Some Companies Are Shifting Salaried Workers to Performance-Based Pay
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Here's your Money Briefing for Wednesday, October 2nd. I'm J.R. Whelan for The Wall Street Journal. For many salaried employees, their pay is all but guaranteed. They get the same amount in their paycheck every two weeks. But many companies are changing up that formula and building incentive performance-based pay into workers' compensation.
A big reason why companies are doing this with more jobs is over the last several years, payroll costs have really gone up. Wages were generally flat or rising only a little bit for the better part of a decade. And then with the pandemic, they really did jump up. And so companies are being more mindful, certainly, of those costs.
How is this change going over with workers? We'll talk to WSJ Careers and Workplace Deputy Bureau Chief Vanessa Furmans after the break.
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What change are companies making from salaried pay to performance-based compensation?
Some companies are making a part of salaried workers' pay contingent on completing certain goals. Wall Street Journal editor Vanessa Furmans joins me. Vanessa, what type of workers are we talking about here?
Well, where you're seeing this mostly is around roles that are close to the sales process. Roles like sales engineers, people who help actually put together the presentations and the pitches for sales meetings. But also a big part of this is customer success managers or after sales support to better ensure companies or clients are renewing with those companies. But we're also seeing some companies are doing this with a broader array of roles. Everyone from accountants to procurement officers to HR executives.
So this is a lot more than just salespeople where this type of pay plan is more traditional.
That's right. Yes. Outside the white-collar workforce, people who are waiters work for tips. So a lot of professions out there, this is not something new for. But you do see more companies in general when it comes to white-collar workers building in shorter-term incentives that are tied to some performance metrics. And the idea is to keep workers engaged in their jobs and aligned with the company's broader business purposes.
How does this work? How much of a worker's pay would be based on incentives?
Well, it really depends. For instance, a company I spoke with, WalkMe, they have most of their workforce on this kind of quarterly incentive basis. plan, and the percentage that is the bonus or the variable part of their pay really depends on how close they are to, say, the customer revenue generation. So it could range anywhere from 8% to, well, for top executives, quite high percentage.
The companies that are doing this, are they overhauling the way they pay their employees, or are they changing some roles over to the incentive-based pay plan?
I wouldn't say it's a blanket overhaul, except in WalkMe's situation, they've been doing this pretty much since the company started. They really wanted to have workers be very focused in their day-to-day jobs in furthering the company's strategic objectives. So they built a pay system this way. For other companies, it's really transitioning specific teams onto these kind of roles here and there.
Employees are used to getting a regular salary for a 40-hour work week.
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