The last couple of years have been difficult for employers and employees. Salary freezes or low pay increases have been challenging for both employers as well as employees. Employers understand the importance of providing a healthy employee benefit package and employees have felt the pinch of getting little if any raises. The good news is the economy is showing signs of recovery and organizations are again budgeting for pay increases in 2011.
According to Mercer’s 2010/2011 Compensation Planning survey, “more than 98% of companies plan to award base pay increases in 2011. Moreover, just 2% of companies are planning across-the-board salary freezes next year compared to 13% in 2010 and 31% in 2009.”
According to Mercer, projected increases to base pay will be 2.9% in 2011. This is up from 2.7% in 2010 but less than 3.2% in 2009.
Projected increases are based on responses from more than 1,100 mid-sized and large employers representing 12 million US workers.
“It looks like salary raises are back and for good reason,” said Catherine Hartmann, a Principal with Mercer’s rewards consulting business. “The risk of losing key employees is top of mind as the economy recovers and certain labor markets improve. And while non-monetary awards such as career development and training are effective in retaining employees, employers realize that top-performing employees are loathe to going another year without an increase in pay. Investments in both cash and non-cash solutions will have a significant impact on avoiding post-recessionary flight.”
The survey shows differentiation for top performers:
According to the survey, the gap between employees who perform well and lower performing employees is widening.
- High performing employees (14% of workforce) will receive an estimated 4.3% increases in 2010.
- Average performers (35% of workforce) will receive an estimated 2.6% increase.
- Weak performers (7% of workforce) will receive an estimated 0.5%
“In the tug of war between limited resources and the need to retain critical employees, recognizing top performance is still clearly a driving factor,” said Ms. Hartmann. “Differentiating salary increases among employee groups is a necessity, allowing employers to make their investments on those employees that will advance the organization in the new economy.”
“Despite budgetary constraints among all sectors, more stable growth industries are planning to provide raises for select employees,” said Ms. Hartmann. “In general, increasing pay will continue to be a challenging priority for employers until improved economic conditions are evident and the economic outlook significantly improves.”
Increase differences by industry:
Projected 2011 base pay increases by employee group:
- All Employees – 2%
- Executives – 3%
- Management – 2%
- Professional (sales and non-sales) – 2%
- Office/Clerical/Technician – 2%
- Traders/production/Service - 1%
Source: Mercer, 2010/20100 US Compensation Planning Survey
Projected 2011 average pay increase by industry:
- Oil and Gas - 3.5%
- Pharmaceutical – 2.9%
- Utilities/Energy - 3.0%
- Banking – 2.7%
- Business/Professional Services – 3.2%
- Retail – 2.8%
- Telecommunications - 2.9%
- Education - 2.6%
- Healthcare - 2.8%
- Hospitality/Restaurant - 3.0%
- Real Estate - 2.5%
Source: Mercer, 2010/20100 US Compensation Planning Survey
These are interesting projections. What percentage increase does your organization project for 2011?
photo courtesy: Wondermonkey2k
