'There's a great reprioritization of work, rewards and careers under way, and it's putting significant pressure on compensation programs for many employers'
Nearly one in three (32 per cent) U.S. employers have increased their salary increase projections from earlier in the year, according to a report from Willis Towers Watson (WTW).
Companies are now budgeting an overall average increase of 3.4 per cent in 2022, up from the average 3.0 per cent increase they projected in June 2021. Employers gave employees an average pay increase of 2.8 per cent in 2021, according to the report.
“There’s a great reprioritization of work, rewards and careers under way, and it’s putting significant pressure on compensation programs for many employers,” says Catherine Hartmann, North America rewards practice leader at WTW, noting that employers are looking to be resilient and adaptable in responding to the pandemic.
“Many employers are targeting certain segments such as hourly workers, digital talent and workers with in-demand skills to receive higher pay.”
Employers were projecting salary increases between 2.5 per cent and 3.1 per cent, according to a survey in June and July 2021 by Gallagher.
Tight labour market, inflation
Nearly three in four respondents (74 per cent) cite the tight labour market for increasing their budgets from prior projections, according to WTW. Meanwhile, only one-third cite anticipate stronger financial results (34 per cent) and inflation or the rising cost of supplies (31 per cent).
While companies are boosting salary budgets, bigger pay raises alone won’t be enough to help address their attraction and retention challenges, says Lesli Jennings, senior director for work and rewards at WTW.
“Supplemental tactics including sign-on bonuses, equity and cash retention, and recognition enhancements plus employee experience drivers such as enhanced career enablement, emphasis on mental wellbeing, focus on DEI [diversity, equity and inclusion], and learning and reskilling opportunities can combine to improve the effectiveness of a compensation program. Winning the talent race will require employers to continue to be creative and comprehensive with their total rewards strategy.”
Many Americans are reconsidering their work and financial priorities, with two-thirds (62 per cent) indicating that work-life balance is more important to them than a high-paying salary (22 per cent), finds a recent survey of 1,081 people by KeyBank.
Employers are not always meeting the benefits needs of employees, according to a previous report from the Conference Board of Canada and TELUS Health.
Variations by industry
Employees in the following five industries are expected to see the largest salary increases in 2022 compared with their actual increases in 2021, according to WTW’s survey involving companies in 130 countries worldwide, including 1,004 U.S. employers, in October and November 2021:
- retail and wholesale trade: 2.8 per cent to 3.6 per cent
- finance: 2.7 per cent to 3.5 per cent
- life and health insurance: 2.7 per cent to 3.5 per cent
- energy: 2.6 per cent to 3.4 per cent
- industrial manufacturing: 2.6 per cent to 3.4 per cent
Many employers anticipate they will lose talent because there are other jobs offering better salaries and benefits for workers, according to a previous report.