Employee Compensation Research and Trends for 2016 : What’s Hot and What’s Not

Employee Compensation Research and Trends for 2016 : What’s Hot and What’s Not

A November 2015 survey of 2016 compensation trends within private sector companies conducted by Wilson Group, a compensation consulting firm based in Concord, MA, reveals that businesses plan to increase base salaries by 3% in 2016 and are expecting greater competition for talent in the coming year. The employee compensation survey looked back at trends in compensation practices for 2015 as well as projecting forward into 2016. The Wilson Group survey, sponsored by the BOSE Companies, included data from over 50 leading companies in New England, with the Wilson Group survey mirroring results shown in other national and international employee and executive compensation research.

The Wilson Group survey showed that:
• Most employees will be getting a 3% raise with most pay increases in the range from 2.5% to 6.0% based on individual performance.
• Fewer people will receive no pay increase at all. According to the survey results, only 3% to 5% of employees will NOT be receiving a pay increase in 2016. This lower range is a significant decline from the 8% for the technology and financial industries shown in previous years.

2015 will also be a good year for employee bonuses. Virtually all companies use bonus plans, and over half (57%) of these plans include all employees.
• In 2015, the median payout is projected to be 100% of the target payout, which means bonuses will meet expectations.
• The range in expected payouts is from 65% of the target payout at the low end to 122% for top performing companies.
• While there were some companies not making payouts this year, these survey respondents were in a small minority in the Wilson Group research.

For 2016, companies are anticipating greater growth.
• In 2015, 44% of the surveyed companies reported growth greater than 4%; this number jumps to 62% expecting growth rates in excess of 4 percent for 2016.
• Over 56% of the companies surveyed reported plans to increase staff, and only 2% reported decreasing staff levels.
• The “hot jobs” for 2016 continue to be for all levels in Information Technology, and professional/managerial and top management roles in Sales and Marketing functions. Professionals in the Finance field will also see increasing job opportunities.
• Voluntary turnover rates in 2015 were 7.1% with involuntary turnover (due to terminations, layoffs, etc.) being just 2%.

How companies will choose to adjust base salaries in 2016 will be partly determined based on the assessments required to implement the new FLSA (Fair Labor Standards Act) regulations on overtime pay. Pressure on base salaries will also increase in some jurisdictions from higher minimum hourly pay rates. Finally, companies are looking to better align employee bonuses with company performance measures and overall achievement of strategies and priorities – encouraging better line-of sight metrics and links between bonuses and levels of customer satisfaction and productivity.

Very few companies are looking to change their stock or equity award programs. The changes in stock compensation plans driven by Dodd-Frank and SEC reporting requirements have already been made, with only minor modifications in executive and employee equity awards seen moving forward. Employees are likely to receive comparable levels of equity and option rewards to what they have received in recent years.

In summary, companies will to be making the executive and employee compensation plan investments in 2016 which are needed to improve their ability to compete for talent, and build better business processes for rewarding performance. These are not major changes in compensation approaches from the past, but they are strategically significant. It is clear that companies are recognizing a world of increasing competition and of growth opportunities, and are more sensitive to the importance of creating and strengthening their competitive advantage – for their customers, employees and for their executives. While each company will be pursuing their own unique priorities and targets of opportunity, it is clear that 2016 will be a strong year across the board, in pay for performance.

For more information about the Wilson Group compensation survey, please visit www.WilsonGroup.com.

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