In a previous Mercer blog on inflation’s impact on total rewards, we divided our recommendations into actions to be taken now and decisions to be considered later. The “later” category included finalizing the annual compensation planning program that typically occurs in Q1. In this blog, we’ll focus key considerations and market practices based on the most recent global research.
Still too early for some
In September, when employers across 103 countries were asked when they were finalizing their budget, the most popular response was November, followed by December. For instance, approximately one-fourth of companies plan to finalize their budgets in December in Ghana, Poland, and New Zealand. Whereas approximately one-fifth of companies plan to finalize their budget in December in Canada, India, Italy, South Africa, and the US.
There is a tradeoff related to when an employer finalizes plans. Finalizing early satisfies budgeting and financial planning requirements and program planning (system configuration, socialization, training, etc.) has fewer variables for which to account. Delaying plans affords the employer the opportunity to consider the very latest market trends (Mercer’s Global Compensation Planning report is updated quarterly) and economic factors (inflation, job growth, etc.).
We worry that some leaders and employees have unrealistic expectations of the upcoming compensation planning process. Accordingly, they are expecting the annual process to address inflation, the great resignation, market competitiveness, performance, and the retention of hot skills. Because of this, it is important to clarify the objectives of annual base pay increases.
Strategies in play
Our global research indicates there are many different strategies being planned for the upcoming compensation planning process.
Rise of the Relatable Organization
As reported in Mercer’s Global Talent Trends Report, employees are expecting employers to stand up for what they value and relate to them through genuine dialogue about their value and their future. This upcoming compensation planning season presents an opportunity to reward, recognize, and strengthen trust with employees. These can be achieved through strategic prioritization of objectives and empathetic communications.