An Overhaul in Pay Plans

A slew of firms worldwide are rejiggering salaries for various roles because they’re paying too much (or too little) compared to local competitors. Other companies are changing what they pay so that existing employees receive equal compensation based on their roles. Some firms are even making adjustments based on whether employees work remotely or in the office.

Whatever the reason, there’s a good chance your organization is in the midst of a big compensation-plan update that could have substantial effects on paychecks in the near future.  Half of companies have made significant adjustments to their compensation plans recently, and 60% expect to do so (or to continue to make changes) over the next two years, according to the latest Korn Ferry Global Total Rewards Pulse Survey.

The last time so many companies sought to make significant changes to their pay plans was in 2020, right at the beginning of the pandemic, says Todd McGovern, global leader in Korn Ferry’s Total Rewards practice. This time, it’s not a health scare pushing firms to make changes, but rather a push from governments (and, to a lesser extent, job candidates and employees) for more salary transparency. But before they disclose publicly what jobs pay, companies have to determine internally whether what they are offering is competitive with the current market. “That’s why we’re seeing the big movement now,” McGovern says. Indeed, 62% of firms said “external competitiveness of rewards” was a big focus of their pay changes, while 60% cited “internal equity and fairness.”

Pay transparency, in a variety of forms, has been getting a lot of attention, with some new laws or rules requiring organizations to disclose information about pay practices that had previously been closely held. In the United States, several state and local governments are requiring firms to disclose salary ranges in job-hiring postings, while some cities and states have banned employers from asking prospective candidates about their salary history (in an effort to get more consistency in pay offers across gender, race, and ethnic groups). The European Union has new rules on pay transparency that go into effect in 2026. Globally, these rules have a lot of public support, particularly from younger workers who, unlike the generations before them, have no qualms sharing pay information with their peers.

In all, Korn Ferry surveyed more than 7,000 pay professionals and HR experts across 152 countries. One key finding: While many companies are making changes to what roles pay based on equity, transparency, and even relevance to the firm, far fewer intend to adjust salary according to whether or not a role is based full-time at an office.

Most companies, 65%, do not differentiate salary ranges based on location, or, when they do, remote workers have the same salary range as their in-office peers. Some companies have mulled discounting the pay of remote employees, the thought being that commuting imposes higher costs, in both time and money, on in-office workers. But so far, few firms have been willing to take that on, McGovern says. Many fear that significant pay changes based on location could breed resentment.

As part of their pay overhaul, 42% of firms said they are rethinking how they communicate changes in compensation policies to their own employees, including managers. An earlier Korn Ferry survey found that employees at 61% of organizations do not understand their firm’s reward strategy. Often pay programs are shrouded in mystery, says Tom McMullen, a leader in Korn Ferry’s North America Total Rewards group. “Communication becomes increasingly critical as reward strategies change,” he says. There’s a risk, when companies don’t communicate well, that employees won’t understand or appreciate their current rewards or future opportunities.

Learn more about Korn Ferry’s Pay Transparency capabilities.

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