Employers budgeting salary boost for 2019
Stagnant salaries are the No. 1 reason employees leave their jobs and employers are taking notice. Companies trying to retain their best talent are setting aside more funds for promotions to prevent employees from looking elsewhere, new survey data says.
Employers are planning to increase their promotion budgets by about 3.4% in 2019, according to a survey of more than 1,500 employers by HR consulting firm Mercer in its 2018/2019 U.S. Compensation Planning Survey Update. Six months ago, the same employers reported they planned to increase the budget by 3.2%. But in a job market with more open positions than people to fill them, employers weren’t confident their incentives were enough to retain workers.
“With a tight job market and confidence in the economy, voluntary turnover is at an all-time high,” says Mary Ann Sardone, partner and Mercer’s North America rewards practice leader. “It is important that employers recognize the critical talent they have by getting pay and promotions right — or they risk losing employees to competitors that may offer better salaries and the opportunity for more career growth.”
Around 30% of employers who responded to Mercer’s survey said they plan to increase their promotion budgets in 2019. However, the majority of raises will be given to employees promoted to higher positions. Only 2.9% of employers say funds would go to merit based raises, which are given to employees working in their current role.
Most of the employers preparing to give promotional raises cited higher competition rates as the reason behind their decision to budget for higher salaries (31%). The rest attributed base salary changes (26%) and business performance higher than expected (14%). Sardone says all three reasons illustrate a growing emphasis on employee retention.
“As employers evaluate their future workforce needs, they are starting to think and act differently than they have in the past,” Sardone says. “Concerned about retaining employees in an environment with high competition and low unemployment, higher promotional budgets signal more investment in career growth and promotion from within.”
According to Mercer’s 2018 U.S. Turnover Study, the top reasons employees voluntarily leave organizations are base pay, promotion opportunity and career change. While merit based raises are desirable, Mercer’s findings suggest workers want an environment that gives them room to grow. Through careful planning, companies budgeting to accommodate opportunities for promotions are helping themselves secure their best talent by preventing their employees’ eyes from wandering to greener pastures.