study of reward fairness and equity - total rewards · study of reward fairness and equity....

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.

© 2018 WorldatWork. All rights reserved.

Executive Summary

© 2018 WorldatWork. All rights reserved. 2

• 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.


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.


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


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.


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%


Variable pay (incentives and/or bonuses) (n=286)


Base pay/merit increases (n=289)

Promotional opportunities (n=289)


Frequency of Employees Voicing Concerns Regarding Lack of External Equity or Fairness


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.


6%

9%

6%

8%

6%

15%

25%

30%

35%

33%

36%

28%

45%

44%

47%

42%

41%

41%

22%

14%

11%

15%

15%

15%


Recognition (n=287)

Job titles (n=289)




Frequency of Employees Voicing Concerns Regarding Lack of External Equity or Fairness


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)


(n=290)

Time in job (n=290)

Seniority/tenure atorganization (n=290)

Work responsibilities(n=290)

Individual potential(n=290)


(n=290)

Nonfinancial Rewards


2%

3%

5%

17%

29%

56%

58%

Time in job(n=290)

Seniority/tenureat organization

(n=290)

Individualpotential(n=290)

Workresponsibilities

(n=290)


(n=290)


(n=290)

Overall orgperformance

(n=290)

Variable Pay

Consistency with rewards philosophy is the most important factor in determining rewards.


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


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)


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


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


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%



Job titles (n=284)

Promotion opportunities (n=283)


Base-pay/merit increases (n=283)

Recognition (n=283)


Variable pay (incentives and/or bonuses) (n=278)




Reward Fairness or Equity Differences by Gender

Women No Difference Men


Demographics


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%


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


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)


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




More than$10 billion


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%


Methodology


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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https://worldatwork.org/docs/research-and-surveys/Survey_Instrument_Workplace_Fairness.pdf

https://worldatwork.org/docs/resources/RFE0318_Participant+List_FINAL.pdf

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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study of reward fairness and equity - total rewards · study of reward fairness and equity....

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