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fc6e297a286c93d8f3742c291143f2a4_400x400PayScale, the Seattle-based company that manages an online database of salary and compensation information, released its annual report on top companies’ attitudes and practices around compensation, analyzing which approaches correlate with company success.

Nearly 7,600 North American business leaders were surveyed on their policies and values around compensation in PayScale’s 2016 Compensation Best Practices Report. The report found that top performing companies, defined as industry leaders who also exceeded revenue projections in 2015, had certain common features:

First, top performing companies were more likely to give bonuses to their employees and to increase the size of those bonuses year-over-year.

On average, the most successful companies were 9 percent more likely to give individual bonuses when compared to their average-performing counterparts, with 81 percent of top companies giving bonuses in 2015.  Top performing companies were also 5 percent more likely to give team bonuses than their average counterparts. Finally, half of the most successful companies reported that they were increasing their budget for bonuses for 2016.

2016 Compensation Report by PayScale. Graphics by Tableau.
2016 Compensation Best Practices Report by PayScale with graphics by Tableau. (Click for larger version.)

Second, top companies reward their top workers, citing employee performance as their main reason for giving raises, rather than employee promotions or cost of living adjustments. Similarly, top performing companies are 9 percent more likely than average companies to agree with the statement, “Our people are our best asset,” with 86 percent of highly successful companies agreeing. (That said, retaining top employees was listed as the number one compensation priority by all survey respondents.)

Third, almost 50 percent of top performing companies have open communications around pay, while 40 percent of average companies report the same. The trend holds for providing a total rewards statement for compensation to employees with 47 percent of top-performing companies giving out statements to their employees, compared to 39 percent of average-performing companies.

Screenshot 2016-03-01 10.22.19
2016 Compensation Best Practices Report by PayScale with graphics by Tableau.

That said, employees did not seem to feel the same way as their employers about company practices.

While the average of all companies reporting transparent pay policies was 40 percent, only 21 percent of all employees said that their companies had open communication about pay. Only 35 percent of employees believed that they were fairly compensated, while 73 percent of employers said the same.

Finally, 45 percent of employees said that they were valued at work, compared to 78 percent of employers who believed that they valued their employees. This “corporate chasm” represents an area for improvement, even top-performing companies.

“We are in the midst of a sea change in the way companies think about compensation,” said Mike Metzger, President and CEO at PayScale, in a press release. “More employers realize the importance of adopting innovative approaches to pay in order to retain the people who are making the largest impact. Although these modern compensation practices require a cultural shift for many organizations, our research shows there is significant benefit in abandoning traditional compensation practices in favor of more transparency around compensation and variable pay practices that recognize an individual’s contribution to the business.”

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