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Global Compensation Survey Indicates Salary Increase Budgets Will Be Lower and Increases Targeted to Fewer People
As the global pandemic continues, the impact on business performance and compensation management will make 2021 a remarkably challenging year. Organizations around the world, and across almost every industry sector, are facing constraints on rewards unlike any they have seen for more than a decade. That will put a premium on creativity and selectivity in how rewards are distributed and in what form.
A just released Korn Ferry survey report reveals that a significant number of organizations globally are planning to skip providing salary increases to a majority of their employees in the coming year. Nearly a third of the respondents said they will provide increases to 50 percent or fewer of their employees, and more than three times as many organizations as last year are planning to skip increases altogether. Only 35 percent of survey participants said that 100 percent of employees will be eligible for increases.
Of the companies that do forecast salary increases, the percentage varies by region and is generally lower for 2021. In North America, the median salary increase that companies forecast is 2.5 percent (down from 2.8 percent last year), 2.1 percent for Western Europe (down from 2.5 percent last year), and 2.0 percent for the Pacific (down from 2.5 percent last year).
“More than ever, it will be important for organizations to ensure that their employees continue to feel valued and rewarded,” said Korn Ferry Global Leader, Rewards and Benefits, Don Lowman. “As financial resources are constrained, organizations need to focus more on a ‘total rewards’ approach.”
This broader view of ‘total rewards’ includes all of the things that an organization provides its employees of perceived value. Beyond financial rewards, such as base salaries, promotions, bonuses and benefits, it also includes non-financial rewards, such as interesting and meaningful work, an energizing work climate, training and mentorship, career development opportunities, recognition and feedback. Korn Ferry research has found that while financial rewards are key to attracting talent into organizations, non-financial rewards can be key differentiators in retaining talent.
In technical, professional and managerial employee groups, Korn Ferry research found that clear career paths and developmental opportunities typically rise to the top in terms of the non-financial rewards employees want most from their employer. Development targeted around both cognitive skills, such as agility, inclusivity and leadership, as well as technical skills, such as sales, project management and people development, can help meet the twin objectives of employee engagement and connection to strategic business goals.
Organizations should not assume their current total rewards philosophy and design are still aligned with what their employees will value the most.
“In this environment where flexible working opportunities have become more widespread, organizations for whom this was a differentiator pre-COVID will likely need to revisit their employer proposition,” said Korn Ferry Client Partner, Pay, Benjamin Frost. “Organizations with a ‘rising tide lifts all boats’ incentive program that lacks individual performance differentiation may not align with top talent’s perceptions of fairness in this pressure cooker business environment.”
“There has never been a more critical time to listen to employees and to understand their mindset, what they value and what they don’t,” said Lowman. “Leadership should also seize the opportunity to assess whether current reward, performance and talent management strategies and program designs are still relevant in the new realities they find themselves. The stakes couldn’t be higher.”
Salary Survey Methodology
Korn Ferry researchers refined and enhanced the methodology for the 2021 salary survey, combining ongoing data collected from 25,000 participants across 150+ countries with additional data gathered at key points throughout the year.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We work with our clients to design optimal organization structures, roles, and responsibilities. We help them hire the right people and advise them on how to reward and motivate their workforce while developing professionals as they navigate and advance their careers.