Pay programs and practices at many organizations are evolving. A WorldatWork study, "Compensation Programs and Practices 2012," compared pay practices from 2003 onward and found that even among small organizations, formalized compensation programs that include written philosophies, salary structures and active performance management are prevalent.

"For a vast majority of organizations, employee compensation is one of the largest operational expenses and the most difficult to manage," said Kerry Chou , a Certified Compensation Professional (CCP) and practice leader at WorldatWork, said in a press release. "We expect to see more compensation professionals applying discipline and rigor to the design and management of pay programs to ensure business objectives are met."

Key study findings include:

• Compensation philosophy. Compared to 2 years ago, more organizations today have a formal, written compensation philosophy that ensures a compensation program supports an organization's culture (67 percent in 2012, up from 61 percent in 2010).
• Salary structure design and administration. Eighty-five percent of organizations have a formal salary structure. While there are several types of pay structures, salary grade structures are the most prevalent among 86 percent of organizations. Broadbands, popular in the 1980s and 1990s, have dropped and are now used by only 8 percent of respondents.
• Pay for performance. Virtually all organizations (99 percent) assess employee performance. A majority (71 percent) have a formal employee performance rating system. Individual performance against management objectives or personal objectives has gained substantially and is now used by three out of five organizations. This trend suggests that performance goals and objectives are being set in a deliberate and employee-specific manner, as opposed to using generic performance objectives that may be found on boilerplate position descriptions. Eighty-five percent of multinational respondents indicate that their performance management program is applied universally worldwide.
• Pay communications. Nearly 80 percent of surveyed companies report they communicate pay to employees, using brief written or verbal communications, at least once a year. Nearly eight in 10 respondents indicate that employees have individual discussions with their supervisor regarding pay programs.
• Job evaluation methods. Compensation managers use several methods to determine the relative value of jobs: market pricing, ranking, classification and point factor. Market pricing is predominant: nine out of ten organizations use market pricing to some degree; 50 percent use it exclusively. The point-factor approach, the most common method a few decades ago, is far behind at 20 percent.
• Variable pay. Variable pay continues to be used at most organizations, at 84 percent today compared to 80 percent in 2010.