Recruiting

Understanding the Current State of the American Workforce

If you want to beat your competition at their own game, you need to understand what makes them tick. This advice goes for recruiting talent as well, but in order to beat your competition and recruit top talent, you need to understand the current state of the American workforce.

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The ADP Research Institute has released the 2019 State of the Workforce Report: Pay, Promotions and Retention. The study provides comprehensive, data-driven organizational benchmarks derived from the aggregated and anonymized actual HR and payroll data of U.S. workers. The inaugural report shares pay, promotion, and hierarchy insights, inclusive of all industries and firm sizes of at least 50 employees. The results are further examined by age, gender, firm size, and tenure.
The report uncovers key insights pertaining to business leaders and the HR community at large. It was designed to help employers gain a better understanding of the hierarchical structure of organizations, pay levels, how pay and promotions are connected, and how employers retain workers throughout their organizations.
“Employees are a firm’s greatest asset, and the data presented in the State of the Workforce report provides an opportunity for firms everywhere to improve organizational design, better serve their employees, and grow their business,” says Dr. Ahu Yildirmaz, co-head of the ADP Research Institute—in a press release announcing the findings. “When making key workforce decisions, it is critical for business leaders to know, for example, that the average number of direct reports per manager is 6.9 and the data shows that managers with more direct reports experience higher turnover.”

How Employers Handle Promotions

Many of the key findings from the inaugural study focus on promotional activities, a topic of great importance to younger employees focused on career opportunities. Overall, employers promote 8.9% of their employees annually and those employees received an average wage increase of 17.4%.
Interestingly, however, promotions within a team are associated with higher turnover among other team members. Dr. Yildirmaz notes that “While promotional opportunity may be perceived as a net positive, it can also have negative impact for team members who have been passed over.”
On the flipside, the probability for promotion exceeds 20% for employees as they reach higher levels of management within the organization.  Firms are more likely to promote internal employees for management positions, and the percentage of internal hires increases for higher levels in the organization.
“A void has existed in the market for human resources data, therefore employers often need to undertake complex organizational restructuring projects with limited insight,” said Matthew Levin, chief strategy officer of ADP.  “The State of Workforce report can help HR leaders lead the charge in organizational strategy by providing the reliable hierarchy, pay and promotion benchmarks they need to make informed decisions.”

Promotions and Pay by Gender

According to the ADP research, women are promoted earlier in their careers than men are, but women face a glass ceiling at the fourth level of management.
Additionally, the average number of years to first manager promotion for women is 6.6 years and 7.3 years for men. As women move up management levels, there is a steep decline at the third level of management; this decline becomes more pronounced at each level of advancement.
When it comes to pay, the average wage is $29.03 per hour, with women earning 79% of what men earn. ADP also found that managers are paid an average of $47 per hour, while nonmanagers earn $25 per hour.
When breaking down the pay data by gender, women earn $25 an hour, 79% of the $32 males earn per hour. The ratio of women pay to men reaches as high as 82% at the fourth level of management but drops to 77% at the top levels of the firm.
Firms are more likely to promote internally to management (17.2%) than make a new hire for management (15.6%). And at the highest level of management, 21.5% are internal promotions while just 12.5% are new hires.

More Direct Reports = Higher Employee Turnover

ADP found that the average number of direct reports per manager is 6.9. Furthermore, employees who have managers with more direct reports are more likely to leave the firm. For example, direct reports’ turnover for managers with 4 to 6 direct reports is 2.3%; direct reports’ turnover for managers with greater than 15 direct reports is 3.5%.
Breaking the data down by industry, leisure and hospitality (11.4 direct reports) and education and healthcare (8.5 direct reports) have the highest number of direct reports.
As the ADP research shows, if your management team has too many direct reports, you run the risk of losing lower level employees to the competition. Furthermore, if you aren’t offering competitive compensation or equal pay, obviously jobseekers are going to pass over your firm for one that does focus on these pay practices. For more information on the State of the Workforce data, including data which is broken down by industry, gender, and age, click here.