Most of the time, corporations budget what managers can spend on salaries for their team. These managers are often left making hard decisions as to who gets paid what. At least that was the way things were when only a few managers tended to break the salary budget.
But fierce competition for key players is changing all that. Indeed, two-fifths of UK hiring managers spend more on salaries than their compensation budget nominally allows, new research shows. In other words, these hiring managers break the corporate-budget guidelines. When 40% of hiring managers are prepared to exceed budgets, rigid salary controls risk becoming disconnected from talent economics, says Tom McMullen, a senior client partner based in Korn Ferry’s Chicago office. “The salary budget then becomes a speed limit everyone ignores,” he says.
It’s happening because some specialist workers demand high remuneration. These specialists are often experts in AI and other tech, as well as lawyers and mergers-and-acquisitions professionals. “The hiring managers have a lot of pressure to get the right types of skilled workers,” says Ian Milton, a Korn Ferry senior client partner in workforce reward for UK and Ireland. Some managers think that if you don’t pay talent enough, the company will fall behind; they want to fix this ahead of time. “The tricky bit is the assumption of the uptick in productivity,” he says.
