It is common for American companies to promote from within the organization, and women employees tend to be promoted to management positions earlier than their male counterparts—but face a glass ceiling at higher management levels—the results of a recently published study by ADP Research Institute indicated.

The “2019 State of the Workforce Report: Pay, Promotions and Retention,” was released on April 16. The study provides organizational benchmarks derived from the aggregated actual HR and payroll data for January 2018 of more than 13 million U.S. workers employed by around 30,000 companies across eight industry sectors that have at least 50 employees. The aim of the report is to help employers gain a better understanding of the hierarchical structure of organizations, pay levels, employee retention, and the connection between pay and promotions.

The study found that, overall, employers promoted 8.9% of their employees annually, and those promoted employees received an average wage increase of 17.4%. More generally, the analysis showed that of the workers studied, 84% had non-supervisory roles, while 16% had management or professional roles; and that the average length of time an employee worked for an employer before receiving a first manager promotion was 6.9 years.

The research further indicated that companies were more likely to promote internal employees for management positions, and that the percentage of internal hires increased at higher levels in the organization: over a one-year period, 17.2% of managers were promoted, while 15.6% were new hires; and at the highest management level, 21.5% of managers were internally promoted, and only 12.5% were new hires.

In addition, the study found that women were promoted slightly earlier than men, they tended to hit a glass ceiling at the fourth level of management. The results showed that while the average number of years to first manager promotion was 6.6 years for women and 7.3 years for men, there was a steep decrease in the likelihood of being promoted for women at the third level of management, and this decline became more pronounced at each level of advancement, the overall promotion rate was found to be 8.4% among women, compared to 9.3% among men.

The analysis also showed that the average hourly wage across all workers was $29.03, with managers earning an average of $47, and non-managers earning an average of $25. The average hourly wage for women was found to be $25 and hour, or 79% of the $32 average hourly wage for men. Researchers observed that the ratio of women’s to men’s pay reached a high of 82% at the fourth level of management, but then declined to 77% at the top management levels.

Moreover, the study found that the total monthly turnover rate, defined as the percentage of employees who separate from their employer, was 3.2%, with 1.8% leaving for voluntary reasons and 1.4% leaving for involuntary reasons. The turnover rate was shown to be much higher among employees who had been with the company for less than four years (5.1%) than among employees who had a tenure of four to six years (1.5%). Not surprisingly, the turnover rate was found to be lowest among workers with a tenure of more than 12 years (0.8%).

Broken down by industry sector, the analysis showed that the monthly turnover rates were highest in the trade/ transportation/utilities sector, which includes retail (5%); followed by leisure & hospitality (4.4%). Much lower turnover rates were observed in manufacturing (2.1%), finance/insurance (2.2%), and education/health (2.4%).


From Benefit Trends Newsletter, Volume 62, Issue 6

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2019 Liberty Publishing, Inc. All rights reserved.