Keeping pace With North American compensation policy and practice trends

March 14, 2019

You've probably heard the excitement about companies implementing an array of new policies and practices to attract today’s talent. By most accounts, these progressive HR policies and practices go beyond monetary rewards to encompass everything from greater workplace flexibility to increased vacation time, and countless other perks.

While these perks seem to be grabbing the attention of the media and HR professionals across North America, companies might not actually be making as many changes, or changing as quickly, as it may seem.

What’s Really Happening With Progressive Benefits?

Undoubtedly, HR policies and practices across the US and Canada are changing, but in many cases, they’re not changing as quickly as they have before. This slowdown is evident when comparing Mercer’s 2018 North American Compensation Policies and Practices’ reports to the 2016 – 2017 editions. The reports show that many employers have become slightly more conservative in their adoption and distribution of progressive benefits.

Flexible Work Programs

Formal flexplace policies allow employees to work away from regular office settings (i.e., “remote working”). While the 2018 US Compensation Policies and Practices data show increases in the number of organizations offering increased workplace flexibility, the increases are minimal when compared to the 2016 – 2017 data.

The highest percentage increases in flexplace policies were only 2% for executive-level employees (i.e., senior management encompassing CEO/COOs through the VP level) and professional-level employees (i.e., individual contributors with no supervisory responsibility who work in a technical function). There was a meager 1% increase for management-level employees (i.e., those who have a significant impact on the direction of a business, such as corporate directors and department managers) and para-professional employees (those having skilled, semi-skilled, or unskilled roles without supervisory responsibilities and usually without degrees).

At the same time, the 2018 Canada Compensation Policies and Practices survey results show significant increases in the number of Canadian employers providing formal flexplace benefits when compared to 2016 – 2017. Both executive-level and para-professional-level employees saw impressive 12% increases from 2016 – 2017 to 2018. The next highest increase was for management-level employees, who trailed closely behind with an 11% boost. Finally, professional-level employees saw a 9% increase between 2016 – 2017 and 2018.

Paid Time Off

In the US, survey respondents indicated that the typical approach to providing time off continues to be a PTO pool approach, which combines at least two types of leave days to create a “pool” of off days to be used as desired. In Canada, 2018 data showed that the number of organizations offering PTO pool policies for vacation days actually decreased from 11% in 2016 – 2017 to 8% in 2018. The typical approach to providing time off in Canada is to manage each type (e.g., vacation, sick, etc.) with separate policies.

Sabbatical/Volunteer Leave

In 2016 – 2017, 12% of US organizations offered their employees sabbatical leave; by 2018, this number decreased to 11%. Among US organizations that offer their employees funded sabbatical leave, 27% provide full-salary leave (a 7% decrease from 2016 – 2017), and 61% offer only unpaid leave (a 14% increase from 2016 – 2017). Meanwhile, the number of US organizations offering paid volunteer leave also decreased from 35% to 31%.

In Canada, the number of companies offering sabbatical leave increased from 23% in 2016 – 2017 to 34% in 2018. Among Canadian organizations who offer funded sabbatical leave, only 10% provide full-salary leave, which is still an increase from the 6% who did in 2016 – 2017. Interestingly, the percentage of Canadian organizations who provide unpaid sabbatical leave has been the same between the two reporting periods, remaining at 81%. As for paid volunteer leave, the number of Canadian organizations offering this perk increased slightly from 32% in 2016 – 2017 to 34% in 2018.

Paid Paternity Leave: Still on the Rise

Though many organizations have slowed the implementation of more progressive rewards or benefits, some of these remain very much in the spotlight. On a global scale, paid parental leave policies are becoming increasingly favorable for working mothers and fathers, and the same certainly seems true for North America. In fact, the 2018 US Compensation Policies and Practices survey data show that the number of US companies offering paid paternity leave has increased from 30% in 2016–2017 to 36% in 2018. Similarly, in Canada, the percentage of organizations offering paid paternity leave separate from parental leave has also increased, and quite drastically, going from 9% in 2016–2017 to 23% in 2018.

Compensation Policies: Know the Pay Trends

Across North America, one thing remains true: getting compensation right remains a top priority. In fact, significant November 2018 updates to the 2018/2019 US Compensation Planning survey showed that employers are now projecting higher increases in their annual budgets for promotional pay increases. This fact aligns with an increased investment in internal career development within participating organizations. Similarly, career development is a well-known component of the holistic rewards approach.

Employers are now projecting higher increases in their annual budgets for promotional pay increases.

In this November update, which includes 32% of the original survey respondents, many employers project their average total salary increase budgets (which include merit and promotional budgets) to be 3.5%, up slightly from the 3.2% anticipated six months prior. Notably, of the approximately 30% of employers projecting higher total increased budgets, changes were reflected primarily in their promotional increases as opposed to their merit increases, which remained the same at 2.9%.

Preparing for the Future: Mix the Best of Both Worlds

As employers continue to evaluate their near-future workforce needs, they should be mindful of what their peers are doing to attract and retain increasingly sparse talent. As with any other HR trend, the most effective attraction and retention strategies change with the times, but in many cases, older strategies will still overlap the new. This continued overlap seems to be especially prominent now as a growing number of employers struggle to balance traditional pay-related perks with the more progressive and holistic benefits of recent years.

With today's tighter job market and the public's increased confidence in the economy, offering your employees higher promotional opportunities can signal an increased investment in their career growth. At the same time, you'll make it more difficult for your competitors to steal away top talent — an obvious key advantage, especially when there's been so much voluntary turnover.

If you’re ready to enhance your compensation practices for a modern workforce, check out the 2018 US Compensation Policies and Practices Survey. And if you need insights unique to the Canadian market, there’s the Canada Compensation Policies and Practices as well. These comprehensive products feature exclusive insights from hundreds of participating organizations while covering everything from compensation management to parental leave to overtime trends — and so much more. What better way to prepare your workforce of today for the changing work environment of tomorrow?