Dive Brief:
- A recent survey on compensation found that even with an improving economy and a more robust job market, salary increase budgets for U.S. companies continue to show little signs of growth.
- According to Mercer’s 2015/2016 US Compensation Planning Survey, the 25th year the firm has done this survey, the average salary increase budget is expected to be 2.9% in 2016, up slightly from the average increase budget of 2.8% in 2015.
- However, salary increases for top-performing employees – 7% of the workforce – will be almost twice that of average performers as companies continue to differentiate salary increases based on performance, Mercer reports.
Dive Insight:
Mary Ann Sardone, partner in Mercer’s Talent practice and regional leader of the firm’s Rewards practice, said that during the recession employers’ focus shifted from fixed pay to variable pay to control costs. But as they have become more comfortable holding the line on fixed cost increases with respect to salary budgets, now there is a steady rise in the use of short-term incentives as a way to reward performance to supplement rather low pay raises.
Yet, pay advancement is evident in other "adjustments." For example, Mercer’s survey shows that promotional increases as a percent of base pay are rising, a sign that employers are looking internally at talent and career progression to retain key employees, rather than risk losing them to competitors. These increases, which average approximately 8% of pay, vary by job category and consistently rose for all groups. For executives, promotional increases rose to 9.1% of base salary (compared to 8.4% last year) and for professionals rose to 7.7% (compared to 6.9% last year).
In addition, 41% of organizations are now budgeting promotional increases separately from merit increases, up from just 36% in 2014.
