New Survey: 98% of Companies Plan to Give Raises Next Year

Surveys show that salary increases will be in the 3 percent range for 2011. (Photo by Dreamstime)

It may be only August, but here’s a good reason to look forward to next year: a new Mercer survey says that “more than 98 percent of companies plan to award base pay increases in 2011.”

According to Mercer’s 2010/2011 US Compensation Planning Survey, employers are approaching salary increases for next year in a cautious manner (just as they did in 2010) with the emphasis on engaging and retaining top talent as the economy continues to slowly improve.

One key difference from the past 24 months: just 2 percent of companies are planning across-the-board salary freezes next year compared to 13 percent of organizations in 2010, and 31 percent in 2009.

“It looks like salary raises are back and for good reason,” said Catherine Hartmann, a principal with Mercer’s rewards consulting business said in a press release accompanying the survey results.

“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 a post-recessionary exodus.

Mercer, which bills itself as a leading global provider of consulting, outsourcing, and investment services, has conducted the survey on compensation trends annually for more than two decades. The research includes responses from more than 1,100 mid-size and large employers across the U.S., and reflects pay practices for more than 12 million workers. The survey results reflect five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service.

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The Mercer survey also found the same range in projected salary increases for 2011 that other recent surveys have found. Of the employers projecting to grant base pay increases, the average increase is expected to be 2.9 percent in 2011, up from an actual 2.7 percent in 2010 but still down from 2009 levels (a 3.2 percent average).

But unlike past years, expected salary increases for 2011 are even across most employee groups, however more employers are taking a segmented approach and continue to focus on giving a more generous overall increase to high-performing talent.

“In the tug of war between limited resources and the need to retain critical employees, recognizing top performance is still clearly a driving factor,” Hartmann said. “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.”

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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2 Comments on “New Survey: 98% of Companies Plan to Give Raises Next Year

  1. John,
    Thanks for sharing the results of the Mercer study. With 98% of companies anticipating salary increases in 2011, it doesn't surprise me that there might actually be some positive buzz around the water cooler on the subject.

    The Mercer study seems consistent with the Hay study you reported on July 1. While salary increases anticipated across all positions does indicate a rebound from the Great Recession, perhaps that rebound isn't quite enough to keep key players engaged in the game.

    In recent months, as we've seen an increase in workforce needs, we've also seen an increase in awareness around talent management.

    It seems to me, we might be a little late to the game if a 2.9% annual increase is considered an effort in the post-recession war on talent. I'm not sure that an annual increase says “thank you” quite as emphatically as needed after the last three years.

    While most employees will not be disappointed when they get an increase, no matter how small, some might question whether 2.9% of a possibly already-reduced salary offsets some of the increased costs they incur to live (including increased costs of their total compensation – healthcare benefits, reduced vacation time, etc.).

    Maybe this is a small effort that will act as a diversion from all of the doom and gloom of recent years. I think it's appropriate to emphasize your thoughts in “Two Views of How Employees (and their Managers) are feeling right now.” We need to remember that “there is still a lot of hard management and HR work to be done to help get companies, and the people who really make them go, through this recovery period and into the next growth stage to come.”

  2. Thanks Tammy, for your keen insight. I remember back (and I am dating myself here) to when you got a pool of money to distribute as raises, and the pool was 6-9 percent of your payroll. That allowed you to give high performers 7-10 percent, the middle level workers 4-6 percent, and the low end people 2-3 percent.

    With a 2.5 to 3 percent raise for 2011, you can't do much to differentiate you high performers any more. I know the Mercer study made a point that high performers are getting bonuses and other forms of variable pay, but those don't say “you are doing a great job” the same was a 7.5 to 8.5 percent raise in base pay does.

    And, I think raises at this level in 2011 will only push more workers to go find a new place to toil as the economy improves. In fact, it's the high performers who have the most options. With raises like this coming down, they'll be the first out the door.

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