Only 1 in 4 employers clearly explain their reward program strategy, report finds

Only a quarter of organizations explain the purpose and design of their reward programs clearly, which could affect employee trust and engagement, according to a recent report from Korn Ferry.

While 24% of employers provide details about the “what, why and how” of their reward program strategy, 76% said they don’t communicate about it all or only share high-level philosophy statements.

“With pay transparency regulations accelerating globally, organizations must be prepared to articulate the why behind their reward structures, career frameworks and pay decisions — something only a quarter of companies do well today,” according to the report.

In a survey of nearly 8,000 companies, 65% said they see pay transparency as a key driver of change in the next one to two years.

Few employers feel prepared for pay transparency laws, with many still “getting ready,” according to an Aon report. Most companies remain focused on compliance rather than using pay transparency as a strategic priority, the report found.

In addition, skills-based and performance-based pay models are expected to gain traction during the next 3-5 years, according to the Korn Ferry report. 

Employee engagement is also important, the report found. Although employees are typically considered to be the most important stakeholder of rewards programs, only half of companies incorporate employee input when shaping reward strategy. Among those who do, the most common methods include engagement surveys and informal input from managers.

Although artificial intelligence tools offer potential for transparency and pay equity, the report found, HR readiness still seems limited and employees remain cautious.

“These findings present a wake-up call for organizations and HR leaders relative to fit-for-purpose reward strategies,” according to the report. “Today’s reported common practices in reward strategy are not necessarily best practice for tomorrow’s challenges.”

Most U.S. employers expect to maintain steady pay plans in 2026, pointing to a disconnect with organizational priorities such as talent development and market competitiveness, according to a Mercer survey. Most respondents plan to spread increases equally rather than direct more funds to high-demand skills.