Wages, pay, compensation. Hourly, salary. Whatever you call it (Let’s go with pay for the remainder of this article.), and whatever the case, it forces your business to evolve. So, are you evolving? And are you evolving in a way that’s mutually beneficial for your business and your employees? If you’re aware of—and reactive to—the following pay trends, you’re on the right path.
It’s modest and progressive, but it is happening. In fact, per the Economic Research Institute, employers’ salary budgets have increased about 3% each of the last couple of years, and will again in 2018. That means your company’s pay should grow by roughly the same percentage, depending on your industry and local market. If your company’s pay remains stagnant, especially for multiple years, you’re unlikely to attract or retain the talent you need.
Pay for Retention
Speaking of retaining talent, pay’s your best bet to do just that. And we actually proved this with our own proprietary data. Now, even though our data is based on hourly pay, the same principle holds true for salaries. The bottom line is this: the better you pay, the less turnover you have (and the more productive employees you have). It’s the best way to cut recruiting, hiring and training expenses, build a better culture and employ the talent you need for whatever comes next.
Pay for Potential (not Performance)
In the past, “pay for performance” was the only pay strategy. Nowadays, it still dominates. But there’s a new way of thinking: “pay for potential.” Instead of paying for performance-related tasks that were completed, companies pay for performance-related tasks that will be completed. Sure, it’s a gamble to assume any employee will do great things, but paying them better from the start will help motivate them to do those things. It’s a psychological boost.
Another shift that we’re witnessing is transparency. Believe it or not, some workers actually talk openly about pay. Why? Because they’re curious, and they want to know if they’re being paid fairly. This is forcing the hand of businesses to do the same. Job candidates, specifically, want to know what a job pays before spending time applying, interviewing and negotiating. Who can blame them? Furthermore, the Prior Pay Law, which has been adopted in 21 states, makes it illegal for interviewers to ask candidates about pay history in order to determine salary offers. Again, forcing employers to be salary transparent from the get go.
Today, on average, women still earn less than men for the same job. Most outlets, including the American Association of University Women, report women earn about 80% of the pay of men. The question is “why?” And there is no rational answer. So it must continue to change—but faster. Besides the justice that would occur, diversity in the workplace means more creativity drawn from an array of perspectives and backgrounds.
What should you do?
Well, your business should raise pay by 3% in 2018, use timely raises to retain talent, pay for potential, be transparent and be fair. OK, that’s the easy answer. It’s also a lengthy list that’s easier said than done. But if you want to be a best-in-class company, you might not have a choice.
Having said that, where should you start? There’s no better place than our 2018 Salary Guides. They’ll provide you with accurate salaries for countless positions, unique to your company size and locale. If you leverage them, you can’t go wrong.