08 May Short-Term Incentive Compensation Increasing Beyond Executive Ranks
Short-term, cash incentives continue to dominate the compensation and incentive-pay landscape at both private companies and nonprofit/government organizations according to salary and compensation survey research released in May 2018 by WorldatWork in partnership with Compensation Insights member, Vivient Consulting.
“Spending on short-term incentives (STIs) increased modestly at private companies from 2015 to 2017, which reflects the tight labor market and competition for talent,” said Bonnie Schindler, partner and co-founder of Vivient Consulting.
On the nonprofit side: “U.S. nonprofit organizations continue to make significant use of short-term cash incentives to motivate and reward employees. Long-term incentive (LTI) use is still a little-used compensation element, but prevalence increased modestly in 2017 and may signal an emerging trend,” Schindler said.
Additional Key Findings From the WorldatWork-Vivient Surveys
- Spending on STIs increased to 6% of operating profit at median, from 5% in prior years.
- The prevalence of exempt, salaried employees and nonexempt (salaried or hourly) employees included in annual incentive plans increased in 2017. The biggest jump occurred for nonexempt employees. Approximately two-thirds of nonexempt employees are eligible for annual incentives, up from half in 2015.
- The majority of respondents consider their annual incentive plans to be only moderately effective, with plan communication, the level of discretion, goal setting and the risk-reward trade-off noted as areas for improvement.
- Nonprofit and government organizations favor simplicity by offering a limited number of STI plans. Of the respondents, more than 75% reported having three or fewer STI plans in place.
- By far, the most common type of STI plan at nonprofit and government organizations continues to be an annual incentive plan (AIP). However, prevalence of AIPs dropped to 77% in 2017 from 86% in 2015
These salary and pay survey are a continuation of compensation, pay and incentives survey research conducted by Compensation Insights member Vivient Consulting.
- the fifth edition of the compensation report produced for privately held companies
- the third edition for nonprofit/government entities with the last report data for both groups released in 2015