It was already a tough time for compensation managers. The shift toward remote work, new pay transparency laws, and record-breaking turnover have challenged companies to make wholesale changes to their compensation strategies. Talk of an impending recession only adds to the strain.
For HR leaders, the discomfort comes with the territory. For all that’s written about culture and flexibility, competitive pay is still a leading factor behind why top performers join and stay at a company. The evidence here isn’t just anecdotal: According to a LinkedIn study, businesses rated highly on compensation also have 56% lower attrition rates.
Pay is paramount — and unsurprisingly, employees have a lot to say about it.
To mark the launch of Lattice’s new compensation management software, we surveyed over 3,000 US and UK workers to understand their perspectives on transparency, cost of living adjustments, pay biases, and other issues. Below are just some of the key takeaways. For a full breakdown, reach out to [email protected]
1. Employees want to know how much peers make.
For all the talk of the modern workplace’s transparency, employee pay decisions remain notoriously opaque. State lawmakers are inclined to agree: As of this writing, 17 states in the US have begun rolling out pay transparency laws, and the UK has been considering similar measures.
They might be on to something. We found that 67% of US employees and 64% of UK-based employees want more transparency from their companies about pay practices. They aren’t looking for half measures either: Just over half of our respondents said that companies should disclose how much everyone gets paid. Millennial workers (58%) gave the most wholehearted support to full transparency.
Notably, in the US, men were more likely to report they were satisfied with their company’s current level of pay transparency than women.
We also found that the mystery behind pay isn’t just about cold, hard numbers — the backroom calculus behind raises and promotions is just as elusive. Over 30% of US employees said they did not understand how the decision-making around promotions and raises worked at their company. Again, men were 10% more likely to say they felt they had clarity around those decisions than women.
Gen Z workers are more than twice as likely to cite stipends as a crucial part of their pay.
2. Gen Z thinks about pay differently.
Compensation encompasses more than a salary. HR teams bucket a range of offerings under “total rewards” — a combination of an employee's monetary and non-monetary compensation. In addition to salaries, bonuses, health insurance, and other conventional offerings, you might find paid time off, learning stipends, and even wellness programs on a total rewards statement.
Make no mistake: The traditional “big three” of compensation — base salary, health insurance, and bonuses are still the most popular forms of compensation among US and UK respondents. It also shouldn’t be surprising that 401(k) matching — or pension contributions in the UK — are also popular with employees.
Notably, we found a generational divide in the data: Gen Z workers are more than twice as likely (compared to peers ages 45 and above) to cite stipends as a crucial part of their pay. During the pandemic, some companies offered stipends for broadband service, home office supplies, and even groceries. Demand for these, coupled with hybrid and remote work’s lasting presence, could make stipends a permanent fixture.
Younger workers also have a different perspective on what should be prioritized by employers when deciding pay. In the US, while an overwhelming majority (83%) of boomers considered work performance one of the most important factors, Gen Z were almost as likely to weigh things like cost of living changes, specialized skills, and education as key considerations.
Over 30% of U.S. employees said they expect a raise every 3-6 months if they’re meeting or exceeding expectations.
3. Employees want higher (and more frequent) raises.
In a year of economic volatility and skyrocketing living costs, our research indicates that employees aren’t just looking for higher raises; they’re expecting them more often — in some cases, just months apart.
Managers, take note: Over 30% of U.S. employees said they expect a raise every 3-6 months if they’re meeting or exceeding expectations. Nearly 40% of younger workers (ages 25-34) felt that way. If that percentage still seems small, the bigger picture won’t give budgets much reprieve: Nearly 60% of US and UK respondents said they expect a pay increase more frequently than once a year.
How much of an increase will ensure employees feel that their work is being valued? Almost a third (32%) of employees are looking for a pay bump of at least 4-5%. A quarter of respondents expect a raise of 6-10%. In contrast, the reported average salary increase budget at most organizations is below 4% — and that was before talk of a potential recession.
Alarming as that may seem to finance teams, they shouldn’t panic just yet. We also found that some employees are often willing to play ball — 46% of US employees said they were planning to negotiate during their next compensation discussion.
4. Companies say they’re addressing bias. Employees disagree.
Much has been written about pay inequities facing women and non-white workers — partly why transparency is a priority today. Our respondents readily acknowledged that these disadvantages were real: Over half (51%) of US and UK employees either agreed or strongly agreed that bias influences pay decisions. Only a quarter of employees believed bias didn’t play a role.
External surveys have found that companies are at least aware of the problem. Payscale, a compensation benchmarking provider, reported that two-thirds (66%) of organizations had plans to address pay inequities through a third-party audit, benchmarking analysis, or similar initiative.
But employees don’t necessarily see it that way. Nearly a third (31%) of US workers said their organizations weren’t taking adequate steps to eliminate biases from the compensation review process. Over 60% of respondents said they didn’t believe that (or weren’t unaware of) their HR team leveraging technology to identify and track pay disparities.
Lattice conducted this research ahead of the broad rollout of our new compensation product, designed to connect performance and compensation to drive employee engagement and retention.
To learn more about building a transparent, equitable approach to employee pay, download HR’s Guide to Setting a Compensation Strategy. For a closer look into our survey findings, contact our team at [email protected].