Benefits, HR News & Trends

Another Reminder That You’ll Only Be Giving 3% Raises Next Year

Salary increase1

Summer is the time for salary surveys, and here’s another one to cement what we probably already know.

According to Mercer, the global HR consultant, “salary budget increases for U.S. employees are improving,” with the average raise in base pay expected to increase 2.9 percent next year.

If you are scratching your head wondering how a 2.9 percent salary bump for 2013 is an increase, you’re not alone. That’s because Mercer’s numbers show that organizations only bumped salaries by 2.7 percent in 2011 and 2012, not the average 3 percent that you’ve seen elsewhere.

Most organization’s planning salary increases

Still, Mercer’s projected salary numbers for next year, taken from their 2012/2013 U.S. Compensation Planning Survey, mirror the forecasts we’ve seen from Hay Group and WorldatWork that predicted modest 3 percent increases (again) in 2013. The wrinkle in the Mercer survey is some of the other small insights, including:

  • More than 95 percent of organizations are planning to award base salary increases next year;
  • Additionally, 2013 is the third consecutive year showing a decline in the use of salary freezes and reductions;
  • Companies are still rewarding top-performers with greater than average increases, widening the gap between these employees and those in the lower-performing categories. Mercer’s survey shows that  the highest-performing employees (8 percent of the workforce) received average base pay increases of 4.4 percent in 2012 compared to 2.4percent for average performers (54 percent of the workforce) and 0.1 percent hikes for the weakest performers (2 percent of the workforce).

“Differentiating salary increases based on performance is the norm and remains an effective way for employers to wisely spend their reward dollars on the most impactful employees,” said Mike Burniston, Leader of Mercer’s Human Capital consulting business for the U.S. and Canada regions, in a press release about the survey.

He added: “Since many companies are still working with limited dollars, taking a holistic approach to total rewards using internal workforce analytics as well as external market data to set appropriate programs for each employee segment is the smart approach.”

Top 3 influences on compensation

According to Mercer’s survey, the top three factors influencing compensation decisions are pointedly pragmatic. They are:

  • The need to retain talent (reported by 74 percent of respondents);
  • The need to strengthen the performance-based culture and to deliver pay for performance (66 percent); and,
  • The need to acquire talent (57 percent).

Mercer’s most recent survey on compensation trends, which has been conducted annually for more than 20 years, includes responses from more than 1,500 mid-size and large employers across the U.S. and reflects pay practices for more than 12 million workers. The survey results are captured for five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service.

Although there is no great, earth-shaking news coming from the Mercer survey, it does make one thing clear: employees shouldn’t expect any big jump in their compensation next year. Yes, 2013 will seem a lot like 2012, with modest (some would say minimal) 3 percent salary increases for all but the most high performing employees.

In other words, get ready for more of what you have been experiencing in 2012. That may not be the greatest news you’ve ever heard. but it does help give you the information to start planning for another year that will probably look a lot like this one.

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.