by Audrey Croley Little
2024 Pay Increase Budget: 4.1% (2023 averaged 4.4%)
2024 Merit Increases: 3.5% (2023 averaged 3.7%)
General/COLA Adjustments: 1.8% (2023 provided 2.0%)
World at Work Total Rewards Association, 2023
It's that time of year again!
As we approach the fourth quarter of 2023, it signals the onset of one of the busiest periods for Human Resources, especially for Compensation Professionals – Year-end Planning. You'll often find Compensation Professionals scurrying around, taking long walks, engaging in more self-talk than usual, and crunching numbers. It's when their creative juices really start flowing, like figuring out how to drive 600 miles on a single tank of gas.
With the arrival of Q4, critical decisions that come into play include determining pay increase pools, distributing bonus rewards, planning promotions, considering equity increases and evaluating pay structure changes.
I've already begun receiving inquiries about pay increase budgets for 2024, especially with organizations aiming to stay competitive. While there are various factors that can affect an organization's ability to recruit and retain top talent, offering competitive compensation undoubtedly plays a significant role.
When awarding pay increases, it's crucial to consider these six best practices:
Always factor in actual performance to convey the right message.
Reward employees with high performance but relatively low pay compared to the market with higher increases to retain them.
Implement a pay-for-performance strategy to ensure top performers receive the highest increases.
Use percentages when determining bonus awards; flat dollar bonuses can send different messages relative to base salary.
Balance both external and internal equity – they both matter.
Review your pay structure(s); if it's been two or more years since the last update, ensure it aligns with the latest data. Pay has changed post-COVID.
As we enter this exciting time of Year-end Planning, you might spot a compensation professional passionately immersed in their work, deep in discussions about numbers and strategies. When you see them, don't be surprised if they appear to be conversing in a unique language of their own. Just offer a friendly smile, as compensation professionals are indeed bilingual in the world of HR and finance, bridging the gap between creativity and data-driven decision-making.
If you require assistance with your year-end compensation strategy planning, let's talk!
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