The 10 Biggest HR and Compensation Trends We Tracked in 2017

Written by Sarah Reynolds

January 5, 2018

The 10 Biggest HR and Compensation Trends We Tracked in 2017 Hero

Let’s take a look back at the 10 biggest trends in compensation and HR that shaped the industry in 2017.

Want to see how our 2017 predictions for the compensation industry held up? Read the previous post in this series.

1. Salary History Bans Became Law

In October 2017, California joined Massachusetts, Delaware, Oregon, Puerto Rico, New York City, Philadelphia, and other locations across the US in banning salary history inquiries during the hiring process. Read more.

Lawmakers at the state level continued to address fair pay and pay equity concerns from a variety of angles, including banning inquiries into candidate salary histories. Proponents of these laws believe they will combat established pay inequalities in the market that could reduce employees’ future earning power.

2. Talent scarcity remained HR’s number one concern

According to our 2017 Compensation Outlook Survey, 68% of HR professionals were more concerned about scarcity of talent in 2017 versus the previous year. Read more.

As baby boomers retire, organizations must replace highly skilled, tenured employees with new talent. In 2017, low unemployment rates kept scarcity of talent - especially skilled talent – top-of-mind for many HR professionals.

3. Salary increase budgets remained flat in 2017

75% of respondents to our 2017-2018 National Budget Survey reported no change to their budgets for salary increases in 2017. Read more.

Annual salary increase budgets held steady at 3% of payroll, despite 58% of organizations reporting revenue growth in 2017. While revenue is traditionally a top driver of changes to compensation program funding, market pressure to hold salary growth steady won out in 2017.

4. Pay-for-performance models became ongoing conversations

Josh Bersin estimates that 70% of multinational companies have moved towards ongoing performance assessments, rather than annual ones. Read more.

As Millennials and Gen Z come of age in the workforce, many companies have abandoned formal performance appraisals in favor of ongoing coaching conversations, challenging compensation professionals to deliver non-traditional pay-for-performance models that reward top performers and keep employees engaged.

5. Managers felt comfortable discussing performance, but not pay

Less than half of respondents to our 2017 Compensation Outlook Survey reported that managers in their organization are capable of having effective conversations about pay. Read more.

Managers, not HR practitioners, were on the front lines of communicating pay policies and decisions out to employees in 2017. The most effective compensation professionals embraced this process change and provided new training to managers to improve their understanding of the organization's pay philosophies and policies.

6. Budget-conscious organizations leveraged employee recognition programs to drive results

According to WorldatWork, organizations had an average of 4.5 employee recognition programs in use in 2017. Read more.

Faced with flat salary increase budgets, organizations increasingly turned to no- or low-cost employee recognition programs to drive engagement and performance. And with 34% of organizations reporting increased levels of recognition across the organization in 2017, these programs clearly had an impact.

7. HR came of age in the big data era

Nearly 50% of organizations surveyed by MIT’s Sloan School of Management indicated that their top analytics challenge was turning analytics into insight. Read more.

Big data has long been a way of life for HR and compensation professionals. But 2017 marked a shift away from analytics and towards insights, allowing HR to see past the big data noise and drive real value for their businesses

8. Artificial intelligence appeared on the HR radar

“We don’t invest in AI. We don’t invest in natural language processing. We don’t invest in image analytics. We’re always investing in a business problem.” – Matthew Evans, VP of Digital Transformation at Airbus, Reshaping Business with Artificial Intelligence. Read more.

In 2017, HR began to leverage technological advances in AI and machine learning to streamline workflows and solve business problems. With predictive salary survey matches, bias-free candidate screening capabilities, and chatbots designed to drive engagement, 2017 marked the rise of AI in HR technology.

9. Crowd-sourced data became HR’s gut check for pricing accuracy

According to our 2017 Compensation Outlook survey, 24% more HR professionals were willing to consider employee-reported data than in 2016 – but only as one of many sources in the pricing process. Read more.

With salaries for hot jobs moving at a record pace in the market, more and more HR professionals leveraged employee-reported data to keep a pulse on up-to-the-minute market pricing in 2017. But while they were open to using employee-reported data as a gut check for traditional surveys, survey results continued to show HR’s discomfort with relying on crowd-sourced data as a single source of truth.

10. Demands for pay transparency put pressure on HR

“The best approach for any organization lies somewhere on the spectrum of openness that aligns with the culture and business model.” – Ben Eubanks, Principal Analyst at Lighthouse Research and Advisory, Transparency and Compensation: Trends and Best Practices. Read More.

Pay transparency was a hot topic in 2017, with companies like Buffer making the news for their radical approach to 100% pay transparency. But for most HR professionals, pay transparency remains a slow process that they want to take step-by-step – not a jump into the deep end.

COMING SOON: The top trends we’re predicting for 2018.

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