In a kick in the pants given the economy, employees hoping for larger pay raises next year may be disappointed.
A new survey from Willis Towers Watson finds that U.S. employers plan to hold the line on budgeted pay raises in 2020, despite low unemployment and a tight labor market.
Some employers, however, are projecting modestly larger discretionary bonuses next year, while others are adding separate promotional budgets in their efforts to supplement employee salaries—with the goal of rewarding top talent.
The 2019 General Industry Salary Budget Survey found salary increases are expected to hold steady in 2020 for:
- exempt, non-management employees (3.1%),
- management employees (3.1%), nonexempt hourly employees (3%) and
- nonexempt salaried employees (2.9%).
Companies are budgeting slightly smaller increases for executives (3.1% in 2020 versus 3.2% this year).
Pay raises have hovered around 3% for the past decade. The last year employers provided larger increases was 2008 (3.8%).
Star performers
Companies continue to reward their star performers with significantly larger pay raises than average performing employees.
According to the survey, employees receiving the highest possible rating were granted an average increase of 4.6% this year, 70% higher than the 2.7% increase granted to those receiving an average rating.
“Despite an extremely tight labor market, most employers are either not willing or fiscally unable to increase their fixed costs across-the-board by bolstering their salary budgets,” Catherine Hartmann, North America Rewards leader at Willis Towers Watson, said in a statement. “Instead, many companies are doubling down on providing significantly larger market adjustments to employees in high-skill roles and selective pay raises to their top performers. Some employers are also recognizing the contributions of these employees with better annual incentives and discretionary bonuses.”
The survey found companies are projecting discretionary bonuses—generally paid for special projects or one-time achievements—will average 5.9% of salary for exempt employees, compared with 5.3% of salary granted for bonuses last year.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
