On the corporate chopping block for next year: salary raises
On the heels of failed stimulus talks in Washington, there may be even more disappointing news for corporate workers from their employers: lower salary increases for next year.
One in three American companies are lowering their projected salary increases for 2021 largely because of weaker anticipated revenues and cost-cutting measures, according to a new survey by Willis Towers Watson, a risk management, insurance brokerage and advisory company.
The survey last month of 705 American employers found that 35% of respondents reduced their projected 2021 salary increase budgets from earlier projections while half kept them the same. Of the 14.3 million employees represented, one in six employees will not receive a pay raise at all in 2021.
A previous survey from May to July showed that companies were planning salary increases of 2.8% for all employees next year. But the latest survey showed that all employees other than executives are projected to receive salary increases of 2.6%.
“The first study we did was early,” says Adrienne Altman, managing director of rewards at Willis Towers Watson. “It was an early read in the pandemic, and most organizations finalized their budgets now in the fall.”
Sixty-eight percent of the companies who changed projections said that weaker anticipated financial results led them to change their projections. Sixty-six percent cited budget cuts.
The sample represents a range of industries, such as manufacturing, healthcare, financial services and energy. Half of the companies are global subsidiaries.
Though payroll budgets may be trimmed, companies will take nuanced approaches to allocating the funds rather than across-the-board cuts, Altman says.
“What we expect them to do is likely to really think about their different talent markets, where they have challenges with attraction or retention, and where the market is moving faster,” Altman says. “So some individuals may be paid very well relative to the range. That's what we would expect with a tighter budget.”
On the flip side, two-thirds of employers expect to fund annual performance bonuses this year. Twenty-five percent are undecided, while 8% don’t expect to fund them at all.
And though companies are currently in the thick of their budget planning meetings for next year, things could change by the end of the year. Altman says potential raises will largely depend on the broader economic environment and cost pressures over the coming months.