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.
In June 2022, inflation in the United States rose to 9.1%, its highest level in over four decades. And with inflation so high, this can lead to salary deflation—meaning employee compensation isn’t keeping up with inflation.
In fact, more than 1 in 3 (36%) haven't received a salary increase during the past 12 months.
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.
Salary increases within the past 12 months:
Men 66% | Women 62%
Average reported salary increase of those who received a salary increase in the past 12 months:
Men average 6.39% | Women average 5.24%
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.
Nearly a quarter (23%) of employees describe negative emotions regarding their financial compensation at work.
- 13% feel frustrated
- 9% feel unhappy
- 7% feel resentful
Echoing our previous findings about women getting fewer and smaller raises, women are unsurprisingly feeling more frustration than men.
16% of women feel frustrated about their current financial compensation from their primary job, compared to 11% of men.
Younger workers are also far more likely to feel the negative effects of compensation dissatisfaction.
Percent who say compensation is directly associated with mental health:
- Millennials 54%
- Gen Z 44%
- Gen X 27%
- Boomers 19%
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.
But how much of a salary increase does it actually take for them to pack up their desk?
Among those who said they would consider leaving their job for a salary increase, it would take, on average, a 16.1% increase for them to consider leaving their current job.
And for employees who do decide to jump ship to a new company, their odds of getting that salary increase are pretty high.
Over half (53%) of employees who’ve moved to a new company in the last two years received a salary bump in doing so with an average increase of 27.4%.
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.
51% of employees say they’d stay with a company or job they dislike if the salary is high.
44% of employees say they’d like to change jobs but their salary is secure, so they’re staying put.
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 is a sizzling hot, buzzword, but what does it actually mean?
Your company tells employees what to expect on their paycheck.
Your company shares how they use market data to determine pay.
Your company has a compensation plan and shares pay ranges with individual employees.
Your company shares their compensation plan with employees to explain why you pay what you do.
All employee pay information and ranges are available to employees.
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.
How do employees prepare for compensation conversations?
- Researching similar roles online (32%)
- Basing their desired compensation on past job history (30%)
- Asking other people in their industry about their compensation (28%)
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.
96% of employees have methods they use to determine their own value as an employee—top methods include:
- Personal skills they bring to an organization (62%)
- Personal knowledge they bring to an organization (55%)
- Performance review feedback (53%)
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.
But it is important to have conversations with your employees about their salary, so they understand their total compensation. And how often should you have these conversations?
Salaried employees have compensation reviews, on average, every 8 months and 16 days— with over a third (38%) saying they have compensation reviews annually.
Anita Grantham, Head of HR at BambooHR, advises getting on a cycle “where compensation conversations happen once or twice a year.” She also advises that leaders “be first to the conversation about compensation.” But this contrasts with what almost half of employees think.
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.
Of above-average salary boosters who prepared, they said the most impactful preparations were:
- Talking with a mentor, career coach, or direct manager (53%)
- Researching similar roles online (53%)
- Asking other people in their industry about their compensation (51%)
- Basing desired compensation on past job history (44%)
- Discussing compensation with coworkers (42%)
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?
- 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.
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.
- 41% of employees would be willing to take a salary cut for health insurance benefits, with 7.8% being the average among those willing.
- 38% of employees would be willing to take a salary cut for paid time off benefits, with 7.6% being the average among those willing.
- 37% of employees would be willing to take a salary cut for flexible work locations and/or hours, at 7.6% cut on average of those willing.
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.
Salaried workers in the U.S. say flexible work hours and location are nearly as important when considering a job offer as dental and vision benefits.
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:
- 47% cite the potential for an end-of-year bonus
- 27% say appreciation gift cards
- 23% say profit sharing
- 22% say spot bonus
- 16% say equity
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.
- 71% of employees say that working extra hours warrants an increase in compensation.
- Nearly half (45%) of employees say that employers not providing essential benefits warrants an increase in compensation.
- Nearly one-third (32%) of employees say that requirements to be in the office warrants an increase in compensation.
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.
Become the place people want to join and stay.
BambooHR gives you the right tools to invest in every aspect of your employee experience.
Understand at a glance how your employees perceive the value of pay, benefits, and perks at your company.
Dig deeper to discover how compensation is impacting employee sentiment or motivation.
Fine-tune your offers to improve acceptance rates and strategically grow your business.
Uncover critical insights to inform your compensation strategy.
Track enrollment and understand how employees actually use their benefits.
Eliminate double entry and keep paydays accurate.
"BambooHR really helps me as an HR leader focus on connecting my employees, managers, and new hires. It does it seamlessly and as part of the product."
Johnny Johnson | HR Director | Medical Clinic of Houston, LLP
Hungry for More? Keep Reading
How a Compensation Strategy Helps You Compete for Talent
In addition to painting a clear picture of total compensation, compensation plans help HR navigate hot topics today’s candidates are asking about, like salary transparency and four-day workweeks.
How HR Professionals Can Manage Employee Benefits in a Post-Pandemic World
Take a look at some tools and strategies to help you identify, measure, and prioritize the benefit expectations of your current and future workforce.
How Compensation Impacts Retention: HR Unplugged Episode 3
In the third episode of her ongoing series, Anita Grantham shares how you can create a compensation plan that helps you keep top talent.
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.