study of reward fairness and equity - total rewards · study of reward fairness and equity....
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Study of Reward Fairness and EquityOrganizations must ensure that rewards programs are rooted in principles of fairness in order to motivate and engage employees from different backgrounds and experiences. WorldatWork and Dow Scott, Ph.D., of Loyola University Chicago gathered data about organizations’ perceptions of fair rewards and the tools rewards professionals use to create reward programs, policies and structures.
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Executive Summary
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• Promotional opportunities lead among employee concerns in both internal and external equity or fairness.
• Individual performance and work responsibilities associated with the job are high-ranking criteria in determining base-pay rewards fairness, while overall organizational performance is a major factor for variable pay.
• “External rewards consistency” falls to the bottom when considering how to determine rewards. Consistency with rewards philosophy is most important.
• Respondents agree that internal rewards equity is incredibly influential to employee motivation, satisfaction, engagement and retention.
• Men and women tend to focus on different criteria when assessing pay fairness.
• Generally, women express more concern than men about fairness of their total rewards packages, but men tend to express more concern about variable pay and titles.
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12%
14%
10%
18%
13%
19%
25%
37%
35%
42%
42%
50%
51%
51%
39%
38%
35%
33%
30%
19%
19%
10%
10%
11%
4%
3%
7%
3%
Employee development or training programs (n=288)
Recognition (n=289)
Job leveling or grading (n=289)
Base pay/merit increases (n=289)
Base-pay amount (n=290)
Career development opportunities (n=289)
Promotional opportunities (n=289)
Frequency of Employees Voicing Concerns Regarding Lack of Internal Equity or Fairness
Constantly or persistently Frequently Occasionally Seldom Never
Promotions, Base Pay and Career Development opportunities are seen as the areas in which employees are most concerned about internal fairness, as more than half of respondents reported that their employees complain about these issues at least occasionally.
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3%
4%
7%
5%
11%
10%
16%
15%
18%
18%
22%
27%
23%
33%
30%
31%
53%
44%
50%
53%
37%
45%
35%
40%
25%
33%
20%
15%
27%
11%
18%
12%
Overtime (n=290)
Retirement benefits (n=288)
Time off requests/approvals (n=287)
Opportunities for special assignments (n=290)
Health-care benefits (n=289)
Job titles (n=290)
Variable pay (n=284)
Flexible work arrangements (n=290)
Frequency of Employees Voicing Concerns Regarding Lack of Internal Equity or Fairness
Constantly or persistently Frequently Occasionally Seldom Never
Retirement, Health-care Benefits and Overtime often are lesser concerns with regard to internal equity. More than 1 in 4 respondents said their employees never voice concerns about internal fairness of these programs.
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2%
2%
3%
6%
4%
6%
15%
17%
15%
15%
18%
25%
30%
32%
42%
41%
44%
51%
43%
35%
30%
34%
26%
18%
10%
13%
10%
6%
9%
1%
Flexible work arrangements (n=290)
Variable pay (incentives and/or bonuses) (n=286)
Career development opportunities (n=289)
Base pay/merit increases (n=289)
Promotional opportunities (n=289)
Base-pay amount (n=290)
Frequency of Employees Voicing Concerns Regarding Lack of External Equity or Fairness
Constantly or persistently Frequently Occasionally Seldom Never
According to respondents, their employees are most concerned that there are issues with external fairness when it comes to base pay, approximately 1 in 3 said employees complain frequently.
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6%
9%
6%
8%
6%
15%
25%
30%
35%
33%
36%
28%
45%
44%
47%
42%
41%
41%
22%
14%
11%
15%
15%
15%
Retirement benefits (n=289)
Recognition (n=287)
Job titles (n=289)
Employee development or training programs (n=288)
Job leveling or grading (n=290)
Health-care benefits (n=289)
Frequency of Employees Voicing Concerns Regarding Lack of External Equity or Fairness
Constantly or persistently Frequently Occasionally Seldom Never
Retirement Benefits rarely are seen as an area lacking external equity; 2 in 3 respondents said their employees seldom or never complain.
Individual performance is a top consideration when determining pay fairness, but responsibilities weigh more heavily in base-pay decisions, and organizational performance is a big consideration for variable pay. Individual potential has a large effect on nonfinancial rewards.
76%
67%
18%
11%
11%
5%
2%
Individualperformance
(n=290)Work
responsibilities(n=290)
Time in job(n=290)
Seniority/tenure atorganization
(n=290)Individual potential
(n=290)Overall org.
performance(n=290)
Team/department/SBU performance
(n=290)
Base Pay
5%
10%
10%
19%
24%
43%
53%
Overall orgperformance
(n=290)
Team/department/SBU performance
(n=290)
Time in job (n=290)
Seniority/tenure atorganization (n=290)
Work responsibilities(n=290)
Individual potential(n=290)
Individualperformance
(n=290)
Nonfinancial Rewards
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2%
3%
5%
17%
29%
56%
58%
Time in job(n=290)
Seniority/tenureat organization
(n=290)
Individualpotential(n=290)
Workresponsibilities
(n=290)
Team/department/SBU performance
(n=290)
Individualperformance
(n=290)
Overall orgperformance
(n=290)
Variable Pay
Consistency with rewards philosophy is the most important factor in determining rewards.
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12%
7%
43%
33%
21%
12%
12%
7%
35%
45%
45%
42%
37%
28%
11%
16%
32%
44%
49%
64%
Consistency with how employees are rewarded in otherorganizations (n=289)
Consistency with how other employees in similaremployee groups (but not similar jobs) are rewarded
within the organization (n=289)
Consistency with how other employees in similar jobs(same titles) are rewarded within the organization
(n=288)
Consistency with how other employees in comparablejobs (same level/grade) are rewarded within the
organization (n=288)
Consistency with what has been promised to theemployee (n=288)
Consistency with organization’s rewards philosophy, goals or objectives (n=290)
Importance in Determining RewardsNot Important Somewhat Important Important Very Important
Senior management often sees both internal and external rewards fairness as important, but not critical.
25% 23%
46% 48%
9% 14%15% 10%6% 6%
Internal rewards fairness(n=279)
External rewards fairness(n=277)
Senior Management’s View of Rewards Fairness
It is not considered in rewardssystem designIt is not an objective, but a result ofwell-designed programsA secondary objective
An important, but not criticalobjectiveA primary, mission-critical objective
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Communications can make or break employee perceptions of fairness.
41%
40%
43%
36%
32%
5%
20%
81%
31%
14%
11%
3%
Communication
Market survey/external
benchmarking
Rewards strategyand design
Culture of opennessand transparency
Nonfinancialrecognition
Other
Things Organizations Do Well to Improve Perceptions of Rewards
Fairness
InternalRewardsFairness(n=290)ExternalRewardsFairness(n=290)
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45%
39%
25%
24%
19%
6%
28%
12%
9%
26%
17%
8%
Communication
Inconsistentapplication/
favoritism
Leadership
Poor economy/pay cuts/freezes
Rewards strategyand design
Other
Things Organizations Have Done that Eroded Perceptions of
Rewards Fairness
InternalRewardsFairness(n=290)ExternalRewardsFairness(n=290)
Internal rewards equity is highly important, but has the biggest effect on employee satisfaction.
49% 57% 52% 52%
41%33% 37% 37%
9% 9% 9% 11%
Employee motivation(n=290)
Employeesatisfaction
(n=290)
Employeeengagement
(n=290)
Employee retention(n=290)
Influence of Organizational Internal Rewards Equity
No effect or neutralMildly influentialModerately influentialExtremely influential
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For the most part, men and women assess pay fairness similarly, although men tend to focus more on external comparisons while women focus more internally.
39%
9%
10%
21%
20%
25%
10%
8%
3%
53%
54%
58%
60%
66%
66%
70%
85%
89%
8%
37%
32%
19%
14%
9%
20%
7%
9%
Internal (inside the company) pay comparison (n=285)
External (outside the company) pay comparison (n=285)
Seniority/tenure at organization (n=285)
Individual potential (n=284)
Individual performance (n=284)
Work responsibilities associated with the job (n=284)
Time in job (n=284)
Team/department/SBU performance (n=283)
Overall organizational performance (n=284)
Assessing Pay Fairness by GenderWomen No Difference Men
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Generally, men and women express concerns about fairness at similar rates, but women tend to be more vocal than men when there are differences, particularly around flexibility and base pay.
52%
38%
16%
23%
28%
19%
17%
14%
8%
21%
18%
46%
46%
60%
60%
66%
67%
75%
75%
77%
77%
79%
90%
2%
16%
24%
17%
7%
13%
8%
10%
16%
3%
3%
9%
Flexible work arrangements (n=283)
Base-pay amount (n=284)
Job titles (n=284)
Promotion opportunities (n=283)
Career development opportunities (n=283)
Base-pay/merit increases (n=283)
Recognition (n=283)
Job leveling or grading (n=280)
Variable pay (incentives and/or bonuses) (n=278)
Employee development or training programs (n=283)
Health-care benefits (n=283)
Retirement benefits (n=282)
Reward Fairness or Equity Differences by Gender
Women No Difference Men
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Demographics
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Sector (n=289)
Private sector, publicly traded
40%
Private sector, privately held
35%
Nonprofit/ not-for-profit
19%
Government/public sector (local, state,
federal)6%
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Organization Size (n=290)
5%10% 12%
22%19%
9% 9% 9%4% 2%
Fewerthan 100
employees
100 to 499 500 to 999 1,000 to2,499
2,500 to4,999
5,000 to9,999
10,000 to19,999
20,000 to39,999
40,000 to99,999
100,000 ormore
employees
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Industry (n=289)
16%
12%
11%
9%
5%
5%
5%
4%
All Other Manufacturing
Finance & Insurance
Consulting, Professional, Scientific andTechnical Services
Healthcare and Social Assistance
Information (includes Publishing, ITTechnologies, etc.)
Utilities
Educational Services
Chemical Manufacturing (includesPharmaceuticals)
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Only industries with at least 5% of responding organizations are listed here.
Annual Revenue (n=248)
7% 8% 9% 11% 11%
23%
10%4% 4%
14%
Up to $30million
$30 million-$100million
$100million -
$300million
$300million -
$600million
$600million -$1
billion
$1 billion -$3 billion
$3 billion -$5 billion
$5 billion -$8 billion
$8 billion -$10 billion
More than$10 billion
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Voluntary Turnover (n=278)
0%-5%21%
6%-10%35%
11%-15%21%
16%-20%10%
21%-26%8%
27%-40%4%
41% or more1%
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Methodology
© 2018 WorldatWork. All rights reserved.
This report summarizes the results of a March 2018 survey of WorldatWork members that gathered data about organizations’ perceptions of fair rewards and the tools rewards professionals use to create rewards programs, policies and structures.
On March 21, 2018, survey invitations were sent electronically to 5,556 WorldatWorkmembers. The survey closed on April 9, 2018, with 437 responses. The dataset was cleaned, resulting in a final dataset of 290 responses. In order to provide the most accurate data possible, data was cleaned and analyzed using statistical software. Any duplicate records were removed.
The demographics of the survey sample and the respondents are similar to the WorldatWork membership as a whole. The typical WorldatWork member works at the managerial level or higher in the headquarters of a large company in North America. The frequencies or response distributions listed in the report show the number of times or percentage of times a value appears in a dataset. Due to rounding, frequencies of data responses provided in this survey may not total exactly 100%.
The full text of the questionnaire can be found here. A list of participating organizations can be found here.
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Definitions
Fair: A decision free from bias or injustice; with regard to fair rewards, it is consistent with your organization’s criteria for making a rewards decision.Internal equity: Refers to fair rewards decisions made
with regard to how others are rewarded within your organization.External equity: Refers to fair rewards decisions in
regard to how others outside of your organization are rewarded.
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Contact Us
© 2018 WorldatWork. All rights reserved.
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Washington, D.C., Office1100 13th St. NW, Suite 800Washington, D.C. 20005 USA
Telephone877-951-9191 (United States and Canada)
+1 480-922-2020 (other countries)
Fax480-483-8352
Websiteworldatwork.org
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