Approaching comp differently to remain competitive

Right combination of transparency, incentives and manager training motivate and engage employees
By Wendy Brown
|Canadian HR Reporter|Last Updated: 11/13/2017
Compensation can be a strategic differentiator to both attract and retain talent, and meet business goals. Credit: ImageFlow (Shutterstock)

Today’s workforce is changing dramatically, and as competition grows for certain jobs and the economy improves, retention is a top priority for many employers. Compensation can be a strategic differentiator to both attract and retain talent, and meet business goals.

Retention a top concern

This year, 56 per cent of organizations agreed or strongly agreed employee retention is a major concern for their company, according to PayScale’s 2017 Compensation Best Practices Report, which gathered information from 7,700 respondents in the United States and Canada.

So, what are they doing about it? The top three areas of focus to retain top talent are offering learning and development opportunities (58 per cent), a merit-based pay plan (57 per cent) or a discretionary bonus plan (33 per cent). While the data is similar to last year, there is a notable decline in the use of perks in 2017 (23 per cent versus 28 per cent in 2016).

In this era of increased job market mobility, it has become common practice for employees to obtain an offer at another organization.

The top three reasons for attrition are personal reasons (62 per cent), professional advancement (60 per cent) and compensation (57 per cent), found the survey.

If someone is thinking of leaving, do organizations make a counteroffer? While 35 per cent said no, they wouldn’t, most organizations (53 per cent) said they would counter, but only for high-performing employees.

Using comp as a strategic differentiator

Top-performing companies view compensation very differently from typical companies.

Compensation isn’t an “exercise” that happens on an annual basis, it is part of the fabric of the culture, something to be constantly calibrated and refined. There is no such thing as a “finished” comp plan, only continuous adjustments to keep pace with ever-changing conditions.

•Top-performing companies are more likely to pay differently than typical companies for competitive jobs (56 per cent versus 50 per cent) and more likely to reference data for specific jobs at least annually (75 per cent versus 69 per cent).

•Top-performing companies are more likely to have completed a full market study in the past 12 months (62 per cent versus 52 per cent).

•Top-performing companies are more likely to have a compensation team (44 per cent versus 30 per cent).

Additionally, the prevalence and variety of variable pay have increased over time. About 74 per cent of all organizations surveyed said they offer some type of variable pay. That number is even higher among top-performing companies — which are more likely to incorporate variable pay in the compensation strategies (82 per cent versus 73 per cent of typical companies).

The larger the company, the more likely they are to provide variable pay — 85 per cent of enterprise companies offer variable pay, versus 69 per cent of small companies.

Variable pay is also becoming more frequent. While it’s still most common to provide bonuses or incentives on an annual basis (56 per cent), that number has decreased significantly since last year’s survey (67 per cent).

Companies are more likely than last year to provide bonuses or incentives on a quarterly (16 per cent) or monthly (10 per cent) basis.

Organizations use a whole host of variable pay options to reward employees, some of which are more typical than others. While individual incentives remain the most common (64 per cent), one-quarter of organizations are using team incentives. Spot or discretionary bonuses remain popular (46 per cent) as well.

Top-performing companies are more likely to give bonuses overall — specifically, individual incentive bonuses (71 per cent versus 62 per cent of typical companies), team incentive bonuses (32 per cent versus 24 per cent of typical companies) and market premium bonuses (six per cent versus four per cent of typical companies).

Communication is crucial. How people perceive their pay matters more than what they’re actually paid. If an employer pays lower than the market average for a position, but communicates clearly about the reasons for the smaller paycheque, 82 per cent of employees surveyed still felt satisfied with their work.


Communication isn’t all or nothing.  There’s a whole spectrum of options for how transparent to be about pay.

Currently, 31 per cent of organizations identify themselves as being transparent (a level three or greater). Nearly half (49 per cent) of all organizations aim to be that transparent in 2017, and it’s not as much about sharing pay amounts as sharing pay rationale and clearly connecting the dots between culture and compensation.

Top companies are far more likely to share a total compensation statement with employees — a good practice to build trust and understanding — and are a great example of how to be more transparent around pay without posting everyone’s salary on the wall. 

When it comes time to communicate about pay, managers are often the ones doing so, but the results are not encouraging:

•Only 19 per cent of organizations said they are “very confident” in their managers’ abilities to have tough conversations about pay.

•Only one-third of organizations offer manager training on how to talk about pay, and the training doesn’t always include basics on compensation or how to deliver specific compensation news to employees.

The moral of the story, then, is to start with your organizational objectives, consider your culture and your workforce, and use the right combination of transparency, incentives and manager training to motivate and engage employees.

Make a plan, but be flexible about the specific needs of the employees at your specific organization.

Wendy Brown is PayScale’s director of content marketing in Seattle, Wash. For more information about PayScale, visit

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