- Despite news of layoffs, 60% of organizations say they experienced more labor shortages and trouble attracting and retaining talent in 2022 than in previous years.
- Fifty-five percent of organizations say that compensation management will be more challenging in 2023.
- The number of employers including pay ranges in job postings has more than doubled to 45% since last year.
Payscale Inc., the leading provider of compensation data, software and services, released the results of its flagship survey, the 2023 Compensation Best Practices Report (CBPR), shedding light on the ongoing power struggle between employees and employers. The largest report of its kind on compensation trends and total rewards, this year’s CBPR examines how employers can elevate their compensation management strategy to rebalance the employee experience in a precarious economy and the age of pay transparency.
“This year’s report showcases how a decline in voluntary turnover and news of a potential recession conflict with low unemployment rates and a continued struggle to attract and retain talent,” said Lexi Clarke, VP of People at Payscale. “We are on the other side of the ‘Great Resignation’ and employees are thinking twice before leaving their current jobs, but they still have higher expectations for the employee experience. Employers need to be deliberate about their company values, culture, and how they reward employees if they want to remain competitive.”
Employers are still facing labor challenges entering 2023, with 60% of organizations stating they’ve had more difficulty attracting and retaining talent in 2022 compared to previous years. However, voluntary turnover has dropped more than 10% (from 36% to 25%), indicating that employees are more wary about making changes, likely due to job security fears amid economic uncertainty or regret from changing jobs previously.
Payscale’s CBPR also highlights the rise in pay transparency due to new legislation being proposed and passed in multiple states and localities throughout 2022. While a minority of organizations (45%) currently include pay ranges in job postings, this number has more than doubled since last year (up from 22%). New legislation, a competitive labor market and social pressures are leveling the playing field when it comes to pay, with 48% of organizations saying that pay transparency legislation is driving changes to improve compensation strategy.
“Pay transparency is likely to continue expanding, with new legislation being proposed in more locations to ensure fair pay for employees,” said Ruth Thomas, Pay Equity Strategist at Payscale. “This is great news as pay transparency has been shown to help close the gender pay gap. In order to publish pay ranges with confidence, organizations first need to take on internal pay equity.”
Indeed, 63% of organizations say pay equity analysis is a planned or current initiative in 2023, which is significantly higher than even a few years ago. These developments are encouraging, but still only half (55%) of organizations have a compensation strategy in place. Although a 7% increase over previous years, this low majority suggests an urgency to improve compensation management practices to prepare for pay transparency laws and improve pay equity. Those companies who do have a compensation strategy in place are better positioned to attract and retain talent regardless of the economy.
While compensation strategies are essential to attracting and retaining talent, fewer organizations plan to give base pay increases in 2023, with only 80% saying they plan to do so, compared to 92% last year. Encouragingly, however, 56% of organizations say that the average base pay increases will be over 3%, up from 53% last year. Still, some employees may see pay raises lower this year than in 2022 as fewer organizations plan to give over 5%. However, the amount of organizations that give formal pay increases twice annually has more than doubled since last year, and 86% will give raises out of cycle, due to inflation, the rising cost of living, and preparation for pay transparency.
When it comes to benefits being offered in 2023 compared to 2022, we are seeing small increases in organizations offering mental health and wellness programs, paid sabbaticals, and extended family leave, as well as 56% of organizations offering benefits of some kind that provide abortion assistance to employees. However, although employees have proven they can be productive working remotely, 89% of organizations in 2023 will have work environments that are either traditional (27%), hybrid (31%), or split by job type (31%), suggesting that physical offices are not going away. Organizations that offer truly remote work (11%) will have a major competitive advantage in attracting and retaining talent.
The push and pull between what employees want and where employers will invest will be a mainstay this year, with 55% of organizations saying that compensation tops the list of what will be more challenging for HR in 2023, just below recruitment (58%). Payscale enables organizations to easily evaluate their current compensation strategies, standardize their internal pay practices, and price out fair pay increases and candidate offers — all based on the most up-to-date market data.
The full 2023 Compensation Best Practices Report contains nearly 100 pages of charts and analysis on survey data from close to 5,000 participants fielded between October 2022 and December 2022. The report and its methodology can be accessed in its entirety on Payscale.com.
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