Compensation Predictions and New Opportunities for 2022
This is the thirteenth year I have written a post during the last week of the year. I seldom make predictions for a new year because compensation generally evolves so slowly that any fundamental changes take several years to come to fruition.
As move forward in 2022, I am going to break that tradition and make a few predictions. We have a unique opportunity in front of us, and many compensation professionals will relish the challenge.
Base pay increases in many industries will be far higher than planned.
If you have planned a 4% budget for 2022 and use a lag, or lead/lag, strategy, please expect to lag from very early in the year. The market is unlikely to cool. Executives are being held to high standards when it comes to growth. Investors have put a ton of money into the market. All of these will factor into increases that will continue to outpace what has become the 3% norm for the past decade and beyond rapidly.Survey providers will feel the pressure to address the inaccuracy of LTI data in surveys.
This is especially true in private company data, but expect to see more demand for global granularity, award details like vesting and performance criteria, and better explanations of how values were determined. This is a weak point in compensation and companies are rightfully impatient to see better data.Survey providers will begin categorizing positions into “onsite,” “hybrid,” and “remote.” Survey data without this level of specificity is putting every competitive company at risk. Expect to see the first “pulse” or “spot” surveys on this topic before the end of Q3. Expect this to be a normal part of survey submissions before the end of 2022.
Expect to see more companies visibly break the Base/STI/LTI paradigm that has dominated compensation philosophies for 15 or 20 years. At some point, you cannot differentiate your offers with just a bit more base pay. Short-term incentives will likely become shorter to address the speed of changing pay. LTI programs are already changing. Leading-edge companies explored more new vesting schedules and LTI plan design elements in 2021 than in any year in recent memory. This information will become more well-known and inspire hordes of other companies to move away from the lock-step adherence to stock options with a 4-year vesting schedule or RSUs that are similarly designed. If the long-time programs worked as advertised, our ability to attract people would be higher, and our turnover would be lower. It’s time for a change.
I am sure we will see other changes, just like I am sure at least one of the above will prove to be completely wrong. 2022 is sure to be another interesting year. In 2020 we just did our best to react to a world that became almost instantly unfamiliar. In 2021 we weathered a push for hiring unlike any year in recent memory. In 2022, we will get our feet underneath us, gather up our balance and leap forward into a new approach to pay that may provide a foundation for the next ten years. There is no reason to wait.
The future is yours to create!
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Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, , “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.
