Salary Raises this Year Are Marginal
LINCOLNSHIRE, Ill. -- Salaries for U.S. workers continue to rise in small incrementally as concerns remain about the stability of the global economy. However, workers have the potential to offset low increases in their base pay through performance-based awards.
Base pay increases for salaried workers at U.S. companies were 2.8% this year, up marginally from 2.7% in 2011, according to a new survey by Aon Hewitt. Salaries have inched upward year-over-year since 2009, when pay increases reached an all-time low of 1.8%.
Pay increases are expected to rise slightly in 2013. For executives, salaried-exempt and salaried-nonexempt workers, Aon Hewitt projects base pay increases of 3%.
"It is unlikely that salary increases will reach pre-recession levels of 4% or higher any time soon," said Ken Abosch, compensation marketing, strategy and development leader at Aon Hewitt. "Companies are more impacted by the global economy than ever before. As a result organizations continue to be conservative with their spending, but we anticipate that attitude will remain even after the economy rights itself -- holding down spending on base pay is the new normal."
Employers continue to offer variable pay, or performance-based awards that must be re-earned each year, as the primary way to drive performance and increase engagement while minimizing their fixed costs, the survey found. In line with2011, fully 90% of companies offered at least one variable pay program.
Overall spending on variable pay as a percentage of payroll continues to rise steadily for salaried exempt workers as companies spent 12% on variable pay compared to 11.6% in 2011. Spending is expected to rise slightly to 12.1% in 2013.
As a percentage of payroll, employers are spending 6% on variable pay rewards for nonunion hourly workers this year compared to 5.2% in 2011. However, spending is projected to fall slightly to 5.6% in 2013 for this group. "Organizations are being more strategic with the limited compensation dollars they have to spend," Abosch explained. "They are spending less on base pay increases for all workers, and instead are rewarding high-performing workers with larger performance-based awards. This allows them to better control spending, while still providing incentives for their best employees."
Workers in some U.S. cities can expect to see salary increases higher than the national average in 2013. Among them are Denver (3.6%), Austin, Dallas-Fort Worth, Detroit and San Diego (3.4%), and Houston and Kansas City (3.3%). Cities that can expect lower-than-average increases in 2013 include San Francisco (2.7%), Chicago and Minneapolis-St. Paul (2.8%).
The industries that can expect to see the highest salary increases in 2013 are mining/milling (3.8%), computers/related products and energy (3.6%) and automotive/vehicle manufacturing (3.3%). The lowest increases are projected to be in education (2.5%), rubber/plastic/glass, government and health care/medical services (2.6%).
Aon Hewitt provides consulting services in the fields of employee benefits, talent and related financial challenges.
Published by The Business Journal, Youngstown, Ohio.
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