3 per cent salary increases ‘new normal,’ says Buck Consultants

Employers increasing use of short-term incentives to reward employees
|hrreporter.com|Last Updated: 11/14/2012

While employees may not see much improvement in base pay next year, the prevalence and size of short-term incentives has increased substantially, according to the sixth annual Compensation Planning Survey released by Buck Consultants.

The median salary increase in 2013 will be three per cent, as employers continue to be cautious with their salary budgets, found the survey of 362 employers in the United States. Buck Consultants predicts that the new normal for salary increases will settle at this three per cent level.

The expected size of short-term incentive awards forecast for 2013 is greater than the target payouts for 2012 and actual payouts in 2011 for all employee groups, except CEOs. Employers see a bonus or other short-term incentive — a one-time expense as opposed to the annual expense of a salary increase — as a cost-effective approach for rewarding employees, said Buck Consultants.

Hiring and retention bonuses are offered by more than one-half of the organizations surveyed (56 per cent). Referral bonuses are also offered by 56 per cent of organizations.

The prevalence of ongoing long-term incentives depends on employee level. For example, stock options are offered to CEOs by 52 per cent of survey respondents but only offered to rank and file exempt employees by 29 per cent.

“The results of this survey are similar to past years in terms of compensation — slow growth, lots of challenges and not a lot of money to spend,” said David Van De Voort, principal, Buck Consultants. “However, we’ve moved past the environment of several years ago when employers were freezing pay and reducing 401(k) matches.”

More than two-thirds (67 per cent) of survey participants cited a focus on retaining top talent in 2013, and more will look to make additions to their workforce. According to the survey, 46 per cent are planning for normal hiring and 19 per cent will be adding staff.

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