Benefits, HR News & Trends

Salary Increases 2012: If You Liked This Year’s 3%, You’ll Love Next Year’s 3%

Salary increase1

In case you weren’t sure about the pace of America’s economic recovery, here’s another sign: average salary increases “in each employee category inched upward,” according to the 38th annual WorldatWork Salary Budget Survey.

Or to put it another way, 2012 pay increases are projected to be right around 3 percent, as they were this year.

According to WorldatWork, “more than 2,200 U.S. compensation and HR professionals responded to the survey, and though the 2011 actual numbers didn’t quite make what they projected in last year’s survey, the numbers in each employee category inched upward and are projected to continue in that trend next year.”

Projected increases for 2012

Here’s how the projected 2012 salary increases break down in each category:

  • Nonexempt Hourly Nonunion – 2.9 percent (mean); 3.0 percent (median);
  • Nonexempt Salaried – 2.9 percent (mean); 3.0 percent (median);
  • Exempt Salaried- 2.9 percent (mean); 3.0 percent (median);
  • Officers/Executives - 2.9 percent (mean); 3.0 percent (median);

This is up slightly from 2011′s actual salary increase figures which ended up at 2.8 percent (mean) and 3.0 percent (median) in every category except nonexempt hourly nonunion, where the mean increase was 2.7 percent.

Participating organizations reported awarding at least some base salary increase to 88 percent of all employees in 2011 on average, compared to 86 percent of all employees in 2010, 80 percent in 2009 (an all-time low), and 91 percent from 2006 to 2008.

Depending on performance ratings, this year low performers can expect an average pay increase of 0.7 percent, middle performers 2.7 percent and high performers 4.0 percent.

Only 3 percent of employers are planning across-the-board salary freezes compared to 43 percent in 2009 and 10 percent in 2010. The actual increase in salary budgets was 2.8 percent in 2011 and is projected to rise again by 2.9 percent in 2012, according to the survey.

What this all means, simply, is that as long as the economic recovery continues to be slow and uncertain, employers are going to continue to be very conservative when it comes to increasing salaries and giving raises.

“Anything is better than nothing”

And in case you aren’t getting the message, here’s how WorldatWork (a not-for-profit organization focused on global human resources issues including compensation, benefits, work-life and integrated total rewards), put it in their press release about the annual Salary Budget Survey:

Gone may be the days of double-digit percentage increases to salary budgets, but anything is better than nothing. In this year’s survey, fewer organizations responded that they weren’t budgeting any increase. In a non-recession year, survey analysts expect to see only about 2-3 percent of respondents answering that they will not budget for salary increases at all. In 2009, a staggering 28-43 percent of respondents answered that they would give a 0 percent increase. This year, as another indication of the recovery, most organizations are planning a salary budget increase, with only 7-10 percent of the respondents citing a freeze.”

I don’t know about you, but “anything is better than nothing” are not words that give a lot of confidence in where our economic recovery is heading.

“More organizations are getting back into the salary budget increase game,” said Alison Avalos, CCP, research manager for WorldatWork, “after having sat out for one to two years. When companies reported zeros for salary budget increases in 2009, it brought the average down significantly. The recovery means that in order for organizations to stay competitive, they will need to consider at least moderate merit budgets and continue to utilize variable pay and other aspects of compensation and rewards.”

And Kerry Chou, a compensation practice leader at WorldatWork, was even more blunt.

“The situation where significant numbers of employees are not receiving any pay increases appears to be over for now,” Chou said “However a quick return to pre-2008 budget levels seems unlikely given the modest rate at which budgets are recovering.”

Other survey findings

Avalos also noted that companies who previously reported zero salary increases did not report numbers that would “make up” for the past. “Even with a recession in the rear-view mirror, organizations are not planning for extremely high salary increases as they recover,” she said. There were very few outlier responses, with most budgeting 3.0 percent for pay increases in 2011.

Here are a few of the other top-level findings from the WorldatWork Salary Budget Survey:

  • Total salary budget increases remain consistent across states and metropolitan areas.
  • Pay for performance continues to be emphasized. With small salary budget increases, professionals report that the bulk of the increase will go to high performers, and very little or no increase will go to low performers.
  • The usage of variable pay programs remains steady.

The Salary Budget Survey was conducted in April 2011, and “survey respondents are WorldatWork members employed in the HR, compensation and benefits departments of mostly large U.S. companies.”

The full report from WorldatWork will be available in August, and unless you are a compensation professional, this early look will probably tell you all that you need to know. Salary increases will remain tight through 2012, and unless there is some huge economic surge out there somewhere, will probably continue to be tight for the forseeable future.

John Hollon is Vice President for Editorial of TLNT.com, and the former Editor of Workforce Management magazine and workforce.com. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices. Contact him at john@tlnt.com, and follow him on Twitter at http://twitter.com/johnhollon.
  • Jghrstar

    We are in the process of planning our 2013 budget do you have any information about 2013?  This article is perfect.

    • John Hollon

      Given that this article forecasting 2012 salary increases was written in early July 2011, I think that July is about as early as similar 2013 salary increases will be available. I’ll have something about it when the surveys and forecasts come in, but it is just too early in mid-March to have a good sense of what the increases will be more than 8 months away.

  • Michael

    I survey compensation in multiple industries. 3% is the projected budgeted wage increase for 2012, as it was for 2011. However, less than 1% was actually awarded in 2011. For 2012, I predict actual increases will be around 1.75%.