Compensation in 2018: The 10 Trends to Watch

by Sarah Reynolds - January 26, 2018

Here are the top ten trends we predict will influence the HR industry in 2018.

Want to see the top ten trends we tracked in 2017? Read the previous post in this series. 

1. 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 reconsider how their roles and responsibilities fit into the overall employee experience. Self-service and augmented-service offerings in HR will become the new normal, and best-in-class organizations will begin to goal their HR leaders on employee service and satisfaction metrics.

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

Focusing on the complete employee experience, rather than considering employee engagement or corporate culture standalone initiatives, will allow HR to deliver real, measurable results in 2018. Rather than relying on once-annual engagement surveys, the most successful HR departments will leverage ongoing employee net promoter score assessments to track their 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 managers, recruiters, and HR business partners join discussions about compensation, comp professionals will need to adjust how they plan and budget to account for a new diversity of inputs. Changes to the compliance landscape, like bans on inquiring about candidate salary histories during the interview process, will mean that far-reaching and ever-evolving training programs will be required to keep these organizational stakeholders up-to-date.

4. 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 notes, “We ask [managers] to be the key translation point between business strategy and day-to-day employee activity.” In compensation, this often means asking managers to do the heavy lifting around communicating comp strategy to the organization. Successful compensation professionals will look to close existing gaps in managers’ comp knowledge and their ability to effectively communicate about pay 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. 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 didn’t even exist a couple of years ago. 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

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 those that will power the AI economy, are growing at a much faster rate as top talent remains scarce – meaning 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 in 2018 will be focused, analytical, and highly specialized. With 22% of large organizations looking to decrease future headcount in HR generalist roles, HR professionals should focus on developing valuable, specialized skillsets that complement their previous generalist experience in order 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. To power this change, HR and compensation professionals will need to develop smart internal job architectures that can easily identify jobs with similar required years of experience, skills, and competencies across job families and functions.

10. 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 artificial intelligence becomes more common in HR applications, HR professionals will need to determine which solutions will have the biggest impact on their business. In 2018, focusing on AI that’s fully integrated into existing HR workflows will allow HR to capitalize on their AI investment and easily integrate promising new technology into their daily tasks.

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