A new report by compensation software firm PayScale Inc. shows that most companies are relying more on benefits and perks than significant base-pay increases in 2019 to retain employees in an extremely tight job market.

Based on a survey of more than 7,000 employers of all sizes, the 2019 Compensation Best Practices Report: Will They Stay or Will They Go? reveals that although employers are very concerned about hanging on to their people, an uncertain economy is compelling HR managers and senior leaders to hold the line on compensation.

Instead, they're hoping to retain their employees by offering better training programs and benefits.

Key findings from the report include the following:

  • Concerns about keeping employees are increasing. More organizations (66%) in 2019 cited employee retention as a major concern when compared to responses from the previous year (59%).
  • Employers will keep the purse strings tight when it comes to compensation. Despite robust corporate profits and lower taxes for businesses, few companies report planning a significant pay raise for most of their workforce; nearly 70% of respondents project base-pay increases of 3% or less. (Wages increased about the same amount last year, according to findings from the 2019 Salary Guide recently released by Randstad US, which showed salaries across major industry sectors rose approximately 3% in 2018.)
  • Not all raises are created equal. More than 40% of employers gave base pay increases of 10% or more for some jobs at their organization. These substantial raises were typically for highly competitive jobs, such as IT positions, where attracting employees with the right skills is more difficult.
  • Companies will offer more benefits and perks in lieu of raises than in years' past. Fifty-nine percent of employers will invest more in training and development programs, 44% plan to allow remote work (up from 39% last year), and 37% will offer flex time. About one-third of companies will offer paid family leave in 2019, an increase when compared to the previous year. The prevalence of unlimited PTO has nearly doubled in recent years (9% of employers offered it in 2018 compared to just 5% in 2016).
  • Bonuses are on the rise—for some employees. While base-pay increases are tepid, many organizations (66%) are planning to use bonuses in 2019 to retain their top performers in competitive jobs. These bonuses are typically directly aligned with performance and broader company objectives.

When It Comes to Retention, Base-Pay Is Key

"Our research shows the most successful companies understand the importance of building a positive pay brand at their organization by addressing pay equity, fostering more transparent pay practices, and ensuring managers are empowered to have meaningful conversations about compensation," said PayScale's Senior Vice President Tim Low in a statement announcing the report's release.

"We talk to our customers about the value of a positive pay brand because we've seen it drive better business outcomes.

"In order to entice employees to stay, however, companies should make sure they're getting base compensation right first, so their employees feel good about their deal. Only then should employers turn their attention to bolstering the perks associated with the position."


Don't miss Essential Skills for Supervisors & Managers, April 12, 2019, from 8 a.m. to 3:15 p.m. in Wallingford.