- As if employers aren't having a tough enough time retaining talent in today's improving job market, a new survey of almost 1,000 U.S. companies found that pay raises will likely remain stagnant at 3% in 2017.
- The survey, from Willis Towers Watson, did find that employers hoping to keep their best people and strengthen their pay-for-performance strategy will continue to reward top performers with significantly larger pay hikes.
- The survey also found that virtually all respondents (98%) are planning to give employees raises next year, with salaries for exempt (i.e., professional) non-management employees to increase 3.0%, the same increment planned for management and nonexempt employees. Finally, executive raises will be a tad higher at 3.1% in 2017, though that's a smaller than the average increase executives received in 2015 and 2016.
According to the survey, exempt employees who received the highest performance ratings received an average salary increase of 4.6% in 2016, compared to the 2.6% increase given to employees receiving an average rating. With inflation rates staying low and pressure on profit margins high, it's a tough environment for employers to do much more with their compensation budgets, according to Laura Sejen, managing director, Rewards, at Willis Towers Watson.
She explains that a number of employers are even starting to question how salary budgets are spent and whether their conventional approaches to salary planning are delivering an acceptable ROI. Some employers are challenging the use of the annual cycle, while others are changing the criteria for determining the amount of individual increases, she said.
Considering the survey results, it appears that incentives tied to individual and company performance are on the rise. Unlike salaries, incentives are variable and give employers greater discretion in rewarding employees for performing at high levels. The upshot is with the competitive job market favoring both active and passive job seekers, employers should revisit their total rewards strategies and programs to ensure their top employees don’t take their skills elsewhere.