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Top 10 Compensation Concerns and Solutions

Top 10 Compensation Concerns and Solutions

IOMA's Report on Salary Surveys

November 09, 2009

In these uncertain economic times, it is little surprise that HR professionals everywhere have major compensation-related concerns. Most specifically, the problem is money – the sheer lack of it. For too many businesses, profits are down, making it ever more difficult to meet payroll needs – never mind about raises for next year. lOMA’s Setting & Managing 2070 Compensation Survey uncovers what the top compensation-related concerns are and, to provide some hope and guidance in the current rocky environment, what the best solutions have been.

Tight budgets, narrow margins, lack of budget increases – whatever you call it, the results are the same: The top problem that HR professionals face today is a compensation budget that cannot grow or, even worse, is forced to shrink. Nearly one-quarter of all HR pros cited “no money” as their top compensation-related concern.

Tight Budget/No Money

Last year, this problem ranked second, after having jumped up from fifth place the year before. The economic scene clearly is reflected in this year’s results, indicating that the situation is even more difficult for many organizations. “It’s an ongoing battle!” said one compensation manager at a biotech firm in the Northeast. It is a battle indeed, as organizations endeavor to balance holding the line on compensation costs without upping the turnover rate or causing workplace morale to nosedive.

“We are struggling to balance economics and employee morale, while trying to engage/motivate/retain,” said the compensation manager at a West Coast educational firm with 1 ,800 employees.

At companies with 7,000 or more employees, 43.5 percent cited a tight budget as their top comp concern. Small firms (199 or fewer employees) also are grappling with the issue, at 44.6 percent.

For some companies facing a budget shortfall, the solution was to cut back on employees, whether through firings or attrition. “Hiring was delayed and a few, but not many, existing positions were eliminated,” said the compensation specialist at a Southeastern nonprofit organization.

Other companies have trimmed the budget all around, resulting in smaller raises for current employees, but without necessitating a widespread layoff. Nearly 43 percent of governmental firms in the survey said that a tight budget was their top concern. Nonprofits and educational institutions also find this a particularly stressing issue.

A handful of businesses attempted to leave employee compensation unaffected, instead focusing on other areas where money might be saved. “We cut or controlled cost for indirect overhead expenses – such as more or better vendor discounts, shopping with coupons, etc. – which makes money available for other items,” said the controller at a health care firm in the Southeast with 85 employees.

Attraction/Retention/Turnover

Even as budgets shrink and compensation dollars disappear, organizations are still pressed to attract and retain their top talent – the kind of people they need to continue to grow their business.


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