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Nov 17, 2014

Remaining market-competitive top reward priority

Conference Board findings underscore importance of monitoring pay structures

By Claudine Kapel

If your organization hasn’t been keeping an eye on how internal pay levels compare to market, you may want to add that to your to-do list.A new Conference Board of Canada study indicates the number one reward priority among Canadian employers is to maintain their competitive market position.

Other reward priorities for the next 12 to 18 months identified by respondents to the Compensation Planning Outlook 2015 include:

•retaining talent

•reviewing strategy and ensuring alignment with business objectives

•connecting pay and performance

•attracting talent.

The survey results, which reflect responses from 382 Canadian organizations, indicate the retention and attraction of talent are key areas of focus for many organizations.

In the face of a “slow-growth Canadian economy,” organizations are planning only moderate pay increases for 2015, says the Conference board. The survey findings indicate the average base pay increase for non-unionized employees is projected to be 2.9 per cent in 2015, in line with the 2.8 per cent increases delivered in 2014.

Most organizations are planning salary increases for 2015, with only two per cent anticipating a base salary freeze for all employees.

Still, the findings illustrate how a tighter labour market can put upward pressure on compensation levels. Projected 2015 base pay increases are highest in Saskatchewan and Alberta, at 3.6 and 3.5 per cent respectively. These are provinces where employers report having the most difficulty retaining and attracting talent and also have the highest voluntary turnover rates.

The survey results indicate 85 per cent of Saskatchewan employers and 78 per cent of those in Alberta are having difficulty attracting and retaining talent. Alberta has the highest level of voluntary turnover, at 12.1 per cent, followed by Saskatchewan, at 11.0 per cent.

The Conference Board research found market pressures were less pronounced to the east, where only 43 per cent of organizations in Manitoba, 55 per cent in Quebec and 56 per cent in Ontario reported difficulty recruiting and retaining particular skills.

More organizations are planning to adjust salary structures in 2015, found the report. The average adjustment to salary structures for 2015 is 2.1 per cent (excluding zeroes). Only 11 per cent of respondents with salary range structures plan to hold their ranges constant in 2015, down from 19 per cent in 2014.

If you want to ensure your organization’s pay practices are delivering the desired results, here are a few action items to consider.

•Be clear about how you want to position your organization’s compensation offering relative to competitive market practice. While many organizations align their compensation with the market median, some may want to take a more- or less-aggressive positioning relative to market.

•Review how your pay levels compare to market, using credible compensation surveys that are appropriate for your organization. Consider the types of jobs covered, as well as the organizations, industries and geographies represented in the data when selecting compensation data sources.

•Adjust the ranges in your salary structure so they too remain in alignment with competitive market practice.

To ensure your compensation programs remain competitive, you need to stay on top of what’s happening in the market. That means doing your homework and getting the real story — even if it’s not what people want to hear.

For example, if you haven’t adjusted your base pay structure in a few years, it may seem like you’re paying well because employees may be high in their range. But if the market reference points in the structure aren’t aligned with current market practice, you may be sugarcoating a real problem that could lead to costly talent challenges in the near future.

When it comes to managing compensation, it pays to know how you align with competitive market practice.

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