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Dive Brief:
- About half of employers use a payment methodology based on market pricing for locations where they have offices, according to Payscale’s 2024 Compensation Best Practices Report. And as telecommuting continues to be hotly debated, most workers still live within commuting distance of their workplace and have either hybrid or in-office arrangements, according to the report.
- Of the 5,735 organizations that responded to a survey in late 2023, 49 percent said they pay everyone the same by location or pool, though this tends to be more prevalent in government and nonprofit organizations, Payscale said. . About a quarter (23%) of respondents said they use geographic differences or pay zones to manage pay by location.
- Compensation strategies are also beginning to reflect the shift to a skills-based talent model. More than a third (34%) of organizations said they have removed the “paper cap”: They no longer require a degree for salaried positions. Forty-five percent said they did not consider education a compensable factor, according to the survey results.
Dive Insight:
HR leaders and compensation professionals are in for a busy year, according to Payscale’s analysis.
Compensation is seen as the biggest challenge facing organizations in 2024, yet it is no longer the highest priority investment, lagging behind retention, recruitment and engagement, survey results have shown. For HR operations in general, investment has declined in every area except for HR software modernization, Payscale said.
Respondents point to three compensation issues as most important: Budgeting or managing salary increases; reward performance; and maximizing compensation budgets.
But those who decide how to handle these issues vary, depending on the size of the organization, according to the survey. Larger organizations are much more likely to have dedicated compensation resources. “The larger the organization, the larger the compensation pool is likely to be,” Payscale said.
Specifically, 59% of organizations said they had at least one in-house compensation professional. About a third said they did not have specialist compensation professionals. In the absence of such a role, organizations tended to leave compensation decisions to the CEO or executive team—not HR—slightly more often, with this approach more common in small companies. For example, 56% of those from the smallest organizations surveyed (1-99 employees) said a CEO or executive team makes compensation decisions compared to 16% of organizations with 750-4,999 employees, the Payscale.
Geographic pay strategies also vary by organization size. Nearly two-thirds (60%) of smaller organizations pay everyone the same by location, compared to 31% of organizations with 50,000 or more employees. In contrast, only 5% of smaller organizations use geographic differences for each employee’s location, while 24% of larger organizations do.
Large organizations are also more likely to use pay bands, which Payscale says “can be easier to manage consistently and fairly [for organizations with] large number of employees in different geographies”.
Unchanged from last year, only 11% of employers—mostly in technology (38%) and agencies and consultancies (30%)—describe their environment as remote, meaning employees choose where to work and can they are highly distributed geographically.
What has changed is the number of remote or hybrid jobs available to top earners — they are almost non-existentaccording to research released in May by job platform Ladder.
Of the more than half a million jobs posted last year, 4% of positions paying $250,000 or more were reported as fully remote, a 60% drop from the previous year, the survey showed. Less than 1% were offered as hybrids, a drop of 95%.
While employers may want to consider subsidies for office-based employees to help offset costs associated with travel, food, transportation and care, they should see compensation more broadlyconsidering job contribution, not location, as an important element of their compensation programs, sources recently told HR Dive.