Canadian employers are not differentiating pay based on individual performance as much as they could and may be underestimating the importance of non-monetary aspects of the employment experience.
According to Towers Watson’s 2014 General Industry Salary Budget Survey, employers are budgeting 3% for salary increases in 2015 for their non-management employees. Executives can expect a 3.1% increase. These figures are consistent with the increases across all ranks in each of the past two years.
Non-management employees who received the highest performance ratings in 2014, however, were granted an average salary increase of 4.7% this year, about 74% greater than the 2.7% increase given to those workers receiving an average rating. Workers with the lowest performance ratings received an average increase of 0.7%.
Many organizations feel pressure to allocate more dollars to their compensation budgets or risk losing talent to other companies, says Sandra McLellan, leader of Towers Watson’s rewards, talent and communication practice in Toronto. But companies are still providing across-the-board increases.
“Does it make sense to give below-average performers an annual increase when it leaves less for your top performers?” she asks. “It’s time to think differently about how pay and bonus programs work together, and about how you can craft specific solutions for unique employee profiles.”
While employers recognize the importance of salary to employees, they are not placing enough importance on the entire employment deal, which includes non-monetary aspects.
According to the Towers Watson’s Global Workforce Study, only 36% of Canadian employees believe that their organization provides opportunities for career advancement, and 40% of Canadian employees feel they must join another organization to advance their career.
Employee views of their leaders are not much better. Only 45% of Canadian workers agree that their leaders inspire them to give their best.
“For employees to remain with an organization, they must have confidence in the ability of their top leaders to motivate and guide them, yet organizations underestimate the role of senior leaders in helping to retain employees,” she adds. “And while companies cannot guarantee job security, they can focus on creating a stable work environment through leaders and managers setting clear expectations of business strategy, goals and results.”
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