US Salary Increase Budgets Remain Flat Despite Upswing in the Economy and Job Market, Mercer Survey Finds
13 November 2015 - 3:42AM
Business Wire
Promotional increases on the rise as employers focus on
retaining and engaging critical talent through career
progression
Although the economy is improving and the job market is more
robust, salary increase budgets for US companies continue to show
little signs of growth. According to Mercer’s 2015/2016 US
Compensation Planning 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.
“During the recession, employers’ focus shifted from fixed pay
to variable pay to control costs. As they have become more
comfortable holding the line on fixed cost increases with respect
to salary budgets, we’re seeing a steady rise in the use of
short-term incentives as a mechanism for rewarding performance to
supplement rather low pay raises,” said Mary Ann Sardone, Partner
in Mercer’s Talent practice and Regional Leader of the firm’s
Rewards practice. “In addition, flat budgets have created more
reliance on other reward methods like developing career
opportunities and creating meaningful work experiences that align
with the company’s goals and support employees’ needs."
Yet, pay advancement is evident in other adjustments. Mercer’s
survey shows that promotional increases as a percent of base pay
are rising, a sign that organizations 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. “Employers are finding ways to deliver pay increases through
other means like promotions, which reflects the growing trend of
focusing on careers and sustained performance, not a one-year
snapshot and reward,” said Ms. Sardone.
As organizations look for enhanced ways to pay for performance,
differentiating salary increases by employee performance continues
to be the norm. Companies are rewarding top-performing employees
with significantly larger increases than those in the
lower-performing categories. Mercer’s survey shows that the
highest-performing employees received average base pay increases of
4.8% in 2015 compared to 2.7% for average performers and 0.2% for
the lowest performers which is expected to continue in 2016. “In
today’s business environment, performance continues to drive pay
raises. Companies expect performance and will vary rewards based on
individual achievements, organizational success, or both,” said Ms.
Sardone.
Besides differentiation among employee performance groups,
variations in salary increases exist among industries. While most
industries were cautious in 2015 granting pay raises on par with or
slightly above the national average increase of 2.8%, organizations
in low-performing sectors – specifically Energy and Mining, which
were impacted largely by the declining oil prices in late 2014 –
had salary increase budgets drop to 2.6% and 2.7%, respectively.
Furthermore, the current market conditions of this sector prompted
some pay freezes. According to Mercer’s survey, the Energy sector
reported the highest percentage of salary freezes with 17% of
organizations freezing pay for at least one employee group.
To ensure employee engagement and better manage talent programs,
regardless of industry, companies are creating the infrastructure
for career management through the adoption of career frameworks.
According to Mercer’s survey, 40% of organizations currently have a
career framework and 30% of those that do not are planning to
implement one. “A framework for jobs and platform for communicating
careers are essential to match employee capabilities with
opportunities and talent needs of the organization,” said Ms.
Sardone.
Mercer’s 2015/2016 US Compensation Planning Survey, which has
been conducted annually for more than 25 years, includes responses
from 1,504 mid-size and large employers across the US and reflects
pay practices for more than 17 million employees. The survey
results are captured for five segments of employees: executive,
management, professional (sales and non-sales),
office/clerical/technician, and trades/production/service across
multiple industries.
To purchase the survey results, visit www.imercer.com/cps or
call 800 333 3070.
About Mercer
Mercer is a global consulting leader in talent, health,
retirement and investments. Mercer helps clients around the world
advance the health, wealth and performance of their most vital
asset – their people. Mercer’s more than 20,000 employees are based
in more than 40 countries and the firm operates in over 130
countries. Mercer is a wholly owned subsidiary of Marsh &
McLennan Companies (NYSE:MMC), a global professional services firm
offering clients advice and solutions in the areas of risk,
strategy and people. With 57,000 employees worldwide and annual
revenue exceeding $13 billion, Marsh & McLennan Companies is
also the parent company of Marsh, a leader in insurance broking and
risk management; Guy Carpenter, a leader in providing risk and
reinsurance intermediary services; and Oliver Wyman, a leader in
management consulting. For more information, visit www.mercer.com.
Follow Mercer on Twitter @Mercer.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151112006141/en/
MercerMiriam Siscovick,
+1-206-356-8549Miriam.Siscovick@mercer.com
Marsh and McLennan Compa... (NYSE:MMC)
Historical Stock Chart
From Apr 2024 to May 2024
Marsh and McLennan Compa... (NYSE:MMC)
Historical Stock Chart
From May 2023 to May 2024