New Year, Old Message: 2014 Salary Increases Will Be Around 3% — Again

Waiting for that big raise to finally come through now that the economy seems to be slowly, gradually improving?

Well, you might need to bit a little longer.

According to the annual WorldatWork 2013-2014 Salary Budget Survey, year-over-year salary budgets are projected to hit 3.1 percent next year, up from the actual 2.9 percent increase that we are seeing in 2013.

As meager as 3.1 percent sounds, it is a tick better than the 3 percent that was projected for this year, and the 3 percent that was also forecast for the year before (the actual increases came in a tad below those numbers).

How salary increases compare globally

And here’s the “good” news, if you can call it that: year-over-year salary budgets declined in every country surveyed except the U.S., according to the WorldatWork study.

“The gradual increases in the U.S. are good short-term news, every other industrialized country isn’t great news for the global economy, on which U.S. economic growth is so dependent,” explained Kerry Chou, CCP, senior compensation practice leader for WorldatWork, in a press release about the survey.

Here is the country-by-country breakdown from the survey:

                           Actual 2012   Actual 2013   Projected 2014

India                          11.2%             10.5%                 10.9%

China                           9.1%               8.2%                   8.5%

Brazil                           7.7%              6.8%                   7.2%

Singapore                    4.3%              4.2%                   4.3%

Australia                       4.0%              3.7%                  3.8%

UK                                 3.1%              2.9%                  3.0%

Netherlands                  3.1%              2.8%                  2.8%

Canada                         3.0%             2.9%                   3.1%

France                           3.0%            2.7%                   2.8%

Germany                       3.0%            2.9%                   3.0%

United States                 2.8%            2.9%                   3.0%

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Spain                             2.8%             2.4%                   2.5%

Japan                             2.6%            2.4%                    2.5%

“Salary budgets … reflect … the national economy”

Two observations about these numbers:

  1. They show how truly mediocre (and that’s the best word I can use here) salary increases have been in most industrialized nations over the last few years. 
  2. The large salary budget jumps in India and China may appear to be large, but you need to know the context. As WorldatWork notes, in India, “the average wage increase this year is offset by annual inflation approaching 10 percent.”

“This means workers in India are not better off than workers in countries where salary increases are below average but still higher than inflation,” WorldatWork’s Chou noted. “Workers in the U.S., for example, are experiencing more buying power since the average 2013 salary budget increase is 2.9 percent, while the annualized inflation rate, as of April 2013 when survey data was collected, was only 1.1 percent.”

Chou added: “Salary budgets generally reflect what is going on in the national economy. A nervous economic recovery creates nervous employers who are hesitant about making significant changes to their salary budgets and other fixed costs but are making an effort to find other ways to reward employees.”

Other ways U.S. employers reward workers

In light of that, here’s another question that the WorldatWork survey posed: How are employers motivating and retaining employees when planned pay increases remain tepid? According to the survey, respondents from U.S. companies are focusing on:

  • Variable pay — Depending on employee category, 81-91 percent of eligible U.S. employees received variable pay for 2012. For officers/executives, 94 percent were eligible for variable pay in 2012, though only 91 percent were actually paid it.
  • Increased differentiation based on performance. In 2014, high performers can expect a 4.1 percent average pay increase compared to only 2.7 percent for middle performers (a 152 percent difference).

It’s good to know that the difference between the 2.7 percent and 4.1 percent is 152 percent, but frankly, a 4 percent raise for a high level performer is still, well, mediocre. I doubt that many high performers are feeling amply rewarded with an increase at that level.

I said this last November about annual salary increases, and it bears repeating:

Many will say — and rightly so — that a 3 percent raise is better than no raise, or worse yet, a pay freeze or pay cut, as so many of us (yours truly included) saw just a few short years ago.

While that may be true, it also points to another truth: if 3 percent is the average salary increase and “the new normal,” workers aren’t catching up at all for the cuts they endured during the worst of the recession. Plus, a 3 percent average hike means that top performers are probably only getting a 5 or 6 percent increase, and that’s hardly enough to reward them for their great work.”

Largest survey of its kind

I was being generous with the top performer increases last November, but you get the picture. Nobody, not even top performers, are getting rewarded for their fine work with great salary increases in this gradually improving (yes, it’s mediocre!) economic recovery.

The WorldatWork 2013-2014 Salary Budget Survey is the largest survey of its kind with 5,207 responses from 17 countries representing nearly 15 million employees. Since 1973, WorldatWork has surveyed U.S. and Canadian companies on their actual and planned salary budgets and compensation programs. In 2012, WorldatWork began adding countries around the globe to the survey, for a total of 17 countries today.

Survey data was collected April 2013, and respondents are WorldatWork members employed in the HR, compensation and benefits departments of mostly large U.S. companies. The full report will be available in early August at www.worldatwork.org/salarybudgetsurvey.

A media briefing will be held via conference call on August 7. An educational Webinar will be held on Aug. 22 for HR and compensation professionals (the Webinar is free for this year’s survey participants and subscribers).

John Hollon is Editor-at-Large at ERE Media and was the founding Editor of TLNT.com. A longtime newspaper, magazine, and business journal editor, John has deep roots in the talent management space. He's the former Editor of Workforce Management magazine and workforce.com, served as Editor of RecruitingDaily, and was Vice President for Content at HR technology firm Checkster. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices, including for the popular Fistful of Talent blog. Contact him at johnhollon@ere.net, connect with him on LinkedIn, or follow him on Twitter @johnhollon.

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