Companies in the United States are expected to implement a steady wage hike next year, according to the latest survey conducted by Towers Watson, a global professional services company.
Based on the results of the survey, U.S. companies (98%) are planning to give an average wage hike of 3% for nonexempt management employees in 2016. Those employees received a similar wage hike this year and in 2014.
Employers are also plan to increase a 3% salary increase for nonexempt salaried and nonexempt hourly employees and 3.1% wage hike for executives and management employees next year.
The survey also found that employers continue to reward their best performing employees with a significant wage increase to retain them amid a tightening labor market.
Additionally, the survey found that exempt workers with the highest performance ratings received a wage hike of 4.6% this year, approximately 77% higher than the 2.2% salary increase given to workers with an average rating.
The number companies raising wages has been climbing steadily since 2008.
A 3% wage hike is a new norm in the United States
Sandra McLellan, practice leader, North America Rewards at Towers Watson said, “To a large extent, 3% pay raises have become the new norm in corporate America. We really haven’t seen variation from this level for many years.”
McLellan noted that most companies are finding the talents they need at current salary levels. Most employers are also focusing on their salary budgets allocations particularly amid the ongoing difficulty in attracting and retaining top performers or employees with critical skills.
Furthermore, McLellan said, “We’ve seen many companies make dramatic changes to their approach to performance management, including eliminating formal performance reviews or taking a ‘ratingless’ approach to reviews. Many organizations are rethinking whether linking base salary increases primarily to last year’s performance makes sense or if this should be the role of short-term incentives and bonus programs.”
More employees are becoming eligible to receive incentives
The survey also showed that an increasing number of employees who are becoming eligible to receive annual and short-term incentives. Eighty-five percent (85%) of exempt employees received a bonus this year, up from 81% last year.
This year, 87% of exempt employees were eligible to receive an annual or short-term bonus, up from 86% a year ago.
McLellan further noted that employees are not just looking at the base salary when deciding to leave or stay in a company. According to her, the top drivers for retention include opportunities for career development, learning development and challenging work.
“It’s the value of the total package — compensation, benefits and non-monetary rewards — that makes the difference. As a result, companies are paying closer attention to understanding how employees value these elements,” said McLellan.
