ERC's research conducted for the NorthCoast 99 program consistently shows a pattern in how great workplaces pay their top performers, specifically in terms of awarding salary and wage increases. These great workplaces tend to...
- Offer salary and wage increases well above the market average for top and average performers
- Provide significantly higher salary and wage increases to top performers
- Provide significantly lower salary and wage increases to bottom performers
Pay Increases Based on Performance
Last year, NorthCoast 99 winners paid an average salary or wage increase of 6.5% to top performers. Increases for top performers were notably higher among technology and professional services firms, which boasted average increases between 8-10%. Meanwhile, average increases awarded to top performers in the health and human services and non-profit industries hovered around 3-4%. Top performers in the manufacturing sector earned 5.2% increases, on average.
Differentiations in pay increases showed variation with organizational size. The smaller the organization (in number of employees), the higher the pay increase awarded to each performance level (top, average, and bottom); whereas the larger the organization, the lower the pay increase awarded.
Average pay increases in 2011 among NorthCoast 99 winners
Top performers: 6.5%
Average performers: 3.6%
Bottom performers: 1.2%
All employees: 3.9%
Pay Increase Differentiation Based on Performance
Similarly, last year, NorthCoast 99 winners differentiated pay increases significantly between performance levels. On average, top performers received increases of 5% more than bottom performers and nearly 3% more than average performers. Meanwhile, average performers received increases of around 2% more than bottom performers.
Pay increases observed among the NorthCoast 99 winners tended to be most highly differentiated at technology and professional services firms, moderately differentiated at manufacturers and other for-profit businesses, and less differentiated in the health and human services and non-profit industries.
Interestingly, differentiations in pay increase differentials also correlated with organizational size. The smaller the organization, the higher the differentials in pay increases among NorthCoast 99 winners.
Average pay increase differentials between performance levels in 2011 among NorthCoast 99 winners
Top performer - Bottom performer: 5.1%
Top performer - Average performer: 2.8%
Average performer - Bottom performer: 2.2%
While findings are only presented for 2011, these trends have been consistent across the past several years, suggesting that they have become best practices in compensating top performers among NorthCoast 99 winners, who excel at attracting, retaining, and engaging top talent. In fact, studies such as this have shown that more differentiation of compensation based on performance leads to better retention of top performers and higher turnover of poor performers. These studies further validate the importance of differentiating pay increases.
NorthCoast 99 winners have implemented pay increase practices that lead the market, differentiate compensation based on performance, and reward their top performers. These practices enable them them clearly stand out as employers of choice in the region and give them an edge in retaining top talent and motivating top performance.