2022 Compensation Trends

No matter how fulfilling a job is, the money matters.

With near double-digit inflation in the U.S. economy, a rise in flexible work, and resignations at historic highs, employees are wondering if their compensation is matching what they're really worth. Meanwhile, employers are scrambling to hire and retain top talent as budgets tighten in the face of economic uncertainty.

To help HR form a plan to improve employee engagement and retention, we surveyed 1,000 full-time, salaried employees in the U.S. on how they feel about their compensation and what they want from employers. We’ve discovered key 2022 compensation trends surrounding:

What are business and HR leaders supposed to do about all this? We’ve analyzed the data and included key takeaways for each trend.

Salary Deflation

Across gender lines, the imbalance becomes even starker: fewer women are receiving raises, and those who do are getting smaller raises than their male colleagues.

Why Inflation Shouldn’t be the Measuring Stick for Wage Increases

The good news is, wages are steadily increasing. But the flip side is, so is the cost of living—at a much faster rate.

Employees see inflation going up, but they don’t see their paychecks covering the increase at the gas pump or the grocery store checkout. And while wages can’t realistically track with a volatile economy, that’s a hard thing to explain to someone who’s struggling to pay for rising energy, home, and food costs.

And then there’s the perennial issue of people not being good at judging their own worth in terms of market value. According to a 2021 survey from Payscale, a majority of workers (51%) who are paid at or above market believe they are paid below market. HR is tasked with correcting this misperception in a way that doesn’t dismiss the reality that many employees are feeling undervalued and unhappy.

When Salaries Don’t Rise, Dissatisfaction Does

We’re living in exceptionally precarious times and even the perception of being underpaid is enough to have a significant impact on mental health.

Mental health affects every other pillar of employee wellbeing, and when people aren’t feeling their best, they can’t show up to do their best work. In short, when mental health suffers, so does engagement, performance, and ultimately your company culture, which makes our next finding especially concerning for HR.

Younger workers are also far more likely to feel the negative effects of compensation dissatisfaction.

Why Offering More Money Isn’t (Always) the Answer

Retention and salary satisfaction are closely linked. In our 2022 Guide to Retention, we found that “better compensation” was among the top five reasons employees leave their companies.

A salary increase is an incredibly tempting offer for most workers, especially considering the dramatic rise in cost of living.

The fear of losing employees may have you scouring your budget for funds to pay employees more. But overpaying to attract and keep top talent is risky. Doing so risks attracting mercenaries, not to mention putting golden handcuffs on people who’d rather be elsewhere.

As important as it is to ensure fair compensation, you need to invest in employee engagement with a crystal clear focus on your mission, vision, and values if you want to improve your culture and meet your growth goals.

Put the Data into Action

Communicate Your Company’s Compensation Strategy

If you’re paying your employees fairly but they still believe they’re being underpaid, there’s a gap in communication—and in order to close it, you need to have a solid compensation strategy for your company (start here if you’re creating or revamping yours) and a plan for clearly communicating that strategy with your employees. And as we step into even more economic uncertainty, a solid compensation strategy will help your company weather potential storms and give employees a sense of security.

Emphasize Total Compensation

An effective compensation strategy includes total compensation—a figure that combines salary or wages with indirect forms of compensation like paid time off, health insurance, bonuses, and any other benefits you offer. It’s up to you to help them see and take advantage of everything you offer and experience just how much you value them.

Focus on Improving the Full Package

As you create a retention strategy, look at the whole picture: how you can improve company culture, help employees feel connected to your mission, and pay them appropriately. If you can create that balance, you can retain and reward the top performers that you want sticking around.

Salary Transparency

Salary transparency is a sizzling hot, buzzword, but what does it actually mean?

The tricky thing about salary transparency is that it’s a sliding scale. So, when employees say they value it, which they do…

…but that doesn’t mean everyone is on the same page.

Salary transparency can mean anything from publically publishing everyone’s salary to sharing pay ranges for job openings, which are on opposite ends of the transparency spectrum.

But whatever salary transparency means to you, your employees, or your competitors, it is something employees are starting to notice and seek out.

As employees are becoming increasingly interested in some level of salary transparency both before and after being hired, this is also something that will affect compensation conversations with current employees.

Prepping for Compensation Conversations

75% of salaried employees prepare for compensation discussions with their employer. To better prepare HR and managers for these compensation conversations, it’s helpful to know what employees have on their mind when they walk into these discussions.

Since many employees are showing up prepared, you and your managers need to show up prepared, too.

Here’s what employees are bringing to the table at compensation reviews.

Those are important, but HR and managers should walk into these conversations prepared to connect the value of employees’ contributions to your business, and with a clear understanding of your company’s compensation strategy.

• How does the employee support business needs?
• How is the employee driving customer value?
• Are the employee’s goals lining up with business strategy?

Who Should Take the Lead in Salary Reviews?

While some employees walk into a compensation conversation prepped and ready, others don’t feel comfortable bringing up salary conversations at all, so you shouldn’t count on your employees to close the communication gap.

What Does It Take to Boost Your Salary?

While many employees’ salaries have remained stagnant during four decades of high inflation, some have been steadily boosting their salary. Those who netted an above-average increase—whether through negotiation or changing jobs—have a few key things in common.

91% of above-average salary boosters prepare for compensation discussions. They say talking with their manager and researching similar roles online were the most impactful preparations.

As you’re having these conversations, you and your managers must make sure you’re staying within the bounds of your compensation philosophy and looking beyond an employee’s negotiation skills to avoid creating pay inequity across your organization. Are you giving an employee a raise because:

• They strong-armed you into it?
• They’re better at negotiating than other employees but not necessarily more skilled?

Or because:

• They’ve proven it’s reasonable?
• They’re a highly engaged employee?
• The raise fits within your compensation strategy?

Anita also advises that “compensation should be role-driven rather than employee-driven. Comp the role first, not the human, because if you compensate the human first, your compensation will never be objective.” There can be many steps to creating a compensation strategy that helps you compete for talent, but doing so will result in more equitable pay.

Put the Data into Action

Decide on Your Company’s Level of Salary Transparency

Your employees and candidates are most likely going to have questions about your compensation practices and policies on salary transparency. Since there is such a wide spectrum of salary transparency, you need to decide what that’s going to look like at your organization and clearly communicate it with your employees (and decide how much you’ll share with candidates, too).

Train Your Managers

Your managers are your front line of communication. When employees have questions about their compensation, they will most likely bring them up with managers. Your managers need to have a clear understanding of your company's compensation strategy in order to become effective ambassadors of the value you’re offering your employees.

Total Compensation

Salary is clearly incredibly important to employees, but as we’ve touched on earlier with total compensation, salary isn’t the whole picture. Benefits are also a huge priority for employees.

Some employees would even be willing to take a salary cut for certain benefits.

Given these stats, it’s no surprise that employees say the most important things when looking at potential employers are:

Work-Life Balance is Key for Many Employees.

What Opportunities are There to Increase Pay?

Benefits aren’t the only piece of total compensation. For those employees who aren’t happy with their salary, what are other opportunities for them to raise their pay beyond salary and are they aware of them?

73% of workers say their employer offers additional ways to increase their annual earnings:

But don’t get too caught up in extra compensation here and there—when it comes down to it, most employees just want a higher salary.

What Benefits Matter Most?

A significant number of employees reported that they would leave their current employer for a salary increase, but what entices employees to leave when the salary at a new job is roughly the same?

And a lot of employees even believe they deserve a pay increase if you aren’t offering certain benefits.

Put the Data into Action

Rethink Your Benefits Offerings

Have you recently reviewed your benefits package to make sure it’s keeping up with the times? Do you review benefits with employees to make sure they know what you offer? You can also gather feedback from your employees to make sure you’re offering what they’re looking for, so you can provide the total salary, benefits, and perks package that will keep them happy.

Make Benefits Discussions Part of the Hiring Process

More than one-third of employees say they didn’t know anything about their current company’s benefits until onboarding.

25% of employees would never have taken their current job if they knew what the benefits package was.

While benefits may not be negotiable the same way salary is, they’re a major piece of your employees’ total compensation. Make sure your recruiters and hiring managers are aware of the benefits you offer and that they are communicating what those benefits are, whether the candidate is comfortable asking or not. You don’t want to disappoint an employee on day one when they find out you don’t offer a benefit they were counting on.

Extraordinary employee experiences start with day one and continue throughout the employee lifecycle, and compensation plays a major role. As you refine your compensation plan and pay attention to how employees are feeling and the feedback they give, you’ll be able to better retain employees and improve employee engagement.

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Methodology:

BambooHR conducted this research using an online survey prepared by Method Research and distributed by Cint among n=1,000 adults (age 18+) in the United States who are full-time salaried employees. The sample was equally split between gender, with a spread of age groups and geographies represented, and readable race groups. Data was collected from June 21 to June 28, 2022.