Tackling the salary budgets

Published
  • September 02 2016, 12:37pm EDT
An end-of-summer event with backyard barbecues and blowout savings sales, today’s Labor Day is not the Labor Day dreamed up in the late 19th century by America’s labor movement to honor the “social and economic achievements of American workers.” And with recent movements by corporate America and the government on paid leave, overtime and a host of other issues, challenges still remain.

An end-of-summer event with backyard barbecues and blowout savings sales, today’s Labor Day is not the Labor Day dreamed up in the late 19th century by America’s labor movement to honor the “social and economic achievements of American workers.” And with recent movements by corporate America and the government on paid leave, overtime and a host of other issues, challenges still remain.

“With the looming new overtime regulations, ongoing minimum wage debates and stagnant planned salary budget increases, compensation issues facing workers and employers are in the headlines every day,” says Kerry Chou, senior practice leader at WorldatWork. “Our most recent survey shows that despite all the headlines and focus on wages and compensation, very few employees understand their employer’s compensation philosophy and approach to pay. And what’s worse, policy makers often try to find solutions to pay challenges without understanding the basics of how pay is designed and used as part of an organization’s overall total rewards strategy.”

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Budgeting

The survey also reported a decreasing number of organizations using a formalized merit matrix or employee ranking to determine base salary increases. Thirteen percent of organizations reported that no guidance is provided other than the overall budget figure — a sharp increase from 1% in 2014. Additionally, 44% of respondents said their organization publishes a merit matrix that managers can use as a guide, but individual managers also have the choice to deviate from the matrix.

Salary increases

Base salary increases (e.g., general increase/Cost-of-Living Adjustment and merit increase) are being awarded to 89% of employees in 2016 on average, according to WorldatWork’s Salary Budget Survey. The median figures show most employers will award pay increases to nearly all employees. 2017 salary-increase budgets are expected to remain flat at 3.1%.

Promotional increases

Promotional increases were awarded to 8% of employees in 2015, inching just above the 7.9% average the year before. Of the promotional increases received, the size of the average pay increase remained unchanged at 8.4%. The amount that organizations plan to spend on promotional increases in 2016 also had no change, at 1.5% of total base salaries.

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Bonuses

The number of employers utilizing bonuses and variable pay rose slightly to 84% in 2016. This number has been hovering around 80% in recent years since spiking from 59% in 2010, the study notes. A combination of awards based on a combination of organization/unit success and individual performance continues to be the most prevalent type of variable pay program.