Employers Focus More on Performance-Based Rewards

August 28, 2006 (PLANSPONSOR.com) - More companies are relying on performance-based awards to motivate and retain workers, according to a Hewitt Associates' survey of 1,028 large organizations.

According to a Hewitt news release, the survey found that employees can expect base salary increases of 3.7% in 2007 – a modest rise from the 3.6% average increase in 2006. Executive employees can expect increases of 3.8%.

While base pay increases remain modest, Hewitt’s survey found that company spending on variable pay in 2007 is expected to remain strong at 11%. Eighty percent of companies surveyed offer at least one broad-based variable pay plan, according to the release.

Special recognition awards are the most common (63%), followed by business incentives (62%), signing bonuses (62%), individual performance awards (44%), non-executive equity awards (44%) and retention bonuses (35%), the survey found.

Other key survey findings included:

  • Some major US cities should see salary increases somewhat higher than the national average projections for 2007, including Houston (4.7%), Washington D.C. (4.5%), Denver (4.4%), Los Angeles (3.9%), Atlanta (3.8%) and San Francisco (3.8%).
  • Industries experiencing above-average salary increases include energy (4.5%), construction/engineering (4.1%) and aerospace (4.0%).
  • Companies reported a 15.7% average turnover rate in the past 12 months.
  • 37% of companies report problems with attraction and retention of employees.
  • Less than 2% of firms reported a salary freeze for 2006, and less than 1% expect a salary freeze in 2007.