The average raise in base pay for employees in the United States is expected to be 2.9 per cent in 2014, modestly rising from 2.8 per cent in 2013 and 2.7 per cent in 2012 and 2011, according to a survey of 1,500 employers by Mercer.
Moreover, salary increases for top-performing employees — about seven per cent of the workforce — will be higher as companies continue to focus on retaining top talent.
“Employers recognize that their greatest challenge is to retain their top performers to avoid post-recessionary flight of these valuable assets. This means they have to reward and recognize them,” said Jeanie Adkins, partner and co-leader of Mercer’s rewards practice. “This includes providing higher pay increases along with other non-cash rewards such as training opportunities and career development.”
As organizations look for enhanced ways to pay for performance, they are segmenting their workforce first and foremost by high-performing as well as high-potential employees. As a result, companies are rewarding these employees with significantly larger increases than those in the lower-performing categories.
Mercer’s survey shows that the highest-performing employees received average base pay increases of 4.6 per cent in 2013 compared to 2.6 per cent for average performers and 0.2 per cent for the lowest performers.
“In an improved economy top performers continue to get salary increases nearly twice that of an average performer which indicates that pay for performance is alive and well in the annual merit process,” said Catherine Hartmann, principal in Mercer's Rrwards consulting business. “Differentiation of salary increases based on performance is now commonplace and remains an effective way for employers to recognize those employees that enhance the company’s competitiveness and contribute to its success.”
In addition to workforce segmentation, organizations are studying the key drivers of employee engagement and targeting certain groups, such as high-potentials or those with critical skills, with enhanced reward programs. They are also investing in a variety of practices to strengthen employee engagement and help improve work-life balance overall for employees. Some of the more prevalent practices include sponsored conferences, professional development events, additional non-monetary recognition awards, and enriched job sharing/flexible hours.
“Employers are clearly starting to see the value of assessing and addressing their workforce needs systematically,” said Hartmann. “They recognize that engaged employees are less likely to seek job opportunities outside of the company, and therefore, have a more positive influence and impact on both team and business performance.”
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