Dive Brief:
- Mercer released its 2019/2020 U.S. Compensation Planning Survey which revealed that despite the tight talent market, the 1,300 businesses it studied haven't plumped up their salary increase budgets. Their data found on average that 2019 merit increase budgets and 2020 increase projections were consistent with the past five years — at 2.9% and 3.0%, respectively.
- "The average total increase budget in 2019 was 3.5% and the average projected total increase budget in 2020 is 3.6%," Mercer said in a statement. This slight increase could be due to the need for organizations to account for "market or pay equity adjustments" in total increase budgets, the company explained.
- The vast majority of organizations determine base salary adjustments based on performance, according to Mercer. In fact, more companies do so now (90%) than in 2018 (88%). Year-over-year promotional increases rose for all employee groups surveyed, Mercer said. Average promotional salary increases, as a percent of base, came in at 9.3%.
Dive Insight:
Workers want to see their bank accounts expand more significantly on payday, according to a 2018 Indeed survey. For most workers to be satisfied with their pay, they would need a $6,000 raise. But there are more ways than a raise to give workers a pay boost. Both Willis Towers Watson and insurance broker Gallagher independently concuded that companies plan to keep wage increases at or below the current 3% average but offer personalized benefits, bonuses and other forms of compensation, for example.
Merit-based raises can prove a powerful incentive, but many workers report such incentives contribute to anxiety on the job. Researchers at Washington University in St. Louis and Aarhus University in Denmark estimated that 70% of the global workforce receives a form of performance-based pay, whether in the form of commissions, bonuses, profit sharing, piece rates or goal achievements. The study examined 300,000 workers in Denmark whose companies used pay-for-performance models, and it found a 5.4% increased likelihood that employees would use medication to treat anxiety and depression in those environments.
