Have you ever wondered where you fall on the spectrum of pay position? Does your company pay below the market, at par with the market, or above the market? It is important to be aware of market trends in compensation in order to remain competitive for the recruitment and retention of employees. Find out where companies and executives have placed themselves on the spectrum and where you fit in to the current market compensation trends.
Competitive Compensation: It's All Relative
1 in 5 organizations believe they are paying higher than market. If this is true, there is pressure on 80% of companies to compete for talent with strong total compensation packages. Market surveys such as the Toronto Region Board of Trade Big Bench report provide assistance in understanding your relative pay position. Benchmarking also informs your merit increase strategy. According to the graph below 65% of surveyed organizations are compensating at par with market. It is surprising that the second largest percentage (17%) are paying higher than market. This is evidence that businesses and organizations greatly value competitive wages in recruiting and retaining employees. Most businesses would like to sit at par with market, but those that can afford to compensate higher will do so. In fact, although the percentage of organizations who deviate by providing either significantly lower or significantly higher wages remains small on either end, more organizations fall into the significantly higher percentage (3%) than the significantly lower (1%).
The following chart indicates the pattern of organizations paying at par with the market over a 4 year period. There was a large increase of 13% from 2014 to 2016 and then a gradual decrease of 4% expected between 2016 and 2017. Companies in similar sectors often remain acutely aware of trends in compensation to remain competitive and when several companies increase or decrease compensation, others follow and trends begin to form.
Why is this Important?
It is important to stay up to date on compensation trends in the market so that you can remain competitive with similar sectors and organizations. As an organization you want to pay what you can afford while remaining at par with market. If you can remain closely tied to market trends then you will have a good chance at staying competitive and preserving your internal budget. If your organization has the capacity to pay higher than market then you will enter a new group of the 17% of organizations competing at this level of compensation.
For more information on making sense of the market and to assist in finalizing and validating your budget, download the free Accompass 2017 Salary Budget Report for a strategic and systematic approach to helping you determine your budget.