A June 2022 survey of 130 CFOs and CEOs showed that 51% of organizations favor salary adjustments for only top performing employees as an employee compensation strategy, according to Gartner, Inc. Survey respondents indicated that employee performance will be a key determinant in awarding pay rises to both salaried and hourly employees as a response to cost of living increases from ongoing high levels of inflation.
“Rising labor costs are among the most negatively impactful to operating cash flow, and it follows that we see a more limited approach to pay rises either by performance or in select markets for now,” said Randeep Rathindran, vice president, research in the Gartner Finance practice. “Organizations will continue to look at benefits beyond compensation as an approach to fight employee attrition and keep costs across the labor force as balanced as possible.”
Despite a tight labor market, and high attrition risk, CEOs and CFOs are attempting to limit expectations for across-the-board pay hikes. Seventy percent of those polled indicated that pay rises would only be forthcoming either to top performing employees or those located in select markets (see Figure 1). Nearly one in four respondents favored the most restrictive approach, offering pay increases to only top performers within selected geographic markets where inflation was the most severe.
