Employers and employees are at odds over the effectiveness of current pay programs, according to the 2024 Pay Effectiveness and Design Survey from WTW, which surveyed 1,900 companies, representing more than 30 million employees across 65 countries.

The report found that of the six core elements that comprise pay program effectiveness – attraction, retention, fair compensation, competitive compensation compared to competitors, aligning with business strategy, and reading current year performance – around half of employers said they are effective in two of the six areas.

Less than half of employer respondents indicated that they are effective at each of the other four factors.

However, WTW’s 2024 Global Benefits Attitudes Survey, published in June this year, found that pay is the most commonly cited driver for both attraction and retention by employees (48%), while more than half of employees (56%) would consider another job offer for better pay.

Commenting on the research, Tom Hellier, Senior Director, Work and Rewards at WTW, tells UNLEASH that pay is simultaneously both a top expense for employers and the most significant reason that candidates choose to either join or stay with an organization.

“HR leaders are tasked with a tricky balancing act – designing reward plans that align to important business goals, while delivering fair and competitive pay that employees understand and value,” Hellier comments. 

It’s where business acumen meets empathy, driving both retention and results.”

Getting to grips with business and employee priorities

Within its research WTW noted that the disconnect between pay schemes and employee expectations is due, in part, to changes that have affected the nature of work in recent years.

These include shifts in labor market conditions, such as talent shortages, generational shifts, and new work models, as well as socio-economic trends such as high inflation and the COVID-19 pandemic.

WTW also found that a lack of internal communication is having a detrimental impact on pay effectiveness.

Less than one in four employers indicated they are effective at communicating how employee pay is determined. 

Meanwhile, over half of employers (58%) think that salary compression is an issue and a similar percentage think it will be a problem in the next few years.

HR leaders can start by getting to grips with business and employee priorities, understanding where there’s common ground and where there are gaps to be bridged,” Hellier exclusively tells UNLEASH.

He recommends employers make efforts to understand employee perceptions of pay and to address any concerns, while also improving data and analytical capabilities to identify how to best draw value from pay spend.

In addition, Hellier says employers need to clarify “the purpose of different pay programs in the context of broader total rewards” and communicate a “point of view on, and plan for, improving pay transparency.”