Moderate pay raises expected for U.S. workers: Towers Watson

Firms also expecting to fully fund annual bonuses
|hrreporter.com|Last Updated: 08/30/2011

Reflecting uncertain economic conditions and a conservative cost-management environment, employers are projecting moderate pay raises for employees next year, according to Towers Watson.

Organizations are planning pay increases that will average 2.8 per cent in 2012 for their salaried non-executive employees, found the survey of 773 U.S. employers. This represents a moderate increase from the average 2.6 per cent raise workers are receiving this year and 2.6 per cent they received in 2010, said Towers Watson. Similar raises for 2012 are planned for executives and non-exempt employees.

“Until the economy shows some solid and consistent improvement, most companies are keeping their salary budgets relatively tight,” said Laura Sejen, rewards global practice leader at Towers Watson. “At the same time, companies also recognize the need to reward their top performers or risk losing them to competitors and, as a result, continue to differentiate pay raises based on individual performance.”

According to the survey, workers who receive the highest performance ratings will be in store for median salary increases of 4.5 per cent this year, which is 80 per cent more than workers with average ratings will receive (2.5 per cent). Workers with below-average performance ratings will receive median merit increases of 1.4 per cent.

Bonuses

A separate survey of 316 North American companies conducted by Towers Watson found that companies’ average projected bonus funding for current-year performance is 101 per cent of target, marking 2011 the second consecutive year that companies are able to fully fund their annual bonuses for workers, said Towers Watson. Companies funded annual bonuses in 2010 at 111 per cent of target.

“Despite the recent economic turmoil, many companies are experiencing stronger profits and higher revenues this year. Since funding of annual bonus pools is typically based on these financial measures, companies are anticipating being well positioned to fund their annual bonus pools at target or better at year-end,” said Sejen.

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