The Top 10 Compensation Trends To Watch Out For

Here are the top ten compensation trends we predicted would influence the HR industry in this year. All of these trends represent longer-term shifts in compensation that HR professionals should continue to monitor. 

Want to see the top ten trends we tracked recently? Read  the latest post in this series. 

1. Top compensation trend: HR’s role in the organization will change

“Employees are becoming consumers of HR services and HR is seeing a shift in its role from administrator to service provider.” – Stacey Harris, VP, Research and Analytics at Sierra-Cedar, Sierra-Cedar 2017-2018 HR Systems Survey

In 2018, HR and compensation professionals will need to change their approach to align with overall employee experience. Furthermore, self-service and augmented services will become the norm, and HR leaders will be evaluated on employee service and satisfaction.

2. HR will prioritize employee experience to drive engagement

“Rather than focusing narrowly on engagement and culture, many leading organizations aim to improve the employee experience as a whole.” – Josh Bersin, Founder of Bersin by Deloitte, The Employee Experience: Culture, Engagement, and Beyond 

Besides compensation trends, we focus on concrete steps HR can take to improve work culture. In 2018, HR can deliver real results by focusing on the complete employee experience. Instead of standalone employee engagement, HR should use ongoing employee net promoter score assessments to track progress in real time.

3. More stakeholders will influence compensation decisions

According to our 2017 Compensation Outlook survey, almost 50% of organizations have 2 or more people involved in decisions about compensation structure. And more than 60% have 2 or more people involved in decisions about compensation budgets.

As more people get involved in compensation discussions, compensation professionals will need to adjust their planning and budgeting. Changes to compliance rules, such as bans on asking about salary history, will require far-reaching and ever-evolving training programs to keep everyone up-to-date.

4. Compensation trend key takeaway: Communication and enablement will empower managers to do more.

Only 42% of respondents to our 2017 Compensation Outlook survey believe that managers in their organizations are capable of having effective compensation conversations with their employees.

As Mollie Lombardi from Aptitude Research Partners says, “We ask managers to be the key translation point between business strategy and day-to-day employee activity.” In compensation, this means that managers have to communicate comp strategy to the organization. Successful compensation professionals will close gaps in managers’ comp knowledge and communication skills in 2018.

5. Compensation’s conscience will pay dividends

Research from Aptitude Research Partners shows that when organizations make pay equity a priority, they enjoy 13% higher employee engagement and are 19% more likely to exceed industry-average levels of productivity. 

In 2018, HR and compensation professionals will need to refocus pay equity discussions around business outcomes to drive action. In addition, pay equity is a critical part of the overall employee experience. And making pay equity a priority can positively impact an organization’s bottom line. With research showing that less than half of all organizations currently have a formal process in place to address pay equity, this work will start with simply putting a process in place.

6. New jobs will emerge to support the AI economy

Gartner estimates that by 2020, Artificial Intelligence will eliminate 1.8 million jobs – and create 2.3 million jobs.

In the new AI-powered economy, HR will be challenged to recruit and retain roles that did not exist before. In 2018, compensation professionals will need to think carefully about how to competitively price the emerging hot jobs that AI will create.

7. Hot jobs will continue to outpace stagnant annual increases - a critical compensation trend

75.2% of respondents to our 2017-2018 National Salary Budget Survey are planning no change to their salary increase budgets from 2017 to 2018.

Annual salary increase budgets have remained flat at 3% for the last several years. And most compensation professionals are forecasting no change in 2018. But salaries for hot jobs like in AI, are growing at a much faster rate as top talent remains scarce. This means that HR professionals will be facing a significant recruiting and budgeting challenge in 2018.

8. HR specialists will replace generalist roles

According to Sierra-Cedar’s 2017-2018 HR Systems Survey, more than twice as many organizations are looking to add headcount in HR specialist roles like recruiting, learning and development, and HR data analytics than HR generalist roles.

The best-in-class HR department this year will be focused, analytical, and highly specialized. With 22% of large organizations looking to decrease future headcount in HR generalist roles, HR professionals should develop specialized skills to grow their careers.

9. Internal development will be key to driving retention and performance

“Employees aren’t resistant to developmental opportunities that aren’t necessarily upward, so long as there is a clear line of sight between the opportunity and their eventual career growth.” – Lisa Buckingham, EVP and Chief Human Resources, Brand, and Communications Officer at Lincoln Financial Group, Generation ‘D’ 

Retaining top talent in 2018 will require organizations to think less linearly about career progression, and to invest in tools that help map non-traditional career paths.

In relation to this, HR and compensation professionals should develop smart internal job architectures to easily identify jobs with similar requirements.

10. Compensation Trend Highlight: Standalone AI won’t have a role in HR – AI will only work if it’s integrated into workflows

“Without solutions that infuse AI and machine learning into existing HR workflows, HR practitioners will be hamstrung by the data science requirements of such applications. HR professionals shouldn’t have to hire data scientists to engage AI in their businesses. AI should come to them fully baked and ready for use.” – Chris Knize, Senior Product Manager at Salary.com, Now Is the Time to Invest in AI Technology

As AI becomes more common in HR, HR professionals should focus on solutions that integrate with existing workflows. This will help them get the most out of AI and make it easier to adopt new technology.