Benefits September 14, 2010

Use of COLAs Dwindling in Salary Changes

September 14, 2010 (PLANSPONSOR.com) – Ninety-four percent of employers in a recent survey said they typically raise employees’ pay when they are promoted, while 92% hand out merit increases and 76% do market adjustments.

Reported by

Fred Schneyer

A WorldatWork news release about its Compensation Programs and Practices found only 11% of employers polled award cost of living adjustments (COLA) to employees.

“From a rewards perspective, it doesn’t make sense to base pay raises solely on the Consumer Price Index,” said Kerry Chou, CCP, compensation practice leader at WorldatWork, in the news release. “Pay raises are a tool to motivate and retain employees. How motivating can it be for a top performer to receive the same base pay increase as a low or average performer?”

Some 89% of respondents indicated they hand out salary adjustments based on individual performance against job standards and/or Management by Objectives (MBO)

Data was gathered from June 16 to July 2, 2010, among members employed in the HR, compensation, and benefits departments of mostly large U.S. corporations. Of the 1,381 responses, 44% came from companies with 5,000 or more employees.

The report is at http://www.worldatwork.org/waw/adimLink?id=42294&nonav=yes.