Ad hoc HRMS still the norm for small- and mid-size companies

In September 2008, PayScale, a provider of on-demand compensation data, conducted a cross-industry survey of 2,043 HR professionals in the U.S. and Canada on their attitudes towards common trends that drive employee compensation and pay practices within their organizations. The organization has now released a white paper on the results.

For most organizations responding to this survey things were not nearly as dire as the news made it appear in 2008. Only 23 per cent of organizations reported downsizing their staffs (on average by 11 per cent), while 45 per cent reported increasing their staff. As expected, the majority of downsizing in the first three quarters of 2008 occurred in the construction, real estate, and mortgage finance industries, while healthcare, IT, and energy sectors grew.

On the flip side, even though 77 per cent of organizations grew or remained the same in the first three quarters of 2008, only 28 per cent reported retention as a top concern, and 47 per cent felt it wasn’t a concern at all. Nor have many small organizations adopted single vendor HRIS or talent management systems designed to improve retention and succession planning of employees. Instead, the majority of organizations employing fewer than 1,000 full time employees continue to rely on ad hoc approaches to managing their HR functions of recruiting, compensation, and retention.

With regard to compensation practices, half of organizations continue to conduct market pricing activities on an ad hoc basis (pay structure below market, individual recruiting, or retention needs). The other half set pay on annual or bi-annual benchmarking schedules. As expected, the larger the organization, the more structured the compensation practices and more frequent the benchmarking process, with formalized compensation practices generally starting at around 100 employees.

Summary of results:

• Organization’s employment growth between 2007 and 2008 was not as bad as economic news might indicate. Only 23 per cent of organizations reported downsizing their workforce between the period, while 45 per cent of organizations reported increasing their size and 32 per cent remained unchanged.

• The average decline rate was 15 per cent of the total workforce. Organizations employing less than 100 full time employees declined by 22 per cent while organizations employing more than 100 full time employees reported declining by just 11 per cent.

• Industries that experienced employment growth were Telecommunications, Pharmaceuticals, Banking, Staffing/Recruiting and Human Resource Consulting, Healthcare and Technology/Computers Software. Industries that declined were Real Estate, Hospitality, Mortgage Financing, Wholesale, Insurance and Construction.

• Only 11.6 per cent of organizations reported that their compensation data budgets declined from 2007 to 2008, while 48.5 per cent reported that their budget had increased. Additionally, 48.7 per cent of organizations reported that they expected their 2009 budgets to increase, while only 9.7 per cent believed that their budgets would decrease in 2009.

• While 2007 industry forecasts indicated that employee retention would be the top HR priority of 2008, only 28.2 per cent of organizations reported retention as their top concern. 26.3 per cent of organizations reported that retention was only one of many concerns and almost half of all respondents, 47.5 per cent, indicated that retention was only a minor concern or not at all.Interestingly, organizations were split between whether employee retention would be an issue in 2009, with 52.5 per cent of respondents indicating that they thought it would be, and only 47.5 per cent thinking that it would not.

• The top three reasons that HR professionals reported employees leaving a job were personalreasons, 41.4 per cent, poor performance, 41.1 per cent, and seeking advancement  opportunities elsewhere, 34.6 per cent.

• Employee retirement does not appear to be affecting many employer’s recruiting or retentionefforts. Only 15.5 per cent of organizations reported that retirement affected their 2008 staffing efforts and only 21 per cent believe that it will be a factor in 2009.

• When it comes to structuring compensation, it appears that organizations broadly fall into twobuckets: ad hoc programs to meet objectives and formal structures. 65.8 per cent of organizations use Salary Ranges to structure their pay while 26.5 per cent set pay on a case-by-case basis. Only 7.7 per cent of organizations reported setting pay using broad bands.

• Half of all organizations, 49.5 per cent, adjust their pay structures as needed, while 44 per cent of organizations set their pay every year. Only 7.7 per cent of organizations reported adjusting their pay structures every other year. Of the organizations that structured their pay as needed, only 40 per cent reported doing a benchmarking project in 2007. 62.6 per cent of organizations conduct focal point reviews at a specific time each year, while the remaining 37.4 per cent adjusted compensation on the employee’s anniversary.

• Types of bonuses used vary significantly across organizations. 72.1 per cent of organizations offer incentive bonuses, but only 29 per cent of those organizations offer bonuses across the board. 59.8 per cent of organizations reported using spot bonuses, 27.3 per cent hiring bonuses, 17.5 per cent retention and 67.1 target incentives.

For more on the PayScale survey, visit www.payscale.com.