TH E 2 0 2 0

CO MPE NS ATIO N BE S T
P R A CTICE S RE PO RT

WINNING THE
JUGGLING ACT
HOW STRATEGIC COMPENSATION ATTRACTS AND RETAINS
TOP TALENT IN A TIGHTENING LABOR MARKET

1
Contents

3 6 27 29
EXECUTIVE SUMMARY CHAPTER ONE SPOTLIGHT CHAPTER TWO
Compensation Best Practices 2019 Year in Review Hot Skills Define the New Variable Pay and Benefits to
When Qualified Talent is War for Talent Attract and Retain Top Talent
Scarce…and Getting Scarcer

38 49 52 54
CHAPTER THREE CHAPTER FOUR CRYSTAL BALL SURVEY METHODOLOGY
Compensation Perceptions, Compensation Practices of Predicted Challenges
Communication and Manager Top Performing Organizations for 2020
Training

2
EXECUTIVE SUMMARY

HIGHLY SKILLED TALENT IS SCARCE… AND GETTING SCARCER.

Getting compensation right is a critical component of any strategic
As unemployment shrinks and customer expectations rise, it’s
approach to talent acquisition and retention. That’s why 70 percent
becoming increasingly difficult for organizations to find qualified
of organizations either have a compensation strategy or are working
candidates to fill gaps in the workforce, especially highly skilled
to develop one. It’s also why the most common strategy to attract
technical talent capable of helping organizations modernize their
and retain talent is to increase base pay, offer more incentive pay
technology, make better use of company data, and digitally transform
to reward performance, and/or provide more perks as part of the
their services.
benefits package.

Currently, there are more job openings than available talent in

One of the challenges facing HR and compensation professionals
the labor market to fill them. 2019 was predicted to end in an
today is evaluating which hot skills in the labor market require a
economic recession—instead, 2.1 million jobs were added to the
boost in compensation. Technology skills in particular are evolving
economy and the unemployment rate dropped to 3.5 percent,
faster than university degrees can be devised, with the result being
the lowest it’s been in the United States in 50 years. Turnover
that 71 percent of organizations are prioritizing skills over a formal
continues to rise as organizations war for talent and the best and
education. Thankfully, advancements in compensation management
brightest leave for higher compensation, better benefits, and more
software to include skills differentials are making compensation
professional advancement. According to Global HR consulting firm
adjustments easier.
Mercer, 54 percent of employees voluntarily leaving organizations
were Millennials/Generation Y (born 1978-1998), with “better job
Highlights from the Compensation Best Practices Report
opportunity” being the most common reason for leaving.
summarizing the findings from 2019 are below. For 2020, recruiting
and retention are predicted to be the biggest challenges for HR.
To increase retention and reduce resources and costs required to
Correspondingly, 85 percent of organizations plan to give increases
maintain continuous hiring cycles, organizations are investing more
to base compensation. Thirty-four percent of organizations plan to
in employer branding, specifically their pay brand, which emphasizes
continue the trend of giving a 3 percent average base pay increase. In
improving the employee experience and includes defining company
addition, 38 percent of organizations plan on performing some type
values and increasing transparency around compensation and
of pay equity analysis in 2020.
benefits. Workers today expect transparency because we are living
in a digital, interconnected world where information about workplace
cultures and practices are easily accessible. In a candidate’s market,
WENDY BROWN
the best people are going to look for positions with employers who
Sr. Director Corporate Marketing
are open and fair, reward performance, and offer opportunities for PayScale
learning and developing and career growth.

3
Highlights

COMPENSATION INCREASES

In 2019, 66 percent of organizations agree or strongly agree that retention is a top concern, which
is similar to last year. In 2019, 82 percent of organizations gave base pay increases, with 3 percent
being the most prominent increase given, which is also similar to last year. Eighty-five percent of
organizations plan to give base increases in 2020. In addition, organizations are continuing to employ
a variety of tactics to attract and retain top talent. These include merit-based pay (60 percent),
learning and development (57 percent), discretionary bonuses (34 percent), and more perks
(26 percent).

TOP PERFORMERS

In addition to all of the above, top performers also differentiate by offering higher base pay increases
as well as more varied incentive pay, such as company-wide bonuses, profit sharing, and employee
referral bonuses in addition to individual incentive bonuses. Top performers were more likely to have
a dedicated compensation team, to have conducted a full market study on compensation within
the last six months and use both third-party survey data as well as paid subscription data (like
PayScale). Top performing organizations were also better communicators about pay decisions and
offered manager training on compensation basics in higher percentages than non-top performing
organizations. Top performing organizations were more likely to provide more benefits, especially
tangible benefits, and agree that employees know how to get to the next level of their career
within their organization. Finally, top performers were more likely to ensure they are part of their
organization’s strategic decision-making processes.

MARKET DATA

The majority of organizations (57 percent) have completed a salary market data study at least once
in the last 12 months. The majority of organizations (52 percent) also reference market data for
individual job titles at least twice to year; 17 percent did so monthly, 14 percent did so weekly, and
6 percent do so daily. Organizations are also continuing to understand the importance of using
multiple data sources. Eighty-four percent of organizations use more than two data sources and
4 percent used more than five data sources.

4
BENEFITS AND PERKS

Organizations are continuing to offer standard benefits in high percentages, such as medical, dental
and vision insurance (78 percent), retirement contributions via a 401K or 403B (73 percent) and
accrued or granted PTO (60 percent). However, more atypical benefits are also being offered and
have grown in popularity. For example, remote work is now offered by 48 percent. Education or tuition
reimbursement is offered by 45 percent of organizations and flex-time is offered by 39 percent of
organizations. Paid parental leave is also growing in popularity at 38 percent. Unlimited PTO, which is
still unusual, has blossomed to 11 percent.

COMPENSATION STRUCTURE AND TRANSPARENCY

Seventy percent of organizations say that they either have a compensation philosophy/strategy or are
working on one. Thirty percent of organizations use pay ranges for each job position and 24 percent
still use pay grades. Seventeen percent use a mix. Most organizations continue to want to be more
transparent about their pay practices than they are currently, with the majority targeting Level 3 or
4 on the Pay Transparency Spectrum. However, only 38 percent of organizations currently share pay
ranges with employees on their job position, 2 percent higher than last year.

PAY BRAND

A pay brand is how employees and job candidates view an organization’s compensation philosophy
and practices. When we asked employers to provide commentary on their pay brand, responses were
all over the map, with some organizations lauding their pay brand as industry-leading and others
saying they do not have one at all or that their pay brand is perceived poorly. Most organizations
felt that their pay brand was perceived better by job candidates than actual employees. Forty-seven
percent of employers rate their pay brand as either good or very good for job candidates while only
43 percent of organizations rate their pay brand as good or very good for employees.

PAY EQUITY

Thirty-eight percent of organizations plan on doing some kind of pay equity audit in 2020. These
organizations were also more likely to be top performers. Sixty two percent said they don’t plan to
do an audit, but some from this group may have already done one or don’t need to because they
continuously monitor their compensation data for internal pay equity.

5
Chapter One

2019 YEAR
IN REVIEW

6
2019 was another year of record job growth and low unemployment. Many economists
predicted that we would enter a recession by the end of 2019 or early 2020, but that hasn’t
happened. We are now in an eleven-year bull market. The U.S. Bureau of Labor Statistics (BLS)
reported the national unemployment rate at 3.5 percent in December of 2019, which was 0.4
percent lower than in December of 2018. This is a 50-year low for the unemployment rate, which
was last at 3.5 in December of 1969.

Over 2.1 million jobs were added to the U.S. economy in 2019, with jobs added in November
smashing expectations as economists anticipated a recession. Nominal wages for all nonfarm
employees rose 3.01 percent year-over-year in December 2019. With unemployment at 3.5
percent, we are — still — in a job seeker’s market.

According to our survey data, organizations see recruiting (21 percent) and retention (22
percent) as their biggest HR challenges in 2020. Forty-two percent of organizations say that the
strong job market has increased their turnover rate while 48 percent say that it has not changed
their turnover rate. Regardless, there are more job opportunities than talent available to fill them,
making strategies to attract and retain top talent a high priority for most organizations.

In this chapter, we look at the leading compensation trends from 2019 to answer the questions
HR leaders and compensation professionals want to know most. These include the average
base increase employees received in 2019 as well as the leading rationale for raises, what
involvement executive leadership has in compensation strategy, how organizations are
evaluating and compensating competitive jobs by industry, which jobs are toughest to fill,
and what steps organizations are taking with compensation to retain top talent. In addition,
we will also look at the salary market data organizations are using and the top trends around
compensation strategy, structure, and team roles.

7
BASE PAY INCREASES IN 2019

IN 2019, MOST ORGANIZATIONS GAVE BASE PAY INCREASES TO

THEIR EMPLOYEES. SPECIFICALLY, 82 PERCENT OF ORGANIZATIONS
GAVE BASE PAY INCREASES, WITH 3 PERCENT BEING THE MOST
PROMINENT INCREASE GIVEN.
The purpose of compensation management is to properly
reward employees for the value they bring to an organization, but
getting compensation right can be tricky, especially as time goes
on. Although the majority of organizations give pay increases
to employees at least once a year, a one-sized approach to
allocating increases doesn’t tend to motivate employees,
especially employees who are high performers.
In addition, organizations didn’t give out raises as high as they
budgeted for in 2019. Thirty-four percent of organizations
budgeted to give 3 percent raises and 11 percent budgeted to
give 4-5 percent raises. However, only 29 percent of organizations
actually gave 3 percent raises and only 9 percent gave 4-5
percent raises. Raises of more than 5 percent were slightly higher
than budgeted, which might make up the difference, but more
organizations also gave lower raises than budgeted.

BUDGET FOR BASE PAY INCREASES IN 2019 AVERAGE BASE PAY INCREASE GIVEN TO EMPLOYEES IN 2019
34%
29%

15%

16% 13%

12% 9% 9%
11% 8%

8% 8% 6% 6%

6% 3%
4% 4% 1%

1%

3%

9%

5%
1%

5%
49

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DISCLAIMER: This graph might not add up to 100% because of rounding

8
When looking at the highest pay increases organizations gave in
2019 (not related to promotion), the allocations are varied. Similar
to previous years, 7 percent cited 3 percent raises as the highest
amount they gave while 19 percent gave 10-14.99 percent raises.
Nine percent of organizations gave raises between 20-30 percent
and 4 percent gave more than 30 percent raises. Enterprise
organizations (5,000 or more employees) were more likely to give
higher raises of 20-30 percent (11 percent) or over 30 percent HIGHEST BASE INCREASE GIVEN TO ANY EMPLOYEE IN 2019
(7 percent) compared to small organizations (1-99 employees), of
which 8 percent gave raises between 20-30 percent and only 19%
3 percent gave raises over 30 percent.

14%

9% 9%
8% 8%
7% 7%

5%
4%
3% 3%
2%
1%

3%

9%

9%

9%

9%

0%

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9
 TOP THREE REASONS FOR GIVING BASE PAY INCREASES
IN ​2019 IN ORDER OF IMPORTANCE

RATIONALE FOR BASE PAY RAISES

0% 10% 20% 30% 40% 50% 60% 70% 80%

The reasons for giving raises varied by organization, but HOT SKILLS

rewarding performance was the leading driver cited by most

PERFORMANCE
organizations (51 percent), with Cost-of-Living Adjustments
(18 percent) and Market Adjustments (11 percent) qualifying TENURE

as the top reasons for other organizations. However, Retention

and Market Adjustment qualified as the second most important MARKET ADJUSTMENT

reason for base adjustments at 23 percent each, followed by INTERNAL PAY INEQUITIES
(NON COMPLIANCE-RELATED)
Performance at 18 percent. The least cited reasons for base pay
increases were Merger or Acquisition and Compliance. However, COST-OF-LIVING

Internal Pay Equity not related to Compliance was a strong third RETENTION
reason for base pay increases, following only Retention
(22 percent) and Market Adjustment (21 percent). COMPLIANCE

MERGER & ACQUISITION

1ST PRIORITY 2ND PRIORITY 3RD PRIORITY

10
 BASE PAY INCREASES BY OCCUPATION

When breaking down 2019 base pay increases by occupation, we find that a 3 percent raise is
the largest category of raise for most occupations. However, some organizations gave increases
less than 3 percent to a majority of employees (Education, Government, Healthcare & Social
Assistance) or increases of greater than 3 percent to a majority of employees (Agencies &
Consultancies, Engineering & Science, and Technology).

AVERAGE BASE PAY INCREASE GIVEN TO EMPLOYEES BY OCCUPATION

0% 20% 40% 60% 80% 100%

AGENCIES & CONSULTANCIES

CONSTRUCTION

EDUCATION

ENGINEERING & SCIENCE

FINANCE & INSURANCE

FOOD, BEVERAGE & HOSPITALITY

GOVERNMENT

HEALTHCARE & SOCIAL ASSISTANCE

MANUFACTURING

NONPROFIT

REAL ESTATE & RENTAL & LEASING

TECHNOLOGY (INCLUDING SOFTWARE)

OTHER INDUSTRIES

0% 20% LESS THAN 1% 1.00-1.49% 1.50-1.99% 2.00-2.49% 2.50-2.99%

SCALE
3.00% 3.01-3.49% 3.50-3.99% 4.00-5.00% MORE THAN 5%

11
IMPACT OF BASE PAY INCREASES 2019 OCCUPATIONS WITH 3% OR HIGHER WAGE GROWTH

ON WAGE STAGNATION Y/Y NOMINAL NOMINAL REAL

Y/Y REAL WAGE
OCCUPATION GROUP WAGE GROWTH GROWTH GROWTH
GROWTH RATE
RATE SINCE 2006 SINCE 2006

Wage stagnation is the study of how income has failed to keep INSTALLATION,
MAINTENANCE & REPAIR
3.4% 2.5% 14.2% 11.4%
pace with inflation, resulting in reduced purchasing power even
TRANSPORTATION 4.4% 3.3% 15.8% 12.4%
when increases are given annually. The nominal wage growth
rate is how much wages have increased year over year. The real INFORMATION TECHNOLOGY 3.2% 2.2% 20.9% 16.4%

growth rate is how much wages have increased when adjusted

for inflation. Using PayScale’s Occupational Index data to analyze
wage growth over time, we can see that, in the United States as a
whole, nominal wages grew before 2008, stagnated with the Great 2019 OCCUPATIONS WITH LESS THAN 3% WAGE GROWTH
Recession, and then started to rise again from 2013 onward.
However, the real growth rate shows that when adjusted for Y/Y NOMINAL
Y/Y REAL WAGE
NOMINAL REAL
OCCUPATION GROUP WAGE GROWTH GROWTH GROWTH
GROWTH RATE
inflation, purchasing power dropped sharply in 2008 and has only RATE SINCE 2006 SINCE 2006

risen marginally since 2013, with another dip in 2018. ACCOUNTING & FINANCE 2.3% 1.6% 16.9% 13.3%

ADMINISTRATIVE & CLERICAL 2.6% 1.9% 14.7% 11.5%

UNITED STATES RATE OF WAGE GROWTH COMPARED TO 2006 ARCHITECTURE &
ENGINEERING
2.7% 1.9% 20.3% 15.9%
20%
ART & DESIGN 2.6% 1.8% 16.7% 13.0%
15%

10%
CONSTRUCTION 2.9% 2.1% 13.8% 10.8%

FOOD SERVICE &

5%
RESTAURANT
3.0% 2.2% 12.0% 9.4%

0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 HEALTHCARE PRACTITIONERS
& TECHNICAL
2.7% 1.9% 18.1% 14.2%
-5%

-10%
HUMAN RESOURCES 1.2% 0.7% 18.1% 14.2%

NOMINAL OCCUPATIONAL INDEX (BASE 2006) REAL OCCUPATIONAL INDEX (BASE 2006)
LEGAL 2.5% 1.9% 16.9% 13.3%

MANUFACTURING &
PRODUCTION
2.2% 1.6% 14.7% 11.5%
However, when we look at wage increases by occupation, we
MARKETING & ADVERTISING 1.7% 1.1% 20.3% 15.9%
don’t see the same story. Professional occupations have fared
better than general occupations, with some seeing notable growth MEDIA & PUBLISHING 2.0% 1.4% 16.6% 13.0%

compared to 2006, even when adjusted for inflation. In 2019, RETAIL 2.0% 1.4% 12.9% 10.1%

some occupations showed nominal wage growth higher than SALES 1.2% 0.8% 10.1% 7.9%

the common 3 percent increase base pay, such as Installation, SCIENCE & BIOTECH 2.3% 2.0% 17.7% 13.9%
Maintenance & Repair, Transportation, and Information SOCIAL SERVICES 2.5% 2.0% 18.4% 14.4%
Technology. When adjusted for inflation, occupations in
PayScale’s index to see the least amount of increased purchasing
power are Food Service & Restaurant occupations and Sales.
12
THE IMPORTANCE OF
COMPENSATION PLANNING

As salary data becomes more accessible online, organizations are DOES YOUR COMPANY HAVE A FORMAL
becoming more aware about the importance of fair and transparent COMPENSATION STRATEGY/PHILOSOPHY?
pay practices and more sophisticated in their compensation
management and planning abilities.

In 2019, 61 percent of organizations responded that compensation I’M UNSURE

planning is becoming more important to executives, which is similar
YES
to last year. Doubtless, this relates to why 70 percent of organizations
either have a compensation strategy or are working to develop one. NO, BUT WE ARE WORKING ON ONE

NO, AND WE ARE NOT WORKING ON ONE

0% 20% 40% 60% 80% 100%

COMP IS BECOMING MORE

IMPORTANT TO MY EXECUTIVES
EMPLOYEES ARE BECOMING MORE
SOPHISTICATED IN THEIR
UNDERSTANDING OF COMPENSATION
DIRECT MANAGERS ARE PLAYING
A MORE IMPORTANT ROLE IN
COMMUNICATING COMPENSATION
STRONGLY DISAGREE
A compensation strategy is the foundation for your compensation
plan. Usually based on a combination of company values, business
goals, and labor market challenges, a compensation strategy outlines
how your organization will approach compensation decisions broadly,
including your level of competitiveness and what you choose to
reward. Factors that influence compensation strategy and planning
include job competitiveness and tough-to-fill positions within a given
industry and how compensation impacts retention. We will next look
DISAGREE NEITHER AGREE STRONGLY AGREE at all of these in more detail.

13
We asked respondents for the top reasons that would lead them
to change their compensation strategy. Retention was at the
top of the list, with 34 percent of organizations citing it first.
Recruitment was also a high priority. Interestingly, paying for
hot skills was third overall, and the most prominent third reason
organizations gave for changing their compensation strategy.
Satisfying Millennial employees and conducting a gender pay
equity audit factored somewhere in the middle, but with enough
prominence to warrant consideration for future compensation
planning and budget allocation.
TOP 3 REASONS TO ADJUST YOUR COMPENSATION STRATEGY
COMPETITIVE JOBS
We define competitive jobs as those that can be hard to fill
because they are in high demand. We asked organizations
to share their strategies for compensation when it comes to
competitive jobs. Overall, 50 percent of organizations say they
compensate more for competitive jobs (e.g. you pay in the 50th
percentile for most jobs but in the 75th for engineers, which is a
competitive category).

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

DO YOU PAY MORE FOR COMPETITIVE JOBS?

RETENTION

RECRUITMENT

PAY FOR HOT SKILLS

20%
30%
MINIMUM WAGE

MILLENNIAL EMPLOYEES

GENDER PAY
EQUITY AUDIT
50%

OTHER

CEO-TO-WORKER
PAY RATIO

ETHNIC/RACIAL PAY YES

EQUITY AUDIT

NO
CONTRACTOR RULES

UNSURE
PAY FOR OTHER
PROTECTED CLASSES

1ST PRIORITY 2ND PRIORITY 3RD PRIORITY

14
We also looked at compensation practices by industry for competitive
jobs and found that some industries are more likely to compensate
more for competitive jobs, such as Real Estate, Rental & Leasing
(62 percent), Engineering & Science (60 percent) and Technology
(59 percent) while other industries were less likely to do so, such as
Education (30 percent) and Government (31 percent).
INDUSTRIES THAT COMPENSATE MORE FOR COMPETITIVE JOBS
When it comes to how organizations compensate more for
competitive jobs, larger organizations were more likely to target
a higher market percentile than smaller organizations. Small
organizations were more likely to emphasize tangible and intangible
benefits. However, small organizations were also slightly more
likely to offer a market premium in base pay (48 percent) over larger
organizations.
HOW ORGANIZATIONS COMPENSATE FOR COMPETITIVE JOBS

0% 10% 20% 30% 40% 50% 60% 70% 80%

REAL ESTATE &
RENTAL & LEASING 62% MANUFACTURING 54%

TARGET A HIGHER
MARKET PERCENTILE

ENGINEERING & AGENCIES &

SCIENCE
60% CONSULTANCIES 51%

OFFER A MARKET
PREMIUM IN BASE PAY

TECHNOLOGY RETAIL &

(INCLUDING 59% CUSTOMER 51%
SOFTWARE) SERVICE
OFFER A MARKET
PREMIUM BONUS

FOOD, BEVERAGE
OTHER INDUSTRIES 58% & HOSPITALITY
46%
PROVIDE TANGIBLE
BENEFITS OR PERKS

HEALTHCARE &
SOCIAL ASSISTANCE
56% NON PROFIT 33%
PROVIDE INTANGIBLE
BENEFITS OR PERKS

CONSTRUCTION 54% GOVERNMENT 31%

OTHER

FINANCE &
54% EDUCATION 30%
INSURANCE
OVERALL 1-99 EMPLOYEES 100-749 EMPLOYEES

750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

Note: Arts, Entertainment & Recreation and Energy & Utilities did not have enough
responses for statistical viability on this question.
15
TOUGH-TO-FILL ROLES

Tough-to-fill roles are competitive jobs that have remained

vacant for six months or longer, often due to a skills gap or
other shortage of labor. In 2019, 37 percent of organizations
had positions open for six months or longer, which is down from
41 percent in 2018. The number is much higher in enterprise
organizations with more than 5,000 employees (62 percent) than In looking at which types of occupations constitute tough-to-fill
small organizations with under 100 employees (23 percent). roles, information technology was the clear winner at 26 percent,
followed by skilled tradespeople (22 percent) and engineering
When organizations were asked why these positions remain (22 percent). The occupations least difficult to fill were marketing
unfulfilled, scarcity of qualified applicants was the most-cited (7 percent), followed by finance (9 percent) and customer service
reason, which was true across organization size and industry. (10 percent).
However, the inability to offer a competitive salary was a close
second. Enterprise organizations with over 5,000 employees
cited location as more of a struggle (33 percent) than small TOUGH-TO-FILL ROLES ACROSS OCCUPATIONS
organizations (15 percent). Enterprise organizations were also
more likely to say they were unable to offer a competitive salary MANAGEMENT 18%
(42 percent) than small organizations (31 percent).
IT 26%

CUSTOMER SERVICE 10%

REASONS TOUGH-TO-FILL ROLES REMAIN OPEN
SALES 15%
80%
EXECUTIVE LEVEL 12%

MARKETING 7%
60%
ENGINEERING 22%

FINANCE 9%
40%
SKILLED TRADESPEOPLE 22%

HEALTHCARE PRACTITIONERS 11%

20%
OTHER 24%

0%
SCARCITY OF UNABLE TO COMPANY LOCATION OTHER
QUALIFIED OFFER CULTURE NOT OF THE
APPLICANTS COMPETITIVE A MATCH POSITION
SALARY

OVERALL 1-99 EMPLOYEES 100-749 EMPLOYEES

750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

16
EMPLOYEE RETENTION AND TURNOVER

Retention continues to be a major concern for most organizations

(66 percent), about the same as last year and increased from the
WHAT PERCENTAGE OF TURNOVER WAS GOOD TURNOVER?
year before (59 percent).

EMPLOYEE RETENTION DISAGREE OR NEITHER AGREE OR

IS A MAJOR CONCERN STRONGLY AGREE NOR STRONGLY 11%
FOR OUR COMPANY DISAGREE DISAGREE AGREE

13%
2019 16% 19% 66%
52%
2018 16% 19% 66%

24%
2017 22% 19% 59%

Employee turnover isn’t always negative. Sometimes it is LESS THAN 25%

good to get fresh blood into an organization, particularly when
underperforming or overpaid employees leave. However, only a 25-49%

minority of organizations (25 percent) felt that the majority of

50-74%
turnover (over 50 percent) was “good turnover”. The majority
of organizations (51 percent) felt that less than 25 percent of OVER 75%
turnover was “good.”

17
In asking why employees left, employers cited the top reasons as To combat employee turnover and the inevitable loss of knowledge,
personal (31 percent), compensation-related, such as higher pay employers turn to a variety of tactics to increase retention. The most
being offered elsewhere (23 percent), and professional advancement common strategy to retain employees overall is to increase base
(23 percent). A bad relationship with a direct supervisor or manager pay (71 percent). Enterprise organizations were more differentiated
was tied in prominence as a third reason, which is interesting given in increasing pay, giving a title change, and increasing variable
the widely-held belief that people leave managers, not organizations. compensation, whereas small organizations provided more benefits.
The prominence of professional advancement suggests that many
organizations could retain more talent by investing more in career STRATEGIES TO RETAIN EMPLOYEES
pathing, upskilling, and promoting top performers.
0% 10% 20% 30% 40% 50% 60% 70% 80%

TOP THREE REASONS EMPLOYEES VOLUNTARILY LEFT

INCREASED
BASE PAY

0% 10% 20% 30% 40% 50% 60% 70% 80%

PERSONAL REASONS
GAVE A
TITLE CHANGE

COMPENSATION

RETIREMENT

PROVIDED
MORE BENEFITS
PROFESSIONAL
ADVANCEMENT

COMPANY CULTURE CLASH

BAD RELATIONSHIP WITH INCREASED

DIRECT SUPERVISOR VARIABLE COMP
OR MANAGER

ORGANIZATIONAL
UNCERTAINTY

OTHER OTHER

1ST PRIORITY 2ND PRIORITY 3RD PRIORITY

OVERALL 1-99 EMPLOYEES 100-749 EMPLOYEES

750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

18
MARKET DATA &
COMPENSATION STRUCTURE

Creating an effective compensation plan requires strong FREE ONLINE DATA SOURCES GOVERNMENT DATA
compensation market data as well as a mature approach to
DOWN 2% DOWN 1%
compensation structure. Without reliable data, organizations can’t
know whether to compensate more for competitive jobs or by how
61% FROM 2018
31% FROM 2018

much. To get an understanding of what organizations are doing to TRADITIONAL, WE DON’T COMPARE OUR
inform compensation planning, we asked two key questions: THIRD-PARTY SURVEYS JOBS TO MARKET

1. What sources do you use?

2. How often do you check the market?
32% DOWN 1%
FROM 2018
32% UP 1%
FROM 2018

PAID ONLINE DATA SOURCES COMPENSATION CONSULTANTS

COMPENSATION DATA SOURCES UP 4%

Sixty-one percent of organizations use free online data to help inform

37% FROM 2018
31% DOWN 3%
FROM 2018

their compensation planning, which is a slight reduction from last

INDUSTRY SURVEYS
year (63 percent). The advantage of looking at free online data is that
DOWN 1%
you are able to see the same information your employees may be
looking at. However, free sources are not packaged for business use
29% FROM 2018

and are not validated according to any rigorous standard.

DID YOU KNOW?
Organizations with mature processes for compensation planning PayScale offers free online data,
will utilize multiple market data sources — preferably three or more paid online data, and integration with
— and organizations who require a high level of accuracy will opt for traditional, third-party surveys as well as
paid data sources, ideally sources that are integrated with their own an organization’s own compensation data.
compensation data.
Interested in learning about how PayScale’s software
solutions make compensation management easier?
Schedule a demo and speak with a representative.

19
COMPENSATION DATA FREQUENCY

More than half (57 percent) of the surveyed organizations
completed a full market study within the past 12 months.
That number rises with the size of the organization. Sixty-four
percent of enterprise organizations have done a full market
study sometime in the last year. Thirty percent of enterprise
organizations have done a full market study in the last 6 months.
Conversely, 27 percent of small companies with less than a
hundred employees have never done a full market study on
compensation.
We also asked how often organizations reference individual job
titles. We found that 24 percent of organizations referenced
market data for individual jobs annually and 17 percent did so
monthly. This is similar to last year. Six percent reported that they
check salary market data for individual jobs daily.
HOW OFTEN DO YOU REFERENCE MARKET
DATA FOR INDIVIDUAL JOBS?

HOW LONG HAS IT BEEN SINCE YOUR LAST FULL MARKET STUDY? DAILY 6%

31%
WEEKLY 14%
26%
MONTHLY 17%
20%
2X PER YEAR 16%

ANNUALLY 24%
8%
LESS FREQUENTLY
5% 5% THAN ANNUALLY
11%
3% 2% WE NEVER REFERENCE MARKET
DATA FOR INDIVIDUAL JOB TITLES 6%
TH 6

UD R

ER
TH AN
TH

TH

TH

TH

ST VE
ON AN

OTHER 6%
S

H
ON H

T NE
ON

ON

ON

ON

OT
M ET
M TH

KE E
36 R
SS

AR AV
O
12

M
LE

-1

-2

-3

M H
6-

13

19

25

E E
N W
DO

20
Market data forms the backbone of an organization’s salary
structure. Seventy percent of organizations base their pay grades
and ranges on market data. This was similar to last year but still
represents a continued shift up compared to 66 percent in 2017
and 49 percent in 2016.
HOW DO YOU ASSIGN JOB TO GRADES?
COMPENSATION STRUCTURE
Compensation structure varies from organization to organization.
Most organizations develop pay ranges for each position (30
percent in 2019). That said, 24 percent of organizations have pay
grades in place. Pay grades group similar jobs together based on
market value, level of responsibility, and value to the organization.

MARKET DATA 70%

HOW DOES YOUR ORGANIZATION STRUCTURE PAY?

QUALITATIVE JOB
24% PAY RANGES FOR EACH POSITION 30%
EVALUATION METHOD

QUANTITIATIVE JOB PAY GRADES FOR GROUPS OF JOBS 24%

16%
EVALUATION METHOD

WE DON’T HAVE A STRUCTURE 20%

RANKING METHOD 15%

A MIX OF GRADES &
17%
RANGES-BY-POSITION
COLLECTIVE BARGAINING
AGREEMENTS OR 8%
UNION CONTRACTS I’M UNSURE 4%

I DON’T KNOW 6% BROADBANDS 3%

OTHER 2%
OTHER 3%

21
The primary reason organizations shift from pay grades to pay
ranges for individual jobs is because pay ranges are more precise.
Forty-nine percent made the move for a mix of reasons, including:
FLEXIBILITY PRECISION
The prevalence of pay ranges is lower in enterprise organizations
than smaller organizations. Forty-seven percent of enterprises
use pay grades while 19 percent of enterprises use pay ranges.
Fourteen percent of organizations with between 100-749
employees use pay grades and 36 percent use pay ranges.

Make room in the salary Gain a better

COMPENSATION STRUCTURE BY ORGANIZATION SIZE
structure for growth and understanding of the
change market rate for the role
0% 10% 20% 30% 40% 50%

CULTURE TRANSPARENCY PAY RANGES FOR

EACH POSITION

Ensure employees aren’t Communication with

PAY RANGES FOR
so focused on pay grades employees around how GROUPS OF JOBS

pay decisions are made

REASON FOR MOVING FROM PAY GRADES TO PAY

A MIX OF GRADE
RANGES ON INDIVIDUAL POSITIONS AND RANGE-BY-POSITION

A MIX OF THE FOLLOWING REASONS 49% BROADBANDS

PRECISION 20%
WE DON’T HAVE
A STRUCTURE

FLEXIBILITY 14%

OTHERS
IMPROVE PAY TRANSPARENCY 9%

IMPROVE CULTURE 7% OVERALL 1-99 EMPLOYEES 100-749 EMPLOYEES

750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

OTHER 2%

22
 “
QUOTE COMPENSATION STRUCTURE BY INDUSTRY
In an employee-driven market as we see today, where
unemployment is so low, no company can afford to have a
sudden and unexpected migration of its most critical employees
“ AGENCIES & CONSULTANCIES
0% 20% 40% 60% 80% 100%

because they failed to properly adjust their salary ranges. ARTS, ENTERTAINMENT
& RECREATION
- Susan Hollingshead, Chief People Officer, Vendini

CONSTRUCTION

EDUCATION

ENGINEERING & SCIENCE

FINANCE & INSURANCE

Some industries are more likely to stick with pay grades, such
as Government (42 percent), Finance & Insurance (35 percent) FOOD, BEVERAGE
and Engineering & Science (31 percent). Conversely, industries & HOSPITALITY

that more frequently use pay ranges include Food Beverage &
GOVERNMENT
Hospitality (42 percent), Agencies & Consultancies (41 percent)
and Construction (35 percent). HEALTHCARE &
SOCIAL ASSISTANCE

Seventeen percent of organizations overall have a mix of grades

MANUFACTURING
and ranges. Having a mix of structures allows organizations to
be both intentional in how they pay and to stay nimble in shifting
NONPROFIT
market conditions.
REAL ESTATE &
RENTAL & LEASING

RETAIL & CUSTOMER SERVICE

TECHNOLOGY
(INCLUDING SOFTWARE)

OTHER INDUSTRIES

PAY RANGES FOR PAY RANGES FOR A MIX OF GRADES &

EACH POSITION GROUPS (GRADES) RAMGES-BY-POSITION

WE DON’T HAVE
BROADBANDS I’M UNSURE OTHER
A STRUCTURE

23
PAY BY GEOGRAPHY

It’s a compensation best practice to adjust pay ranges according to the competitiveness
of the labor market and cost-of-living in different geographic locations. Of the
organizations who have multiple locations, more adjust pay ranges based on geography
than those who don’t. As organizations grow, they sometimes struggle to determine
when to start differentiating pay based on geography, but most start once they have
several hundred employees.

DOES YOUR ORGANIZATION MAINTAIN DIFFERENT PAY RANGES

FOR DIFFERENT GEOGRAPHICAL LOCATIONS?

63%

57%

45%
42% 43%

35%
32%
31% 30% 29%
27%
26%

20%

13%

8%

YES, WE HAVE MULTIPLE PAY NO, WE MAINTAIN ONE PAY RANGE N/A, WE DON’T OPERATE IN
RANGES BASED ON GEOGRAPHY ACROSS MULTIPLE GEOGRAPHIES MULTIPLE LOCATIONS

OVERALL 1-99 EMPLOYEES 100-749 EMPLOYEES 750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

24
ROLES IN COMPENSATION

In 2019, the CEO continues to be the final approver of pay

decisions in a large percentage of organizations (75 percent).
Meanwhile, the functional manager and HR team/manager
continue to be most involved in recommendations and
communications with employees. Obviously, company size
impacts who becomes involved in pay decisions as smaller
organizations will have fewer layers of hierarchy and also less
DOES YOUR ORGANIZATION HAVE A COMPENSATION TEAM?
specialization in compensation as a discipline. Similar to last year,
35 percent of all organizations have a dedicated compensation
90%
team. Ninety percent of enterprise organizations have a dedicated
compensation team, compared to only 15 percent of small orgs.

65%
WHO IS INVOLVED IN PAY INCREASES AND COMMUNICATION

0% 30% 60% 90% 120% 150%

CEO
35%
CFO 28%

COO
15%
BOARD OF DIRECTORS

FUNCTION VICE PRESIDENT

OVERALL 1-99 100-749 750-4,999 5,000 OR MORE

FUNCTION DIRECTOR
EMPLOYEES EMPLOYEES EMPLOYEES EMPLOYEES

FUNCTION MANAGER

HR TEAM/HR MANAGER

COMP TEAM/COMP MANAGER

1ST PRIORITY 2ND PRIORITY 3RD PRIORITY

25
Similar to last year, we asked HR and compensation professionals
how they see their role evolving in the near future, specifically
what they envision themselves spending more, less, or the same
amount of time on in 2020. The top two activities that HR and
comp professionals see themselves spending more time on in
2020 are creating, analyzing, interpreting and presenting analytics
to a business audience and activities to further pay transparency.
These findings track similarly to last year and follow the trend of
HR becoming an increasingly strategic function of the business,
which we also asked about. This year, 27 percent said they are
part of the strategic decision-making process, which was also a
differentiator of top performers vs. non-top performers.

HOW HR AND COMP PROS SEE THEIR ROLES CHANGING IN 2020

STRATEGIC FUNCTION OF HR/COMP
0% 20% 40% 60% 80% 100%

JOB EVALUATION/
MARKET PRICING 43% 49% 8% I COLLABORATE WITH &
PROVIDE STRATEGIC INPUT TO 57%
OTHER GROUPS IN MY ORG
EXPLAINING PRICING
43% 48% 9%
METHODOLOGY TO MANAGERS

PARTICIPATING IN SURVEYS 19% 68% 13% I MEET WITH OTHER TEAMS IN

MY ORG TO ENSURE I’M PART OF THEIR 27%
STRATEGIC DECISION MAKING PROCESS
CREATING, ANALYZING, INTERPRETING
AND/OR PRESENTING ANALYTICS RESULTS 53% 43% 5%
TO A BUSINESS OR EXEC AUDIENCE

CONDUCTING A PAY 46% 48% 7% I FOLLOW THE PLAN CREATED

EQUITY ANALYSIS 13%
BY OTHER TEAMS IN MY ORG

ACTIVITIES THAT FURTHER 52% 42% 6%

PAY TRANSPARENCY

REVAMPING YOUR OTHER

43% 46% 11% 3%
COMPENSATION PLAN

MORE TIME SAME AMOUNT OF TIME LESS TIME

26
SPOTLIGHT: HOT SKILLS DEFINE
THE NEW WAR FOR TALENT
Last year, we warned of the possibility of a recession coming. At
present, that concern has abated. When the treasury yield curve
inverted in mid-2019, it signaled a coming economic recession, but
the Federal Reserve responded by cutting interest rates, flattening
the curve, which then recovered in the fourth quarter. The result was
a surge in an already strong labor market and the unemployment rate
dropping to 3.5 percent in December, a 50 year low for the United
States.
The challenge now is navigating the ever-increasing talent shortage.
Job openings exceeded the available talent in the labor market in
2018. Without a recession to balance out supply and demand, the
War for Talent that McKinsey first predicted would last 20 years in
1997 is only getting hotter. This is particularly true for highly skilled
technology professionals as organizations strive to digitally transform
in order to keep up with customer expectations in a digital world.
The War for Talent is affecting the HR organization too. HR is
increasingly becoming a strategic business function and new
advancement in HR technology systems and people analytics provide
data and automation of talent management and recruiting functions
that were never possible before. According to LinkedIn’s Global
Talent Trends for 2020, there has been a 242 percent increase in HR
professionals with data analysis skills in the last five years. However,
most organizations are still pretty immature in this area, in part
because the technology is still evolving, but also because talent with
the technology skills needed is in short supply.
Organizations simply don’t have enough people with highly developed
skills in technology, data science, and analysis — not to mention
the complementary soft skills like critical thinking, creativity, and
communication — needed to propel the business into the future.
With every business function experiencing similar opportunities and
challenges, organizations are competing for top talent like never
before. Predictably, organizations are increasingly valuing skills
more — and paying premiums to obtain hot skills that are in high
demand. In some positions, skills are more important than education,
particularly new and emerging skills for which university degrees
don’t currently exist or are insufficient to assess competency.
DOES YOUR ORGANIZATION PRIORITIZE SKILLS
OR EDUCATION MORE?
71%
23%
6%
FORMAL EDUCATION SKILLS OTHER
OR DEGREE
27
Given the growing prominence of hot skills, especially the
degree to which AI and automation is predicted to disrupt the
labor market in the future, we asked our audience to rank the
importance of the top skills needed for the future. Computer
programming is high on the list, but soft skills such as critical
thinking, complex problem solving, and emotional intelligence
outranked hard skills like programming ability. This is because
these are the skills needed to build the working models, glean the
insights to make strategic business decisions, and communicate
the vision effectively with the rest of the organization.
TOP THREE SKILLS NEEDED FOR THE FUTURE
0% 10% 20% 30% 40% 50%
CRITICAL
THINKING
COMPLEX PROBLEM
THINKING
Overall, attraction and retention strategies centered around skills
need to be top-of-mind for industry-leading organizations. In
particular, organizations need to be thinking about Millennials,
who are becoming leaders now, and Generation Z, the young
“digital natives” who are now graduating and entering the
workforce. According to data from Global HR consulting firm
Mercer, 54 percent of employees voluntarily leaving organizations
were Millennials/Generation Y (born 1978-1998), with better
job opportunity being the most common reason for leaving.
60% 70% 80%
Therefore, organizations should look closely at career pathing and
upskilling opportunities in addition to compensation and benefits
to attract and retain the top talent of the future.

EMOTIONAL
INTELLIGENCE

DID YOU KNOW?

CREATIVITY
PayScale’s new Skills Differential Engine,
available with MarketPay, can help you adjust
ABILITY TO compensation for the hot skills commanding
PROGRAM/CODE
premium pay in the labor market.
ORAL COMMUNICATION/
PUBLIC SPEAKING

WRITTEN
COMMUNICATION

1ST PRIORITY 2ND PRIORITY 3RD PRIORITY

28
Chapter Two

VARIABLE PAY AND

BENEFITS TO ATTRACT
& RETAIN TOP TALENT
In order to attract and retain top talent in a tight labor market,
it’s imperative to offer compelling compensation and benefits
packages. However, it can be challenging to compete on base pay
alone. In recent years, more organizations have been turning to
variable pay and benefits to reward performance and differentiate
on the employee experience. This section of the Compensation Best
Practices Report digs into which types of variable pay organizations
are trying as well as what kind of benefits they are offering currently
or looking to offer in the next year.

29
THE ROLE OF VARIABLE PAY

Variable pay constitutes all cash compensation that is paid to

employees above or in addition to their base pay (which is fixed).
Variable pay includes any type of bonus, incentive pay, or sales
commission that is based on performance or not guaranteed.
The difference between bonuses and incentive pay is that FREQUENCY OF BONUSES OR INCENTIVES
bonuses do not have to be tied to measurable performance
objectives. For example, some bonuses are given at the end of
the year as a “holiday bonus” or at the discretion of management.
WEEKLY 1%
Variable pay can be individual to the employee, team-based,
or company-wide. Variable pay also includes hiring, retention,
and referral bonuses as well as profit sharing. Variable pay is MONTHLY 10%

commonly used to motivate employees to work smarter or harder

for both individual and company achievement and success rather QUARTERLY 18%
than trading time for a paycheck.

SEMIANNUALLY 7%
Similar to previous years, the majority of organizations in 2019
provided some form of variable pay (73 percent). Also similar to
previous years, variable pay is more prevalent in top-performing ANNUALLY 54%
organizations (81 percent) than non-top performing organizations
(77 percent). Variable pay is also more common in enterprise
PROJECT-BASED 7%
organizations of 5,000 or more employees (83 percent) than
small businesses of 1-99 employees (67 percent).
N/A 4%
In 2019, 54 percent of all organizations paid out bonuses on at
least an annual basis, which is similar to the last couple of years.
Eighteen percent of organizations paid out bonuses quarterly and
10 percent paid out bonuses monthly. This maps closely to what
has been reported over the last three years.

30
 HIGHER FREQUENCY BONUSES OR INCENTIVES BY INDUSTRY

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

AGENCIES &
CONSULTANCIES

CONSTRUCTION

ENGINEERING &
SCIENCE

FINANCE &
INSURANCE

FOOD, BEVERAGE &

HOSPITALITY

HEALTH CARE &

SOCIAL ASSISTANCE

MANUFACTURING

In the past, we have observed that industries with shorter

employee tenures are more likely to pay bonuses on a more NONPROFIT
frequent basis. For example, 28 percent of Food, Beverage
and Hospitality organizations, 28 percent of Retail & Customer REAL ESTATE &
Service organizations, and 26 percent of Technology companies RENTAL & LEASING

pay bonuses on a quarterly basis. This is similar to last year.

RETAIL &
Project-based bonuses were also more common in Agencies & CUSTOMER SERVICE
Consultancies (13 percent) and Technology organizations
(11 percent). TECHNOLOGY
(INCLUDING SOFTWARE)

OTHER INDUSTRIES

MONTHLY QUARTERLY PROJECT-BASED

31
TYPES OF BONUSES

The most popular type of bonus is still the individual incentive bonus,
which includes the common annual performance bonus. Sixty-seven
percent of organizations gave individual incentive bonuses in 2019,
which is one point higher than the 66 percent of organizations who
gave individual incentive bonuses in 2018. The employee referral
bonus (48 percent) and spot bonus (46 percent) were the next most
frequent bonus types, according to respondents. These top
3 categories match last year’s, but the percentage of organizations
participating in employee referral and spot bonuses is higher
(45 and 36 percent respectively for 2018).
The types of bonuses used to incentivize employees vary by
organization size. For example, enterprise organizations (those with
more than 5,000 employees) are more likely than small organizations
(those with fewer than 100 employees) to use multiple incentive
types. For example, 70 percent of enterprise organizations gave
individual incentive bonuses versus 61 percent of small organizations.
This difference is even more pronounced for employee referral
bonuses (59 percent versus 26 percent), hiring bonuses (65 percent
versus 18 percent), and retention bonuses (53 percent versus 12
percent), all of which are directly connected to talent acquisition and
retention strategies rather than performance evaluation.

TYPES OF BONUSES PAID TO EMPLOYEES IN 2019 TYPES OF BONUSES PAID TO EMPLOYEES IN

2019 BY ORGANIZATION SIZE

67%
70%

48% 60%
46%
38%
50%
32%
27%
24%
21% 40%

4% 30%
3%

20%
N ET
E L

N EE

ES T

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US A

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IN

N ET
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ES

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1-99 EMPLOYEES 100-749 EMPLOYEES 750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

32
BUDGETING FOR VARIABLE PAY

All-together, the majority of organizations (73 percent) have a budget
dedicated to bonus or incentive payouts. This is a slight increase, 2
percentage points higher, since last year. Having a budget for variable
pay shows commitment to rewarding good performance. Having no
budget for variable pay doesn’t necessarily preclude paying out cash
bonuses contingent on performance, but it does send a different
message. Whether you need to budget for variable pay will depend on
your circumstances, such as how strictly you adhere to your budget.
When breaking out variable pay budgets by organization size,
enterprise organizations are only slightly more likely to have a budget
for variable pay (76 percent) than small organizations (74 percent).
However, enterprise organizations allocated a larger portion of their
budget for incentive payouts than smaller organizations. For example,
14 percent of enterprise organizations allocated more than 15 percent
of their budget to bonus or incentive pay while only 8 percent of small
organizations did the same.

The amount which organizations allocate to incentive pay varied. BUDGET FOR BONUS OR INCENTIVE PAY BY ORGANIZATION SIZE
Eighteen percent of organizations allocate between 2 and 3.99
35%
percent of their total organization’s salary budget to incentive pay.
Fourteen percent of organizations say they budget between 4 and 30%
5.99 percent. Twelve percent of organizations say they budget
between 10 and 14.99 percent. Only 9 percent of organizations 25%

allocate more than 15 percent of their total salary budget to

20%
variable comp.
15%
BUDGET FOR BONUS OR INCENTIVE PAY
27% 10%

5%
18%
0%
14% 0-1.99% 2-3.99% 4-5.99% 6-7.99% 8-9.99% 10-14.99% 10-14.99% MORE THAN
12% 15%
10%
9% 1-99 EMPLOYEES 100-749 EMPLOYEES 750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES
6%
5%

We also asked organizations how their bonus or incentive budget

will change in 2020 compared to 2019. The majority, 55 percent of
%
%

%
9%

9%

ET
99
99

99

99

15

organizations, said their budget would remain the same. This is a one
DG
9

4.
1.

3.

5.

7.

9.

AN
-1
0-

2-

4-

BU
6-

8-

10

TH

percent increase since last year.

O
N
E
OR
M

33
 CURRENTLY IN PLANNED NEW
BENEFITS
2019 IN 2020

EMPLOYER-PAID MEDICAL, DENTAL, VISION, ETC. 78% 40%

ACCRUED OR GRANTED PTO 60% 29%

UNLIMITED PTO 11% 7%

BENEFITS AND PERKS ACCRUED OR GRANTED VACATION 43% 21%

PAID VACATION (REIMBURSED) 23% 13%

The benefits and perks offered by organizations haven’t 46% 22%

ACCRUED OR GRANTED SICK
changed materially year over year. Most organizations still offer
employer paid medical, dental and vision (78 percent) as well as 403B OR 401K 73% 37%

a 401K or 403B (73 percent). However, some organizations are

PENSION 13% 8%
experimenting with offering more atypical benefits to differentiate
their employer brand and attract and retain top talent in a tight EQUITY 16% 10%
labor market. As technology has changed the nature of office
4% 3%
work, many organizations now offer remote work opportunities COMMUTE TIME

(48 percent) and flex-time (39 percent), both of which have 48% 28%
REMOTE WORK
increased by a few percentage points since last year and continue
to increase year over year. Paid family leave has also been PAID SABBATICAL 5% 4%
increasing year over year, now at 38 percent for 2019
UNPAID SABBATICAL 6% 4%
(32 percent for 2018 and 29 percent in 2017). Education and
tuition reimbursement is also popular (45 percent) but has not PAID FAMILY LEAVE 38% 22%
changed since last year.
EDUCATION OR TUITION REIUMBURSEMENT 45% 26%

Although on a smaller scale, we have also seen unlimited PTO 24% 19%
GYM MEMBERSHIP OR REIMBURSEMENT
tick up to 11 percent (from 9 percent in 2018) which is double
what it was in 2016 when unlimited PTO was offered by 5 percent TRANSPORTATION ALLOWANCE 16% 9%
of organizations. Accrued or granted PTO and sick leave has
PAID CHILDCARE 2% 3%
remained high at 60 percent and 46 percent respectively, similar
to last year. COMMUTING ALLOWANCE 6% 7%

TUITION REIMBURSEMENT 31% 16%

4-DAY WORK WEEK 10% 10%

FLEX TIME 39% 24%

OTHER 8% 20% 34
 HOW ORGANIZATIONS REWARD HIGH PERFORMING EMPLOYEES

0% 10% 20% 30% 40% 50% 60% 70% 80%

BIGGER BASE 67%

PAY INCREASE 61 %

52%
PROMOTION
47%

BONUS OR INCENTIVE 39%

NO FORMAL PLAN 35%

36%
CAREER DEVELOPMENT
34%

GOAL-BASED 35%
BONUS OR INCENTIVE 27%

29%
AWARD & RECOGNITION
27%

NON-MONETARY 25%
PUBLIC RECOGNITION 23%

FLEXIBLE WORK 16%

SCHEDULE 17%

REWARDING HIGH PERFORMERS COMMISSIONS

17%
13%

13%
EQUITY
One final consideration for variable pay has to do with how 10%

organizations decide to reward their high-performing employees. 7%

WE DON’T
10%

In 2019, organizations rewarded high-performing employees in a 10%

PAID TIME OFF
variety of ways, including bigger base pay increases (61 percent, up 10%
from 58 percent in 2018), promotions (47 percent, down from 48 11%
FLEXIBLE WORK
percent in 2018), informal bonuses or incentives (35 percent) and LOCATION 9%
career development (34 percent). Top performing organizations
4%
(those that exceeded revenue goals) have more emphasis on all OTHER
4%
types of rewards than typical organizations except for flexible
work schedules.
TOP-PERFORMERS OVERALL

35
 When broken out by company size, enterprise organizations with 5,000 or more employees
were more likely than small organizations with 1-99 employees to offer bigger base pay
increases (72 percent compared to 54 percent), awards/recognition (42 percent compared
to 19 percent), and promotions (57 percent compared to 36 percent). However, small
companies were more likely than enterprises to offer flexible work locations (11 percent
compared to 5 percent), flexible work schedules (19 percent compared to 15 percent), and
paid time off (13 percent compared to 4 percent).

HOW ORGANIZATIONS REWARD HIGH PERFORMING EMPLOYEES BY COMPANY SIZE

80%

70%

60%

50%

40%

30%

20%

10%

0%
EA SE

IV D

AN E

TY

UL K

TI RK

IT OR

EN ER
IO Y

’T

ER
OF
PL IV

IT AR
ON

ED R
NT SE

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UI
SE

ON

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CR BA

PM RE

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H WO

CA O
AL ENT

DO
GN RD

OT
GN ET
CE A

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LO LE W
SI

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EQ

LO CA
IN L-B

M
IN R

CO WA
IS

OM
CO ON

E
SC LE
RM NC
Y GE

TI

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M
A

IB

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RE A

PR
OR GO
PA BIG

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FO I

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1-99 EMPLOYEES 100-749 EMPLOYEES 750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

36
 HOW ORGANIZATIONS PLAN TO ATTRACT AND
RETAIN HIGH PERFORMERS IN 2020

60%
MERIT-BASED
PAY PLAN 65%

57%
LEARNING & DEVELOPMENTAL
OPPORTUNITIES
We also asked organizations to tell us what they plan to do to 58%
help recruit and retain high-performing employees in 2020. The
majority of organizations (60 percent) plan to use a merit-based 34%
DISCRETIONARY
BONUS PLAN
pay plan — a tactic that is more prevalent for top-performing 40%
organizations (65 percent) as well as for enterprise organizations
26%
(67 percent). Providing learning and development opportunities MORE PERKS
ranked as a close second (57 percent). Using a discretionary 32%

bonus plan came in third (34 percent). This was similar to

22%
last year. NON-DISCRETIONARY,
INCENTIVE-BASED PAY PLAN
31%

Interestingly, top-performing organizations are more likely to

14%
use most of these tactics to recruit and retain high-performing STOCK OPTION
AND/OR GRANT PLAN
employees. Top-performing companies are particularly keen to 18%

offer non-discretionary, incentive-based pay in 2020 (31 percent)

7%
over typical organizations (22 percent). OTHER
5%

ALL ORGANIZATIONS TOP PERFORMERS

37
Chapter Three

COMPENSATION
PERCEPTIONS,
COMMUNICATIONS, &
MANAGER TRAINING
Providing the right mix of compensation to attract and retain top
talent is only part of compensation best practices. Equally important
is how compensation practices are communicated, understood
and perceived by an organization’s employees. Forward-thinking
organizations acknowledge the importance that pay transparency
has on workplace culture and actively establish a pay brand to drive
positive perceptions of fairness and increase employee engagement.
Organizations with more mature compensation practices also train
managers on how to effectively communicate compensation policies.

38
THE CORPORATE CHASM

PayScale has a dual audience of both employers and employees,

which allows us to survey both audiences on the same
questions and compare perceptions on compensation practices
EMPLOYERS EMPLOYEES
and workplace engagement to identify gaps. We call this the AGREE OR AGREE OR PERCEPTION
CORPORATE CHASM
corporate chasm and have been tracking it year over year. STRONGLY STRONGLY GAP
AGREE AGREE

Collectively, the data show that employers are both more COMPENSATION DRIVES EMPLOYEE
ENGAGEMENT AT MY ORGANIZATION 47% N/A N/A
optimistic about employee perception of their compensation
practices, communications, and workplace culture, and more EMPLOYEES AT MY ORGANIZATION
65% 48% 17%
pessimistic about employee relationships with managers and FEEL APPRECIATED AT WORK

trusting employees to do their work effectively. For example, 65

THERE IS FREQUENT, TWO-WAY
percent of employers agree or strongly agree that employees feel COMMUNICATION BETWEEN 63% 57% 6%
MANAGERS AND EMPLOYEES
appreciated at work while only 48 percent of employees felt they
were appreciated, constituting a 17 percent gap in perception. EMPLOYEES AT MY ORGANIZATION
45% 21% 24%
FEEL THEY ARE PAID FAIRLY
Similarly, 45 percent of employers agree or strongly agree that
employees feel they are paid fairly (which is still less than a HOW PAY IS DETERMINED AT MY

majority) while only 21 percent of employees agree or strongly

ORGANIZATION IS A TRANSPARENT 27% 24% 3%
PROCESS
agree that they are paid fairly, a 24 percent gap in perception.
EMPLOYEES AT MY ORGANIZATION
HAVE A GREAT RELATIONSHIP WITH 58% 68% -10%
Compared to last year, the gap has widened slightly for perception THEIR DIRECT MANAGER

of two-way communication between managers and employees

INTERACTIONS AT MY
and employees feeling like they are paid fairly. It has remained ORGANIZATION TEND TO BE 68% 51% 17%
POSITIVE AND PRODUCTIVE
about the same for pay transparency and employee relationship
with direct managers. Employer perception has grown slightly for EMPLOYEES AT MY ORGANIZATION
ARE TRUSTED TO DECIDE HOW TO DO 63% 81% -18%
positivity and productivity and weakened for trust in employees THEIR OWN WORK

to do their own work. All in all, the data indicate that employers
can do a better job validating and communicating compensation
practices and workplace engagement with employees.

39
PAY BRAND

The last few years have a seen a steady rise in employer branding
as organizations strive to apply customer experience best
practices to candidate and employee experiences. At PayScale,
we define a “pay brand” as the perception that employees and job
candidates have about an organization’s compensation practices DOES YOUR COMPANY HAVE A FORMAL COMPENSATION STRATEGY/
and communications. Through prior research, we know that PHILOSOPHY AND DO YOU SHARE IT WITH EMPLOYEES?
a strong pay brand equates to more satisfied employees and
smaller gaps in perception between employees and management
on key workplace issues.

In order to develop a strong pay brand, organizations have to have

mature compensation planning processes. This usually includes
32%
a pay philosophy articulating why you pay as you do within the
general trends for your industry and labor market as well as
pay ranges or grades and a plan for how you communicate pay
decisions with managers and employees.

A strong pay philosophy will naturally align to the company

mission statement, values, and culture. For example, a company
with a mission to engineer the best products in the world might
have a philosophy to pay above the 75th percentile in order to
I’M UNSURE
attract world-class engineering talent. Meanwhile, a company
with a commitment to fairness will be concerned about pay YES

transparency and pay equity for all employees.

NO, BUT WE ARE WORKING ON ONE

When employees understand how pay decisions are made and NO, AND WE ARE NOT WORKING ON ONE

are cognizant of the total rewards offered by their employer,

including variable pay and benefits, they are more likely to believe
they are fairly paid and likewise more likely to feel engaged
with their work and committed to the organization. According
to our data, the majority of organizations in 2019 either have
a compensation strategy and philosophy that they share with
employees or are working on one.
40
 PAY BRAND IN THEIR OWN WORDS

We also asked people to describe their organization’s pay brand in

EMPLOYER VS. EMPLOYEE PERCEPTION OF PAY BRAND
When asked to self-evaluate their pay brand with current employees
as well as job candidates, most organizations felt that perceptions
landed somewhere in the middle, neither bad nor good or mostly
good. Interestingly, employers felt that job candidates had a better
perception of their current pay brand than their current employees.
their own words. Contributions ranged from a couple of words to
succinct descriptions of their organization’s pay philosophy, benefits,
and cultural differentiators. Some organizations were aware of
challenges with pay, such as difficulties in obtaining promotions or
salary compression negatively impacting tenured employees, while
others highlighted the importance of using salary market data to
make pay decisions and how they offer superior benefits or better
work-life balance to compete against companies with deeper pockets.

“
HOW WOULD YOU EVALUATE PERCEPTION OF YOUR
We are known for paying less than competitors, but we feel
ORGANIZATION’S CURRENT PAY BRAND?
that our culture is different than theirs and will make up the
difference.
44%
39% 40%
We pay at market or slightly above with outstanding
36%
benefits.

We strive for pay that is within the range for our talent market.
We know that pay is a driving factor but not the only one and
we seek to hire people who are not only driven by pay.
15%

3%
2%

VERY BAD BAD

7%

NEITHER BAD
OR GOOD

WITH YOUR OWN EMPLOYEES

GOOD
7% 7%

VERY GOOD

WITH JOB CANDIDATES

Unfortunately, team members feel that the company

We recognize and reward performance and provide a

“
underpays them for their work and takes advantage of team
members with longer tenure.

framework that supports diverse, complex, and localized

needs while addressing market shifts and associated
performance. This data enables managers to make pay
decisions based on internal and external data.

41
FAIRNESS AND PAY EQUITY

Pay equity was in the spotlight a lot in 2018 and continuing into 2019.
Part of the reason for this were several highly publicized class-action
lawsuits. Later in 2019, Melinda Gates made headlines with her
announcement to commit $1 billion to promote gender equality and
expand women’s power and influence in the United States.
The Equal Pay Act was passed in 1963 when women made $0.59
for every $1.00 a man made. Research from PayScale on the Gender
Pay Gap shows that although the gender wage gap is narrowing, it’s
closing more slowly with little progress made in recent years.
When we asked our audience if they were interested in conducting
a pay equity audit in 2020, 1 percent said they planned to do one for
racial pay equity, 7 percent said they planned to do one for gender pay
equity, and 30 percent said they planned to do one for both race and
gender pay equity. However, the majority of organizations, 62 percent,
said they don’t plan to conduct a pay equity audit in 2020. Some of
these may have already done one and don’t need to do another, or
they might continuously monitor their compensation data for internal
pay equity. Others may not be ready yet.

A valid pay equity case doesn’t have to prove active and intentional PERCENT OF ORGANIZATIONS WHO PLAN TO
discrimination. Pay inequity is commonly the result of unconscious PERFORM A PAY EQUITY ANALYSIS
bias. The way the Equal Pay Act is worded also doesn’t require that
women have to make less than men systemically in an organization
for a lawsuit to be viable. You only need one instance of a woman 62%

making less than a man in the same role with similar responsibilities
to be in violation of the Equal Pay Act. Indeed, any employee who
makes less than any other employee doing the same job with similar
job responsibilities can lodge a complaint about pay inequity and land
an organization in hot water.

Accordingly, many organizations are looking into conducting pay 30%

equity audits. Pay equity can be assessed both internally and

externally, but internal pay inequity is the more important of the two
to protect the organization from allegations of unfair or unequal pay.
In order to avoid liability, many organizations seek to shore up their
pay philosophy and compensation strategy before embarking on a 7%
pay equity audit so that they are prepared to address any issues they 1%
might uncover immediately.
YES, RACIAL YES, GENDER YES, BOTH RACIAL NO
PAY EQUITY PAY EQUITY & GENDER PAY
EQUITY

42
COMMUNICATION AND PAY TRANSPARENCY

If a tree falls in the forest and no one is there to hear it, does it make a sound? More importantly, does it
matter to anyone who wasn’t there? The answer to this question can also apply to your compensation
strategy. You can have an extremely organized and data-driven process for determining pay as well as a
superior culture with generous benefits, but if you don’t explain it to employees, they aren’t going to be able
to appreciate it, and you won’t realize as much value from it.

First, don’t assume that employees know what is considered competitive pay for your industry and
company size. Talking to your employees about how you compete in the market, what this means for pay
decisions, why employees are paid what they are for their positions, and what market data you used to
determine pay is essential for improving engagement and narrowing the corporate chasm.

Second, make sure your employees understand their total rewards. This is particularly important when
it comes to variable pay, stock ownership, and benefits. For example, it is not altogether uncommon for
employees to accept an offer including a year-end bonus but never learn from their manager how the
bonus is achieved or paid out. If there are also intangible benefits for working with your organization,
such as flexible work hours, catered meals, or the ability to bring a pet to work, make sure you explain that
differentiation as well.

Third, don’t forget about growth. Most employees are more concerned with what they can make in the
future than what they currently make right now, especially new graduates or if it’s been awhile since the
employee received their last raise or promotion. The clearer you can be about your policy for raises — both
merit-based and annual — as well as what it takes for employees to be promoted or otherwise grow and
move up in their field to earn more compensation, the more incentive employees have to work hard and
commit to the long term with your organization.

43
 THE PAY TRANSPARENCY SPECTRUM
THE PAY TRANSPARENCY SPECTRUM
1. WHAT 2. HOW 3. WHERE 4. WHY 5. WHOA

The pay transparency spectrum defines the degree to which your Your organization
tells employees
Your organization
shares some
Your organization
has a comp plan
Your
organization's
Ranges and
employee pay
organization shares its compensation strategy with employees when and what to market data with and shares pay comp plan reflects information is
expect on their employees ranges with org culture, drives available to all
or — at the far end of the spectrum — publicly. Although pay paycheck individual talent strategy, employees
employees and is open to EEs
transparency is often conflated with pay communications, they
are not the same thing. There are no right or wrong answers with

TRANSPARENCY
CURRENT PAY
pay transparency and our data show that both top performing 45% 22% 19% 8% 6%

organizations and non-top performing organizations can be

anywhere on the spectrum.

TRANSPARENCY
DESIRED PAY
21% 19% 27% 23% 10%

However, previous research from PayScale has shown

that increased pay transparency also increases employee
engagement and retention when compensation strategy is
tied to salary market data and decisions about pay are well-
communicated. In addition, PayScale research has also shown
that pay transparency closes the gender wage gap.

Year over year, most organizations confess that they are less
transparent than they would like to be with the majority of
organizations targeting Level 3 or Level 4 on the pay transparency
spectrum. The percentage of organizations targeting Level 5 pay
transparency has ticked up two percentage points since last year.

44
WHAT ORGANIZATIONS CAN DO TO FOSTER GREATER TRANSPARENCY

Greater pay transparency requires a more mature compensation
strategy. It’s difficult to communicate transparently when you
don’t have clear methodologies to answer questions about how
you determine pay and it’s dangerous to be transparent if you have
internal pay equity problems. Most compensation strategies begin
with a salary structure. For example, you might use pay grades or
grade-based pay ranges to manage employee pay at scale. Grades
offer a useful framework for stacking the relative importance of jobs
against each other. This is especially useful when market data on a
new or unusual job position is scarce. However, salary grades don’t
work as well when data for job positions are plentiful as it will make
more sense to employees to be benchmarked against their specific
job rather than a general grade when possible.
Most organizations do not communicate as much as they could to
employees, even on an individual basis. In 2019, just 38 percent of
organizations share pay ranges with employees on their job position,
which is only a 2 percent increase from last year. In addition, only
33 percent of employers share market data when giving a raise.
Enterprise organizations with over 5,000 employees are most likely
to share pay ranges with employees as well as where employees fall
within their range. However, enterprises are least likely to share salary
market data when giving the rationale for a raise.
PAY TRANSPARENCY ACTIONS BY COMPANY SIZE
70%

In 2019, 16 percent of surveyed organizations switched from using 60%

pay grades to setting ranges for each position. Of those that made
50%
the switch, 20 percent said the main reason was increased precision
40%
or to gain a better understanding of the true market value of each
position, 14 percent said it was for greater flexibility to accommodate 30%
more rapid pay changes, 7 percent to improve culture and ensure 20%
employees aren’t so focused on pay grades, 9 percent to improve pay
10%
transparency, and 49 percent for a mix of the above reasons.
0%
WE SHARE PAY RANGES OUR EMPLOYEES KNOW WE SHARE MARKET DATA
Another best practice is to share pay ranges for individual positions WITH EMPLOYEES FOR WHERE THEY FALL WITHIN WITH EMPLOYEES WHEN
THEIR POSITION THE RANGE GIVING THE RATIONALE
with employees as well as where the employee falls within their range FOR A RAISE

and why. The reasons why include things like years of experience,
1-99 EMPLOYEES 100-749 EMPLOYEES
education, specific skills, location, past performance and other
750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES
compensable factors. When you are forthcoming about pay, you
communicate to employees that you care about getting their pay
right and are interested in their career growth and future within the
organization.

45
Lastly, forward thinking organizations provide employees with total TOTAL COMPENSATION STATEMENTS PROVIDED TO
compensation statements or total reward statements that outline EMPLOYEES BY INDUSTRY
all of the employee’s rewards. These include base pay, variable pay,
0% 20% 40% 60% 80% 100%
and benefits, sometimes with a monetary value assigned so that
the employee can understand the total value of their position within AGENCIES &
CONSULTANCIES
the organization. In 2019, only 38 percent of organizations provided
CONSTRUCTION
a total compensation or total rewards statement to employees.
Total compensation statements are more commonly provided in EDUCATION

enterprise-level companies than small companies. They are also more

ENGINEERING & SCIENCE
commonly provided in highly educated and professional industries.
More importantly, they are a differentiator between top-performing FINANCE & INSURANCE

organizations and non-top performing organizations, with 43 percent

FOOD, BEVERAGE
of top-performers providing total compensation statements to 38 & HOSPITALITY

percent of non-top performers. GOVERNMENT

HEALTHCARE &
Although giving employees so much information about their SOCIAL ASSISTANCE

compensation can feel scary, it’s important to remember that MANUFACTURING

employees are an investment. Very likely, the organization has
made very conscious decisions about what to offer employees in NONPROFIT

terms of base pay, variable pay, and benefits. Not explaining this RETAIL &
CUSTOMER SERVICE
information to employees only leaves the door open for employees to
TECHNOLOGY
misunderstand or undervalue their compensation and benefits. (INCLUDING SOFTWARE)

OTHER INDUSTRIES
TOTAL COMPENSATION STATEMENTS PROVIDED TO
EMPLOYEES BY ORGANIZATION SIZE YES NO UNSURE

Note: Arts, Entertainment & Recreation, Energy & Utilities and Real Estate and Rental
and Licensing did not have enough responses for statistical viability on this question.
61%
58% 57%

43% 46%
39% 40%
34%
DID YOU KNOW?
PayScale’s Compensation Management
10%
5% Software can generate total compensation
2% 3%
statements for each employeee
YES NO UNSURE
automatically.
1-99 EMPLOYEES 100-749 EMPLOYEES

750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

46
TRUST IN MANAGERS TO TALK
ABOUT COMPENSATION

In order to share total compensation statements with employees,
you have to trust your managers to have these conversations
effectively. Unfortunately, trust in managers to have pay
conversations continues to be low. Similar to last year, we find
that most organizations don’t trust their managers to have tough
conversations about pay with employees. Only 17 percent are
very confident and 44 percent are confident. That still leaves 36
percent who are not confident and 3 percent who are unsure or
don’t know if they are confident.
CONFIDENCE IN MANAGERS’ ABILITY TO HAVE TOUGH
CONVERSATIONS WITH EMPLOYEES ABOUT PAY
However, this isn’t as surprising when most organizations do not
train managers on how to talk to employees about compensation.
Similar to last year, only 32 percent of organizations offered
training to managers on how to have conversations with
employees about compensation, while 60 percent do not.
Perhaps unsurprisingly, top-performing organizations provided
more training to managers on how to talk about compensation
(36 percent).
MANAGER TRAINING ON HOW TO TALK ABOUT
COMPENSATION WITH EMPLOYEES
60%
55%

3%

36%
32%
17%
VERY CONFIDENT

36% SOMEWHAT CONFIDENT

8% 9%
NOT CONFIDENT

UNSURE
44% YES NO UNSURE

ALL ORGANIZATIONS TOP-PERFORMERS

47
 Even when organizations do train managers, only
55 percent train managers on how to have specific
compensation conversations. Clearly, there’s an
opportunity to improve pay communications through
manager training. Manager training on compensation
should be more important to organizations given
that the majority of managers are responsible for
communicating pay decisions to employees.

TOPICS MANAGERS ARE TRAINED ON

80%

60%

40%

20%

0%
COMMUNICATION STYLES COMPENSATION BASICS SPECIFIC COMPENSATION ORGANIZATION ORGANIZATION OTHER
CONVERSATIONS PERFORMANCE CULTURE

ALL ORGANIZATIONS 1-99 EMPLOYEES 100-749 EMPLOYEES

750-4,999 EMPLOYEES 5,000 OR MORE EMPLOYEES

48
Chapter Four

COMPENSATION
PRACTICES OF
TOP-PERFORMING
ORGANIZATIONS
In this year’s report, we looked at what the top-performing
organizations are doing differently when it comes to
compensation planning and communications in order to isolate
compensation best practices and better identify what really sets
top-performers apart.

Top-performing organizations are defined as organizations

who exceeded their revenue goals in 2019. When we work with
organizations to advise them on compensation best practices,
we find that top-performing organizations are ahead of the
pack when it comes to the decisions they make, not only in
compensation, but also in culture and employer branding.

49
TOP PERFORMERS USE MORE TOP PERFORMERS GIVE MORE
COMPENSATION DATA AND VARIED BONUSES

As was true last year, top-performing organizations consult
salary market data more frequently than non-top performing
organizations. Thirty-one percent of top-performing organizations
have completed a market study within the last six months
compared to 23 percent of non-top performing organizations.
Top-performing organizations are also more likely to use paid
online data sources (41 percent) or traditional third-party survey
data (34 percent) versus non-top performing organizations
(36 percent and 30 percent respectively).
Top-performing organizations were also more generous with
variable pay and incentive-based bonuses (81 percent) than
non-top performing organizations (77 percent). Top-performing
organizations were also more creative with bonus structures, as
they were more likely to incentivize employees with a variety of
bonuses. Giving a company-wide bonus was particularly more
common in top-performing organizations.
TYPES OF BONUSES

0% 10% 20% 30% 40% 50% 60% 70% 80%

MARKET DATA DIFFERENCES RETENTION BONUSES

HIRING BONUSES
COMPLETE A MARKET 31%
STUDY IN THE LAST
6 MONTHS 23% INDIVIDUAL
INCENTIVE BONUSES

TEAM
41% INCENTIVE BONUSES
USE PAID ONLINE
DATA SOURCES SPOT BONUSES OR
36% OTHER DISCRETIONARY
BONUS PROGRAMS

MARKET
PREMIUM BONUSES
34%
USE TRADITIONAL,
3RD PARTY SURVEYS PROFIT SHARING
30%

COMPANY-WIDE BONUS

TOP-PERFORMERS NON TOP-PERFORMERS

EMPLOYEE
REFERRAL BONUS

OTHER

TOP-PERFORMERS NON TOP-PERFORMERS

50
TOP PERFORMERS COMMUNICATE OTHER DIFFERENTIATORS
COMPENSATION BETTER OF TOP PERFORMERS

As we’ve seen already, top performing organizations are more
likely to have trained managers on communicating compensation
(36 percent) compared to non-top performers (30 percent). The
differentiation was especially apparent for top performers in
training on compensation basics (79 percent) and organizational
performance (71 percent) compared to non-top performing
organizations (70 percent and 67 percent respectively). As
we’ve also seen, top performing organizations provide total
We looked across the data points to ascertain where top
performers statistically differed from non-top performers in their
approach to compensation. In addition to what has been covered
already, the following stood out as compensation best practices:
EMPLOYEES KNOW HOW TO GET TO ORGANIZATION HAS A DEDICATED
THE NEXT LEVEL OF THEIR CAREER COMPENSATION TEAM

compensation statements to employees more (43 percent) TOP PERFORMERS NON-TOP PERFORMERS TOP PERFORMERS NON-TOP PERFORMERS

compared to non-top performing organizations (38 percent).

66% 53% 40% 28%
PAY COMMUNICATION DIFFERENCES

OFFER MANAGER 36% ORGANIZATION SHARES A FORMAL COMPENSATION TEAM HAS

TRAINING ON TALKING COMPENSATION PHILOSOPHY WITH INCREASED IN SIZE IN THE LAST
EMPLOYEES 2 YEARS
ABOUT COMPENSATION 30%
TOP PERFORMERS NON-TOP PERFORMERS TOP PERFORMERS NON-TOP PERFORMERS

TRAIN MANAGER ON
COMPENSATION BASICS
70%
79%
36% 30% 38% 27%
TRAIN MANAGER 71%
ON ORGANIZATION
PERFORMANCE 67%

ORGANIZATION PLANS TO GIVE ORGANIZATION GAVE BASE PAY

PROVIDE TOTAL BASE PAY INCREASES IN 2020 INCREASES IN 2019
43%
COMPENSATION
STATEMENTS TO TOP PERFORMERS NON-TOP PERFORMERS TOP PERFORMERS NON-TOP PERFORMERS
EMPLOYEES 38%

91% 80% 90% 79%

TOP-PERFORMERS NON TOP-PERFORMERS

51
CRYSTAL BALL
PREDICTED
CHALLENGES IN 2020
2020 is going to be a year of uncertainty in which some will make bold moves and
others will play it safe. The fear of a recession that seemed certain last summer has
dissipated, but it is unclear for how long. In addition, the Presidential Election in the
United States may impact the economy and labor market. Finally, we are still in the
War for Talent in which technology talent in particular is in high demand in every
industry and organization looking to digitally transform in order to remain relevant
and competitive in the upcoming Age of AI. Organizations with strong values that
prioritize people and develop a winning workplace culture and employer brand will be
best positioned to succeed in 2020 and beyond.

52
FUTURE OUTLOOK BIGGEST PREDICTED HR
INVESTMENTS AND CHALLENGES

85 PERCENT 55 PERCENT
OF ORGANIZATIONS PLAN THE MAJORITY OF
TO GIVE INCREASES IN ORGANIZATIONS PREDICT
2020. THAT THEIR BONUS OR
INCENTIVE BUDGETS WILL
NOT CHANGE IN 2020.
We asked respondents to share their predictions for the biggest
investments and challenges HR will face in 2020. This year,
talent acquisition and retention were easily the most important
concern for the majority of respondents, followed by employee
engagement and training & development:
BIGGEST HR CHALLENGES OF 2020

34 PERCENT 30 PERCENT RETENTION 22%

RECRUITING 21%

OF ORGANIZATIONS PLAN TO OF ORGANIZATIONS PLAN ON ENGAGEMENT OF EMPLOYEES 15%

CONTINUE THE TREND OF A 3 PERFORMING BOTH A RACIAL
TRAINING & DEVELOPMENT 13%
PERCENT AVERAGE BASE PAY AND GENDER PAY EQUITY
MANAGING COMPENSATION 11%
INCREASE. ANALYSIS IN 2020.
MANAGING PERFORMANCE 10%

FINDING THE RIGHT HR SOFTWARE 4%

OTHER 3%
AVERAGE EXPECTED PAY INCREASE IN 2020

34%
Meanwhile, the biggest HR investments for 2020 include training
& development (25 percent), recruiting (14 percent), and
compensation changes (13 percent).

BIGGEST HR INVESTMENTS PLANNED FOR 2020

TRAINING & DEVELOPMENT 25%

16%
RECRUITING 14%
12%
11% COMPENSATION CHANGES 13%
8% HR SOFTWARE 11%
6% BENEFITS
5% 10%
4% 4% RETENTION 9%
1%
ENGAGEMENT OF EMPLOYEES 8%
MANAGING PERFORMANCE 7%
%

3%

9%

5%
1%

5%
49

99

49

99

99
.4

4.
AN

AN
1.

1.

2.

2.

3.
-3
1-

5-

2-

5-

5-
TH

TH
01

OTHER 2%
1.

2.

3.
3.
SS

E
OR
LE

53
SURVEY METHODOLOGY

THE 2020 COMPENSATION BEST PRACTICES SURVEY LOCATION

GATHERED RESPONSES FROM NOVEMBER 7, 2019 TO
Respondents spanned the globe, including 3,913 respondents in
JANUARY 8, 2020. THERE WERE 4,903 RESPONDENTS.
the United States and 440 respondents in Canada. Organizations
with both single and multiple locations were represented.
ORGANIZATION SIZE

We defined four organizational sizes for comparison as follows: NUMBER OF LOCATIONS IN ORGANIZATIONS SURVEYED
Small (1-99 employees), Mid-Size (100-749 employees), 44%
Large (750-4,999 employees) and Enterprise (5,000 or more
employees). Forty-two percent of respondents reflect small
32%
organizations; 31 percent of respondents come from mid-
sized organizations; 15 percent of respondents come from
large organizations, and 12 percent come from enterprise
16%
organizations.
9%

SIZE OF ORGANIZATIONS SURVEYED

1 EXCLUSIVE 2-10 SEPERATE 11-20 SEPERATE 21+ SEPERATE

LOCATION LOCATIONS LOCATIONS LOCATIONS
12%

SMALL

15% MID-SIZE ORGANIZATION HEADQUARTERS

42%

LARGE 80%

ENTERPRISE

31%

9%
5%
TOP PERFORMING ORGANIZATIONS 1% 2% 0% 1% 1%

Top-performing organizations are defined as those who exceeded

A

AN W

RI TH

OM D

ER
AT ED

AD
LI

DI

GD E
A L NE
ES

CA

N IT

H
ST NIT

AF OU
RA

IN
their revenue goals in 2019. Twenty-one percent of respondents N

OT
KI UN
S
CA
ST
U

AU

ZE
fit this criterion.
54
INDUSTRY AND ORGANIZATION TYPE

As in prior years, the top industries represented in the survey

TYPE OF ORGANIZATION
were Technology (including software), Healthcare and Social
Assistance, Manufacturing, Nonprofit, and Finance & Insurance.
In terms of organization type, most respondents were either from 1%
1%
1% 2%
a public company, a private company or a nonprofit (86 percent),
but we also have respondents from government (4 percent), 1%
11%
schools (1 percent), colleges/universities (1 percent), hospitals 4%

(2 percent), cooperatives (1 percent) and trade associations

(1 percent).
13%

INDUSTRY OF ORGANIZATIONS SURVEYED

0% 5% 10% 15% 20%

62%
ENERGY & UTILITIES 1%
ARTS, ENTERTAINMENT
& RECREATION 2%

REAL ESTATE & RENTAL & LEASING 2%

ENGINEERING & SCIENCE 3%

PUBLIC COMPANY COLLEGE/UNIVERSITY
GOVERNMENT 3%
PRIVATE COMPANY HOSPITAL
FOOD, BEVERAGE & HOSPITALITY 3%
TRADE ASSOCIATION
RETAIL & CUSTOMER SERVICE 4% NONPROFIT ORG

COOPERATIVE
AGENCIES & CONSULTANCIES 4% GOVERNMENT
SCHOOL/SCHOOL
OTHER
EDUCATION 4% DISTRICT

CONSTRUCTION 5%
JOB LEVEL
FINANCE & INSURANCE 7%

NONPROFIT 7% Most respondents identified at the Manager level (29 percent).

Twenty-six percent identified as Individual Contributors, 23
MANUFACTURING 11%
percent identified as Directors, 7 percent identified as Vice
HEALTHCARE & SOCIAL ASSISTANCE 11% Presidents and 14 percent identified as C-level executives.
TECHNOLOGY
14%
(INCLUDING SOFTWARE)

OTHER 18%

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 ROLES IN COMPENSATION

Our respondents play a variety of roles in the compensation process — ranging from
setting comp budget (34 percent), to updating comp structures (53 percent), reviewing
pay increase recommendations (59 percent), to setting new hire pay (49 percent) to job
evaluation (59 percent).

ROLES RESPONDENTS PLAYED IN COMPENSATION

SET COMP BUDGET 34%

COMPLETE COMP MARKET STUDY 53%

UPDATE COMP STRUCTURES 53%

REVIEW PAY INCREASE RECOMMENDATIONS 61%

MAKE PAY INCREASE RECOMMENDATIONS 59%

APPROVE PAY INCREASES 39%

CREATE INCENTIVE AND BONUS PLANS FOR MY TEAM 23%

CREATE INCENTIVE AND BONUS PLANS FOR THE ORG 36%

ADMINISTER INCENTIVE AND BONUS PLANS FOR THE ORG 41%

MANAGE EXECUTIVE COMP 23%

MANAGE SALES COMP 15%

SET NEW HIRE PAY 49%

JOB EVAULATION 59%

NONE OF THE ABOVE 14%

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Occupational Index for CBPR
ABOUT THE DATA
For this Index, we evaluate the difference between these two pay
Provided in this file is an index of nominal and real wage growth,
figures over the entire sample of employee profiles in each quarter.
which tracks changes in total cash compensation for full-time U.S.
The aggregate difference reflects changes in pay over time, and forms
employees in 19 occupational groups and Nationally since 2006.
the basis of the Occupational Index.
The real wage index provided in this analysis has been adjusted for
inflation using a CPI deflator. Labor force estimates and percentage
The percentage of the labor force for each occupational group is
of the labor force for each group are provided for additional context.
calculated using May 2018 National Occupational Employment
Estimates from the Bureau of Labor Statistics
The occupational groups measured include:
(https://www.bls.gov/oes/2018/may/oes_nat.htm)

• Accounting & Finance • Information Technology

• Administrative & Clerical
• Architecture & Engineering
• Art & Design
• Construction
• Food Service & Restaurant
• Healthcare Practitioners &
Technical
• Human Resources
METHODOLOGY
• Installation, Maintenance & Repair
• Legal
• Manufacturing & Production
• Marketing & Advertising
• Media & Publishing
• Retail
• Sales
• Science & Biotech
DEFINITIONS
TOTAL CASH COMPENSATION (TCC): TCC combines base annual salary or
hourly wage, bonuses, profit sharing, tips, commissions, and other forms of
cash earnings, as applicable. It does not include equity (stock) compensation,
cash value of retirement benefits, or value of other non-cash benefits (e.g.,
healthcare).
NOMINAL OCCUPATION INDEX (BASE 2006): The Nominal Occupation Index
provides the nominal wage growth rate of all major occupational groups from
the year 2006. A value of 10% would indicate that nominal wages have grown
10% from 2006.

This index uses data on full-time employees working in a given

Y/Y NOMINAL WAGE GROWTH: This describes the nominal wage growth
occupational group in a given time period. PayScale has performed
from the past year. For example, the nominal wage growth in 2019 is
a detailed analysis of how various compensable factors, like work
reflective of how that ocupation’s wage grew over the past year from 2018.
experience, education, employment setting and job responsibilities,
Real Occupation Index (Base 2006): The Real Occupation Index provides the
affect pay.
real wage growth rate of all major occupational groups from the year 2006. A
value of 10% would indicate that real wages have grown 10% from 2006.
Utilizing detailed data for each individual worker who provided
information on their compensation (salary, bonuses, etc.) and
Y/Y REAL WAGE GROWTH: This describes the real wage growth from the
compensable factors (work experience, education, etc.) at a particular
past year. For example, the real wage growth in 2019 is reflective of how that
point in time (e.g. Q1 2010), PayScale can then calculate what a
occupation’s wage grew over the past year rom 2018.
similar worker with the exact same compensable factors would earn
at a different point in time (e.g. Q1 2017).
57
ABOUT
PAYSCALE
PayScale offers modern compensation software and the most precise,
real-time data-driven insights for employees and employers alike.
Thousands of organizations, from small businesses to Fortune 500
companies, use PayScale products to power pay decisions for millions of
employees.

For more information, please visit: www.payscale.com or follow

PayScale on Twitter: http://twitter.com/payscale.

58