies plan to continue expanding in 2014 with 54 percent of organizations expecting to increase in size in 2014. In last years survey, 50 percent said they expected their workforce to increase in 2013 (38 percent in 2012).

How do you expect your workforce to change in 2014? (by Company Size)
Change to Workforce Increase Stay the Same Decrease

Small 54% 42% 4%

Medium 56% 39% 5%

Large 50% 42% 8%

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 Industries had significant variance in responses, as you can see in the table below.

How do you expect your workforce to change in 2014? (by Top 5 Industries)
Change to Workforce Finance & Insurance Healthcare & Social Assistance Info, Media & Telecom Manufacturing Professional, Scientific & Tech Services Other Increase Stay the Same Decrease

52%

44%

5%

49%

47%

4%

73% 50%

24% 46%

4% 4%

64%

30%

6%

MERIT-BASED PAY AND LEARNING AND DEVELOPMENT ARE POPULAR RETENTION STRATEGIES

52%

43%

6%

Employee Retention Remains a Priority for 2014

Regardless of company size, 57 percent of companies feel employee retention is a high concern or their top concern in 2014, while fewer than 11 percent say it is a little to no concern for 2014. Professional, Scientific & Tech Services and Information, Media & Telecommunications are the industries most concerned with retention in 2014, with 65 percent and 70 percent citing it as a high or top concern, respectively.

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 Companies in Finance & Insurance were least concerned with retention, with 13 percent of respondents saying it was of little or no concern. As the graph below shows, companies are focusing on offering merit-based pay and learning and development opportunities to attract and retain quality employees in 2014.

Plans for Recruiting and Maintaining High-performing Employees in 2014

40% 35% 30% 25% 20% 15% 10% 5% 0%
Merit-based Pay Plan Non-discretionary Incentive-based Pay Plan
Small Companies

34% 32%

34%

35%

34%

33%

17% 15% 10% 11% 11% 9% 6% 5% 14%

Discretionary Incentive Plan

Stock Option/ Grant Plan

Learning and Developmental Opportunities

Large Companies

NEARLY 2/3 OF INFO, MEDIA & TELECOM COMPANIES REPORT A SKILLS GAP

Medium Companies

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Hiring Woes
Half of respondents agree with the statement: There is a lack of qualified applicants for our open job positions. Medium and large companies were most likely to agree (51 percent), while small companies were slightly less likely to agree (50 percent). Nearly 2/3 of Information, Media, & Telecommunications and Manufacturing companies agree (61 percent each), the highest of all industries. Finance & Insurance respondents are least likely to agree, with only 39 percent experiencing a lack of qualified applicants. Large companies are most likely to have positions open for six months or more; 50 percent have them, compared to 36 percent of medium companies and only 24 percent of small companies (33 percent overall). Information, Media & Telecommunications and Manufacturing were the two most likely industries to have unfilled positions for at least six months (45 percent and 43 percent, respectively). Recruitment difficulties varied by company size, as seen in the chart below; large companies struggled filling IT positions, while small companies had the hardest time with Sales. Overall, both IT and Management were the hardest positions to fill across the board (with 22 percent and 19 percent, respectively).

LACK OF QUALIFIED APPLICANTS IS THE TOP REASON FOR UNFILLED JOBS

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Tough Positions to Fill by Company Size

35%
31%

30% 25% 20% 15% 10% 5% 0%

ice les en tin ing ve Sa Le em Se ke er ive ag ar er M gi Fin ne an rv ce t IT l g
15% 21% 19% 17% 17% 16% 16% 14% 12% 10% 8% 7% 8% 9% 9% 6% 5% 7% 6% 10% 24% 23% 25%

SOCIAL MEDIA USAGE AT WORK IS GAINING ACCEPTANCE

an

ut

sto

Small Companies

Cu

Ex

Medium Companies

ec

The most popular write-ins were technical/engineering positions and medical/clinical specialists. Lack of qualified applicants was the top reason for unfilled positions (60 percent compared to 61 percent in 2012), followed by being unable to offer a competitive salary (23 percent compared to 22 percent in 2012). This was broadly the case for all company sizes and industries.

Employee Reviews and Communication

Most companies reported they conduct performance reviews (93 percent), although the popularity of performance reviews decreases with company size (98 percent of large companies, 96 percent of medium, and 88 percent of small companies report doing performance reviews).

En
Large Companies

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 Only 46 percent of respondents indicated feeling somewhat confident their managers could have tough conversations about compensation with their employees. 27 percent report feeling not too confident and only 18 percent report feeling very confident. This trend is seen consistently across company sizes and industries. More than half of respondents felt their organization does not offer manager training to teach them how to talk to employees about compensation (53 percent). Smaller companies are even less likely to offer such training (65 percent). 55 percent of respondents reported that they do not offer Total Compensation Statements to their employees. Finance & Insurance is more likely to offer Total Compensation Statements than any other industry (63 percent).

61%
USE SOCIAL MEDIA FOR RECRUITING. LINKEDIN MOST COMMONLY

Social Media in the Workplace

Use of Social Media by Employees
More than half of all respondents (55 percent) indicated their workplace has a formal policy on the use of social media, slightly down from 56 percent last year (53 percent in 2011). Of companies with official policies, the proportion of respondents encouraging social media use at work rose to 37 percent in 2013 from 35 percent in 2012 (and 29 percent in 2011). Similarly, only 33 percent of those companies say the use of social media is not allowed at all, compared to 36 percent who said that was the case in 2012 (42 percent in 2011) indicating a downward trend in control. The larger the company, the more likely it has a formal social media policy in the workplace: 49 percent of small companies have a formal social media policy, compared to 59 percent of medium companies and 61 percent of large companies. Small companies were also the least likely to block access to social media sites. Only 8 percent of small companies with an official social media policy blocked access to websites, compared to 17 percent of medium companies and 22 percent of large ones. 29

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 The Finance & Insurance industry was most likely to have a formal policy on the use of social media; 74 percent of respondents in the industry said they had one.

Manufacturing, Information, Media & Telecommunications

industries were the only industries in which less than half of respondents said they have formal social media policies in place, with 45 percent and 43 percent, respectively.

For those with a policy in place, Finance & Insurance

and Healthcare & Social Assistance were the strictest, as 47 percent and 46 percent (respectively) of respondents work. indicated that the use of any social media was not allowed at

Information, Media, & Telecommunications is the only industry where a majority of companies with a formal policy actually encouraged the use of social media at work (54 percent), were just under that mark at 47 percent.

although Professional, Scientific & Tech Services companies

Social Media as a Recruiting Tool

61 percent of all respondents said they used social media to help recruit their workforce in 2013. For those who use social media, LinkedIn was the most used it as a recruiting tool.

RESPONDENTS CAME FROM MULTIPLE COMPANY SIZES, INDUSTRIES AND COUNTRIES

popular website, with 56 percent of respondents saying they

Facebook was the second most popular network, utilized by 29 percent of respondents, and 15 percent used Twitter. Overall, larger companies were more likely to use social

media for recruiting; 68 percent did so, while only 65 percent so.

of medium companies and 54 percent of small companies did In the Information, Media & Telecommunications industry,

77 percent of companies use social media for recruiting, the Services came in second with 72 percent.

highest of any industry. Professional, Scientific, and Technical The Healthcare & Social Assistance industry was the least likely to utilize social media in recruiting at 48 percent. 30

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SURVEY METHODOLOGY
The Compensation Best Practices survey was conducted in November and December of 2013. There were 4,738 respondents to the survey. Survey results were analyzed to create comparisons between small companies (<100 employees), medium-sized companies (100 - 1,000 employees) and large companies (1,000+ employees), as well comparisons by industry.

Company Size

21% 44.2% 34.8%

Less than 100 Employees

100-1,000 Employees

More than 1,000 Employees

In addition to representatives from all company sizes, the top five industry categories represented in the survey were Finance & Insurance; Healthcare & Social Assistance; Information, Media & Telecommunications; and Professional, Scientific & Tech Services.

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Top 5 Industries

6.9%

Finance & Insurance Healthcare & Social Assistance Information, Media & Telecommunications Manufacturing Prof, Scientic & Tech Services Other

13.2% 49.8%
9.8%

7.4% 13.1%

Respondents came primarily from eight different countries with the majority (64 percent) residing in the United States and the second most popular location being Canada (13 percent).

Location

1.4% .7% 2.5% .3% 5.7%

United States

10.1%

Australia Canada India New Zealand

13.4% 1.5%

64.4%

South Africa United Arab Emirates United Kingdom Other

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ABOUT PAYSCALE
Creator of the largest database of individual compensation profiles in the world containing 40 million salary profiles, PayScale, Inc. provides an immediate and precise snapshot of current market salaries to employees and employers through its online tools and software. PayScales products are powered by innovative search and query algorithms that dynamically acquire, analyze and aggregate compensation information for millions of individuals in real time. Publisher of the quarterly PayScale Index, PayScales subscription software products for employers include PayScale MarketRate, PayScale Insight, and PayScale Insight Expert. Among PayScales 3,000 corporate customers are organizations small and large across industries including Cummins, Zendesk, Clemson University and Covenant Dove. For more information, visit www.payscale.com See the interactive graphs: www.payscale.com/cbpr

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