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Compensation trends and strategies

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A survey of 400 of the Fortune 1000 companies indicates that they are putting more emphasis on at-risk pay and less on base compensation. This includes the adoption of so-called alternative pay strategies such as “broadbanding” (the enlargement of pay ranges into broad bands, reducing the number of pay levels) or “gainsharing” (a program designed to improve productivity or reduce costs and share the value of any productivity gains or cost savings with employees).

Salary Increases

How are salary increases delivered to employees?

  Executives Exempt employees Nonexempt employees
Merit-based only 94.8% 95.4% 89.6%
General, across-the-board only 0.5 0.5 2.3
Combination of merit and general    4.7       4.1       8.1   
Total 100.0% 100.0% 100.0%
Bonus Plans

Companies that offer employees formal bonus plans.

  Executives Exempt employees Nonexempt employees
1997 91.0% 73.3% 39.5%
1996 91.4 64.0 33.9
1995 88.7 59.4 27.4

Bonuses paid in 1997 as a percentage of salary to nonsales employees.

  Executives Exempt employees Nonexempt employees
Average 38.7% 14.4% 5.6%
Minimum 20.8 9.0 4.1
Maximum 67.6 28.0 10.9
Budget target 35.9 13.3 5.4
Alternative Pay Strategies

The incentive program most used by survey respondents was lump-sum merit increases—delivered in the form of a single cash payment—to reward individuals who are at the top of their salary range without altering the salary structure. What other alternative strategies are companies using?

  Now using In process of implementing Considering Not considering
Broadbanding 25.1% 4.7% 21.6% 48.5%
Competency based pay 7.1 2.7 33.8 56.3
Gainsharing 16.3 1.4 10.5 71.9
Group incentives 28.3 2.5 21.1 48.1
Skill-based pay 12.0 1.1 17.9 68.9
Team-based pay 13.2 2.0 24.2 60.7

Source: 1997/1998 Compensation Budget Survey of Fortune 1000 Companies ,
Buck Consultants, Secaucus, New Jersey.

 

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©1998 AICPA