The 2022 Salary Adjustment Survey was conducted during June to August 2022. A total of one hundred seventy-three organizations shaped the results of this year's survey report.

COVID-19 Impacts

In response to the COVID-19 pandemic, businesses are exploring ways to better manage pay, benefits and the workforce. Hence, the Council added COVID-19 questions to this year’s survey.  Employers continue to evaluate pay and benefit programs along with workforce planning initiatives, as they consider new levels of flexibility dealing with the changes COVID-19 has brought us.

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, 61.8% of the participants reported no changes for 2022 and salary/pay adjustments will continue as planned. Nineteen percent are increasing their merit budget in 2022, while 14.5% are undecided, as noted in the chart below from highest to lowest responses received.

Projected impact to the salary/pay adjustment budget for 2023 reported 42.2% of the participants will proceed with their 2023 salary/pay adjustment budget as planned. Over thirty-four percent are still undecided at this time and 17.9% will increase their budget for 2023, as noted in the chart below from highest to lowest responses received.

As employers face difficult economic conditions, they must manage expenses while striving to support their employees. The outcomes indicate just that. Most participants, 96.5%, have not implemented salary reductions and do not have plans to reduce base pay as compared to 89.5% reported in 2021. Only 1.2%, reported having implemented or plan to implement salary reductions as a compared to 5.8% in 2021. The remaining 2.3% are undecided.

More than two-thirds of the participants, 70.5%, have reported that they will re-evaluate their annual pay adjustments in the near future.

Survey participants were provided a list of options to describe how the COVID-19 pandemic has impacted their workforce in the first half of 2022. The table below is in order of the most responses received. Percentages do not total 100%, due to multiple selections made available.

Over one-half of participating employers, 60.1%, reported no changes to their 2022 hiring plans and 23.1% are hiring based on job, department and/or location. The table below reports the outcomes in order of the most responses received.

Over one-fourth of the participating organizations, 28.9%, do not offer a bonus plan as part of their total reward programs.

For those companies that offered a bonus plan in 2021, 82.1% reported no changes to their bonus plans where bonuses have been or will be 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, 60.6% reported no changes to their 2022 bonus program where bonuses will be paid out as planned in 2023.  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 as only 1.8% of employers have suspended company matching contributions. The data indicates that most employers, 93.9%, have decided not to implement any changes and continue with their current program. The graph displays the types of actions taken in response to the COVID-19 pandemic listed in order of most responses received.

Average Pay Adjustments

The average 2022 actual adjustment for Hawaii calculated at 3.3% for all employee groups (based on the data submitted by survey participants), while the median calculated at 3.0%.

The average projected 2023 salary adjustment for Hawaii calculated at 3.0% for all employee groups (based on the data submitted by survey participants), while the median calculated at 3.0%.

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.

In 2022, 54.3% of the organizations utilizing a formal pay structure reported a 2.1% average adjustment to their structures. The National WorldatWork 2022-2023 Salary Budget Survey Report indicated a national actual average adjustment of 2.7% for 2022.

Organizations with one thousand or more employees are the significant group having a formal pay structure as noted in the table below.

Of these organizations with formal pay structures, 47.9% have one formal pay structure, while the remaining 52.1% have more than one formal pay structure.

Market pricing continues to be the most 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, step structures, broadbands, pure market pricing and other combinations, over one-half of participating organizations, 52.1%, indicated utilizing a market-based salary structure. Percentages do not total 100%, due to multiple selections made available.

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. Over one-half, 51.2% conduct a review on an annual basis, while 15.9% conduct a review every two years, with the remaining 32.9% having a variety of other timeframes.

Nearly three-fourths of participants, 72.3%, utilize HEC and Other Surveys as a tool to conduct their market analysis process. The chart below details other market analysis methods and tools shared by the participants.

Other technical system of application used include:

• BLS.gov
• CompAnalyst/Salary.com
• Marketpay
• Payfactors.com
• PayScale
• Willis Towers Watson Consulting

Lump Sum Payments

The data indicates the use of lump sum payments in lieu of pay adjustments is not a prevalent practice with only 13.9% of participating organizations using this practice. The median lump sum payment provided, calculated at 3.0%.

Performance Incentive Plans

Incentive plans which are paid out annually are the most prevalent for all work group categories. Overall, 32.5% of the organizations reported that they have a formal performance incentive plan for their Executives, followed by 28.9% for their Exempt employees and 19.8% for their Office & Technical Non-Union employees.

The median percent for incentive awards paid out between 7/1/21 to 6/30/22 was 19.0% for Executives and 9.9% for Exempt and 5.0% for Office and Technical Non-Union employees.

Promotional Adjustment

Forty-four percent of the organizations reported promotional adjustment data. The average promotional adjustment calculated at 2.2% for the current/actual period and 2.1% 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 tools utilized by organizations are listed below in order of most responses received:

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 on compensation programs and practices and the outcome indicates the following:

• Salaried Non-Exempt
  Nearly one-third of the organizations that participated, 32.4%, have jobs and/or employees classified as Salaried Non-Exempt. Of these Salaried Non-Exempt jobs/employees, 62.5% are compensated based on an annual salary and the remaining 37.5% 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, 17.3% have a documented philosophy in writing, while 34.1% have an unwritten compensation philosophy:
  
  Of the organizations that have a compensation philosophy, 30.7% of the organizations feel their employees do not understand the compensation philosophy, while 18.2% reported that most of their employees understand the organization’s compensation philosophy. The chart below displays the level of understanding of the compensation philosophy as reported by the participants in order from highest to lowest response.
  

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

  Over one-half of the organizations have some form of compensation policy, 28.3% have a written policy, while 22.0% have an unwritten policy.
  
  Of the organizations that have a compensation policy, many understand the organization’s compensation policy. The chart below displays the level of understanding of the compensation policy as reported by the participants in order from highest to lowest response.
  

• Relative Value of Job
  Most organizations use a combination of methods to determine relative job value with the top method being Market Pricing. The chart below displays the methods to determining job value as reported by the participants from highest to lowest.
  
  
• Pay Adjustments
  The top three methods in determining base pay adjustments utilized among the one hundred seventy-three participating organizations are: 
  
  • Individual performance against job standards
  • Market value of the position
  • Individual performance against MBOs or similar personal objectives

*Percentages do not total 100%, due to multiple selections made available.

• Performance Management System
  Most of the participants, 77.5%, reported that they have a formal performance management program within their organization and 22.5% reported that they do not formally assess performance.

  Of the organizations that have a formal program, 60.1% share the performance rating results with their employees.
  

• Employee Ranking
  Most organizations, 73.3%, do not rank their employees as part of their performance management program.

  Of the organizations that use ranking based on performance, 19.0% of the managers rank their own employees and do not integrate their rankings with other managers’ teams/units.

  The remaining 7.7% integrate their rankings with other managers’ rankings or with all employees of the organization.
  

• Performance Rating
  Half of the organizations reported that pay adjustments are tied to the employee's performance rating.
  
  The levels of performance ratings utilized by organizations varies, with five levels of performance rating being the most common amongst participants.
  

Pay Adjustment Variations

For organizations that reported having variations in their pay adjustment for top performers compared to average performers, the top three variations were reported as:

• 1.5 times the average performer
• 1.25 times the average performer
• 2.0 times the average performer

Over one-third of the participating organizations, 35.7%, have no variation and pay the same adjustment for all employees. 

The chart represents the variations in pay adjustments for top performers as compared to average performers. 

• Approach to Communicating Compensation
  Many organizations, 51.4%, do not share any compensation information with their employees, while 20.2% share pay range information as it pertains to the individual employee and 16.8% share grade level.

  The chart represents the compensation (grade level and pay range location) communication approaches reported by the survey participants from highest to lowest responses. Percentages do not total 100%, due to multiple selections made available.
  

  Of the organizations that communicate compensation information, most organizations, utilize both written and verbal communication approach when communicating pay adjustments. Slightly more than forty-four percent utilize a combination of brief written and verbal communication and 17.3% utilize a detailed written and verbal approach.

  The chart represents the pay adjustment communication approaches reported by the survey participants from highest to lowest responses.
  

Effects of Healthcare Cost

Although rising health-care costs continue to be of concern, most participating organizations, 80.9%, 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 snapshot 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 engagement surveys to identify gaps between being an employer of choice and being merely an employer. For more information, please contact Dawn Mitchell, Survey & Compensation Services Manager (dmitchell@hecouncil.org), or Susan Amuro, Survey & Research Analyst (samuro@hecouncil.org).