News & Announcements

HEC Releases 2020 Salary Adjustment Survey Summary Highlights

Posted Friday, October 16, 2020 8:30 am

The 2020 Salary Adjustment Survey was conducted during June to August 2020. A total of one hundred seventy-four organizations shaped the results of this year's survey report.

In response to the COVID-19 pandemic, many businesses are exploring ways to manage pay, benefits and the workforce. Hence, the Council added COVID-19 questions. Understanding the situation is very fluid and changing regularly, survey outcomes shared in this report may have changed. Employers continue to evaluate pay and benefit programs along with workforce planning initiatives, as they consider new levels of flexibility dealing with the “new normal” COVID-19 has brought upon us.

COVID-19 Impacts

Participants were requested to share how the COVID-19 pandemic has impacted their plans with making salary/pay adjustment budgets this year. Of the actions taken, 57.5% of the participants reported no changes planned for 2020 (which was the largest response received amongst the options provided). Nineteen percent are undecided and the remaining (16.7%) reported freezing salaries in 2020. The remaining plan to decrease or increase merit budgets, as noted in the chart below from highest to lowest responses received.

Projected impact to the salary/pay adjustment budget in 2021 were reported with over one-half, (54.6%) of the participants undecided at this time (which was the largest response received amongst the options provided) and one-third, (33.3%) will continue to proceed with 2021 salary/pay adjustment budget as planned and (6.3%) are freezing salaries.  The remaining plan to increase or decrease merit budgets, as noted in the chart below from highest to lowest responses received.

As employers face difficult economic conditions, they are working to manage expenses yet are striving to support employees. The outcomes indicate just that. More than three-fourths of employers (78.7%) have not implemented salary reductions and do not have plans to reduce base pay. The remaining employers reported they remain undecided (10.3%) with the smallest group of employers (8.6%) having implemented or plan to implement salary reductions and (2.3%) have reported furloughs and reduction in work hours. 

Of the fifteen organizations (8.6%) who have implemented or will be implementing salary reductions, over one-half (53.3%) are reducing pay for their management group and (40.0%) are reducing the salary of their executives. The graph below is in order of the most responses received.  Percentages do not total 100%, due to multiple selections made available.

More than two-thirds of the participants, (67.2%) have reported that they will re-evaluate their annual pay adjustments in the near future.

Faced with the significant downturn of consumer demand for goods and services due to the “stay at home” order in place, 30.4% of participating employers have furloughed employees or executed permanent reduction in force measures. Hence, the unemployment rate in Hawaii for July was at 13.1% as reported on August 20, 2020 by the Department of Labor & Industrial Relations.

Survey participants were provided a list of options to describe how the COVID-19 pandemic has impacted their workforce. The table below is in order of the most responses received. Percentages do not total 100%, due to multiple selections made available.

Impact

%
Representation

No changes to the workforce

57.5%

Workforce staffing is being reviewed

28.7%

Furlough (temporary layoff)

20.1%

Permanent Reduction in Force

10.3%

Other

8.0%

Undecided

3.4%

Other workforce impacts are listed in alphabetical order:  Hiring freeze, increasing in workforce, reduction in work hours, require mandatory use of earned time off and shifting staff to where they are needed.

One-third of participating employers (33.9%) reported no changes to 2020 hiring plans and (31.0%) are limiting recruitment for selected jobs.  The table below reports the outcomes in order of the most responses received. 

Actions

%
Representation

No changes to 2020 hiring plans

33.9%

Hiring is limited to select jobs

31.0%

Varies by job, department and/or location

21.3%

We have implemented or plan to implement a hiring freeze

9.2%

Undecided

4.0%

Other

0.6%

Over one-third of the participating organizations (33.9%) are not offering a bonus plan as part of their total reward programs.

For those companies offering a bonus plan, more than one-half (60.0%) reported no changes to bonus plans where bonuses have been paid out as planned. The graph below displays the types of actions being taken listed in order of most responses received.

As businesses focus on plans to bring employees back to work or return to the office from temporary remote work arrangements, more than one-half (52.1%) are undecided as to what type of bonus plans if any, might be considered. The graph below displays the types of actions being considered listed in order of most responses received.

While employers work to manage costs, few employers have executed cost-saving measures with defined contribution plans. Based on data collected, only 3.7% of employers have suspended or reduced company matching contributions (which aligns with national trends reported in a survey conducted recently by Aon).

With data indicating that many employers (86.0%) have decided to not implement any changes. The graph below displays the types of actions taken in response to the COVID-19 pandemic listed in order of most responses received.

Participating organizations provided actual data that reflected the previous 12-month period (7/1/2019 to 6/30/2020) and projected adjustments for the upcoming 12-month period (7/1/2020 to 6/30/2021) by various employee groups, as noted below. 

  • Executives
  • Exempt
  • Office & Technical (non-union)
  • Office & Technical (union)
  • Production & Service (non-union)
  • Production & Service (union)

Average Pay Adjustments

The average 2020 actual adjustment for Hawaii calculated at 2.4% for all employee groups (based on the data submitted by survey participants), while the median calculated at 2.5%. 

The average projected 2021 salary adjustment for Hawaii calculated at 1.5% for all employee groups (based on the data submitted by survey participants), while the median calculated at 1.0%.

Formal Pay Structure

An organization's pay structure is a hierarchy of pay ranges with established minimum and maximums. Organizations apply control points (often the mid-point) within each pay range. As a general rule, a percent increase is applied to the control points to adjust the pay structure.

Fifty-six percent of the organizations utilizing a formal pay structure reported a 1.3% average adjustment to their structures. The National WorldatWork 2020-2021 Salary Budget Survey Report indicated a national average adjustment of 1.9%. 

Organizations with five hundred or more employees continue to be the significant group having a formal pay structure as noted in the chart to the below.

Employee Count

% with a
Formal Pay
Structure

1,000+ Employees

89.5%

500 to 999 Employees

88.9%

100 to 499 Employees

64.7%

Less than 100 Employees

41.9%

Of these organizations with formal pay structures, 53.1% have one formal pay structure, while the remaining 46.9% have more than one formal pay structure.

Market pricing has been the most commonly used method to develop and support compensation structures.  This process is based primarily on external factors with the organizational goal of being market competitive.  While there are the options of traditional, broadbands, step structures, market-based structures and other combinations, nearly one-half of participating organizations (49.0%) indicated utilizing a market-based salary structure.

Organizations review market data on a regular basis to ensure salary structures and base pay levels remain competitive. Participants were requested to share the timing of organization-wide market analysis.  Nearly one-half (47.0%) conduct a review on an annual basis, while 38.6% conduct a review every two years, with the remaining 14.5% having a variety of other timeframes.

Nearly two-thirds of participants (63.3%) utilize a spreadsheet application to manage the market data analysis process.

Lump Sum Payments

The data indicates the use of lump sum payments in lieu of pay adjustments is not a prevalent practice with only 12.6% of participating organizations using this practice. The median lump sum payment provided, calculated at 2.4%.

Performance Incentive Plans

Incentive plans which are paid out annually are the most prevalent for all work group categories.  Overall, 34.5% of the organizations reported that they have a formal performance incentive plan for their Executives, followed by 28.4% for their Exempt employees and 18.3% for their Office & Technical Non-Union employees.

The median percent for incentive awards paid out between 7/1/19 to 6/30/20 was 10.0% for Executives and 5.9% for Exempt and 3.3% for Office and Technical Non-Union employees.

Promotional Adjustment

Nearly fifty-two percent of the organizations reported promotional adjustment data.  The average promotional adjustment calculated at 1.2% for the current/actual period and 1.0% for the projected period.

Base Pay Adjustment Program Types and Dates

The most prevalent base pay program continues to be "Performance-Based/Merit” for all job categories. Holding the same consistent pattern, the most prevalent practice for when pay adjustments are granted continues to be "Common Date for All Employees” for all job categories.

Base Pay Target Levels

Participants were requested to share benchmark points where an organization would target base pay levels in comparison to the market. The data indicates, for organizations that have a base pay practice, most benchmark at the median (or 50th percentile). As a reference point, according to a WorldatWork Survey, most organizations aim to compete at the median.

Employee Recruitment and Retention

Attracting and retaining key talent is top of mind for all organizations, and the top four tools utilized by organizations are:

  • Market adjustments / increase to base pay
  • Employee referral bonus
  • Noncash recognition and rewards
  • Sign-on/hiring bonus

Compensation Programs and Practices

In addition to reporting data on salary adjustment, pay structure, incentive and promotional adjustments, participants were requested to provide responses to questions focused around compensation programs and practices and the outcome indicates the following:

  • Salaried Non-Exempt

    One-third of the organizations that participated (33.3%), have jobs and/or employees classified as Salaried Non-Exempt. Of these Salaried Non-Exempt jobs/employees, (72.4%) are compensated based on an annual salary and the remaining (27.6%) are compensated based on an hourly rate.
  • Compensation Philosophy

    The Compensation Philosophy consists of management's understanding of where base pay fits within the organization's business strategy and supports the organization's culture.  It identifies the organization’s market and how competitive the organization wants to be.

    Over half of the organizations have some form of compensation philosophy, be it written or unwritten, (19.0%) have a documented philosophy in writing, while (33.3%) have an unwritten compensation philosophy.

  • Compensation Policy

    The Compensation Policy ensures that a compensation program carries out the compensation strategy while supporting the compensation philosophy.

    Over half of the organizations have some form of compensation policy, (34.5%) have a written policy, while (17.2%) have an unwritten policy.

  • Performance Rating

    Half of the organizations (50.0%) reported that pay adjustments are tied to the employee’s performance rating.

    The levels of performance ratings utilized by organizations center around three through five levels with five levels of performance rating being the most common amongst participants.

  • Effects of Healthcare Cost

    Although rising health-care costs continue to be of concern, most participating organizations (69.5%) report that health-care costs will not impact base pay budget recommendations.

HEC conducts a variety of compensation and benefits surveys to provide data useful in developing and administering compensation and benefit plans, and personnel policies. Custom snapshots and comparison reports from our compensation surveys are available, along with customized, proprietary surveys conducted on your behalf.  Our Survey & Compensation experts can also work with members on employee opinion surveys to identify gaps between being an employer of choice and being merely an employer.  For more information, please contact Susan Amuro, Surveys & Research Analyst (samuro@hecouncil.org).

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