Average Salaries to Rise Less Than 3 Percent in 2016: Mercer Survey

An improving economy and a more robust job market aren’t driving U.S. companies to raise salary budgets for next year, according to results of a survey more than 1,500 mid-size and large employers.

According to Mercer’s “2015/2016 US Compensation Planning Survey,” the average salary increase budget is expected to be 2.9 percent in 2016, up just a hair from the average 2.8 percent jump budgeted in 2015.

While the averages aren’t moving, salary hikes for top-performing employees will be almost twice that of average performers as companies continue to differentiate salary increases based on performance, Mercer said, noting that these top performers represent roughly 7 percent of the workforce.

In 2015, Mercer’s survey shows that the highest-performing employees received average base pay increases of 4.8 percent in 2015 compared to 2.7 percent for average performers and 0.2 percent for the lowest performers which is expected to continue in 2016.

“Employers are finding ways to deliver pay increases through other means like promotions, which reflects the growing trend of focusing on careers and sustained performance, not a one-year snapshot and reward”

“During the recession, employers’ focus shifted from fixed pay to variable pay to control costs. As they have become more comfortable holding the line on fixed-cost increases with respect to salary budgets, we’re seeing a steady rise in the use of short-term incentives as a mechanism for rewarding performance to supplement rather low pay raises,” said Mary Ann Sardone, Partner in Mercer’s Talent practice and Regional Leader of the firm’s Rewards practice.

In a media statement earlier this month, Sardone added that flat budgets have created more reliance on other reward methods—developing career opportunities and creating meaningful work experiences, for example.

Other findings:

Promotional increases as a percent of base pay are rising.

This is a sign that organizations are looking internally at talent and career progression to retain key employees rather than risk losing them to competitors, Mercer said.

Promotional increases average approximately 8 percent of pay, varying by job category
For executives, promotional increases rose to 9.1 percent of base salary, compared to 8.4 percent last year
For professionals, promotional raised rose to 7.7 percent of base salary, compared to 6.9 percent last year).

Mercer’s “2015/2016 US Compensation Planning Survey,” which has been conducted annually for more than 25 years, includes responses from 1,504 mid-size and large employers across the U.S. and reflects pay practices for more than 17 million employees. The survey results are captured for five segments of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service across multiple industries.

To purchase the survey results, visit www.imercer.com/cps.