Companies giving their best performers the largest raises
The survey, conducted by Towers Watson Data Services, found that virtually all respondents (98%) are planning to give employees raises next year and are projecting average salary increases of 3.0% in 2016 for their exempt nonmanagement (e.g., professional) employees. That’s the same increase these employees received this year and in 2014. Employers are also planning 3.0% salary increases for nonexempt salaried and nonexempt hourly employees. Executives and management employees can expect increases that will average 3.1% in 2016. The number of companies that are giving raises has risen steadily since the recession in 2008.
“To a large extent, 3% pay raises have become the new norm in corporate
America. We really haven’t seen variation from this level for many
Indeed, the survey also found that exempt workers who received the highest performance ratings were granted an average salary increase of 4.6% this year, about 77% larger than the 2.6% increase given to workers receiving an average rating. Workers with below-average performance ratings received salary increases of less than 1%.
“We’ve seen many companies make dramatic changes to their approach to performance management, including eliminating formal performance reviews or taking a ‘ratingless’ approach to reviews. Many organizations are rethinking whether linking base salary increases primarily to last year’s performance makes sense or if this should be the role of short-term-incentive and bonus programs,” said McLellan.
In fact, the survey also revealed that more employees are becoming eligible to receive annual and short-term incentives, and more are also receiving awards. More than eight in 10 (85%) exempt employees received a bonus this year, up from 81% in 2014. Meanwhile, 87% of exempt employees were eligible to receive an annual or short-term bonus this year, up slightly from 86% last year.
“It’s no longer all about base salary. While our research consistently shows the importance of pay when employees decide to stay or leave an organization, we also know their decisions are not just about the money. Opportunities for career development, learning development and challenging work are top drivers of retention. It’s the value of the total package — compensation, benefits and nonmonetary rewards — that makes the difference. As a result, companies are paying closer attention to understanding how employees value these elements,” said McLellan.
About the Survey
Ed Emerman, +1 609-275-5162