With a predicted 3.1% average raise in base pay for 2014, U.S. employers’ budgets for pay raises will maintain their sluggish, yet steady rise. While this projected salary budget doesn’t seem significant, this is the first average increase exceeding 3% since 2008—instilling a growing sense of financial security and foundational stability within the U.S. workforce.
According to WorldatWork, out of the 17 countries surveyed, the U.S. was the only country to increase their salary budget from 2012 to 2013. Moreover, metropolitan areas such as Los Angeles and San Francisco witnessed an average 3.1% salary budget increase in 2013, the highest of the year. And although organizations in Detroit, Baltimore, and Phoenix reported the lowest overall at 2.8%, the difference between the lowest and highest is relatively small, with both numbers having increased since last year.
The ongoing rise in the U.S. salary budgets keeps pay rates from remaining static. A mere 2 to 3 years ago, the waiting period between pay raises was as long as 18 to 24 months. In 2013, the average gap between raises shrank to 12 months. This average waiting period is that of an average, healthy economy’s—proving the U.S. to be on the long road to financial recovery.
Since the increasing budget is still fairly modest, employers are seeking other creative ways to reward their hardest-working employees. Outside of the 3% raises, organizations have found a few effective methods to help keep their workers happy.
- Variable Pay—In 2012, 81% to 91% of eligible U.S. workers received annual bonuses based on performance reviews and goal achievement.
- Other Bonuses—Organizations often use referral compensations or noncash-related programs in order to provide additional incentives for employees.
- More frequent adjustments—Skyrocketing from 35% to 72% in the past 3 years, more and more agencies are making alterations to their employees’ base salaries, outside of the annual raise period.
- Increased differentiation based on performance—Basing pay increases on work ethic, the highest performing employees are expected to earn an average raise of 4.1%, with the middle performers earning approximately 2.7% in 2013.
The projected increase for U.S. salary budgets signifies the continuation of a slow but steady economic rebuild for the U.S. workplace. Attributing employers with larger budgets and providing employees with more frequent bonus opportunities should continue to strengthen internal performance and increase employee morale.
Learn more about the anticipated 2014 U.S. employer budget rise here.