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Pay raises for US employees continue to grow steadily, new Mercer study finds

  • 08 August 2014
  • United States, New York

Employers’ focus remains on retaining and engaging top performers

Along with the strengthening economy and growing job market, pay raises for US employees are improving. According to Mercer’s 2014/2015 US Compensation Planning Survey, the average raise in base pay is expected to be 3.0% in 2015, up slightly from 2.9% in 2014, 2.8% in 2013 and 2.7% in 2012. These results are indicative of a steadily increasing trend. Additionally, salary increases for top-performing employees – 8% of the workforce – will be higher as companies continue to focus on retaining and engaging top talent. See Figure 1.

“Employee engagement and retention continue to be a top priority for employers,” said Mary Ann Sardone, Partner in Mercer’s Talent practice and Regional Leader of the firm’s Rewards segment. “As a result, employers recognize that they need to reward top-performing employees. And while pay is still most important, they’re continuing to provide rewards beyond compensation in the form of training and career development.”

Mercer’s most recent survey on compensation trends, which has been conducted annually for more than 20 years, includes responses from more than 1,500 mid-size and large employers across the US and reflects pay practices for more than 16 million workers. The survey results are captured for five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service.

Differentiation for top performers

As organizations strive to balance reward programs with budgets and the need to retain critical talent, they are analyzing key segments of their workforce and concentrating rewards on top performers. Consequently, the range between increases to high-performing employees and those given to lower performing employees continues to widen. Mercer’s survey shows the highest-performing employees received average base pay increases of 4.8% in 2014 compared to 2.6% for average performers and 0.1% for the lowest performers. See Figure 2.

“Differentiating salary increases based on performance has become the norm,” said Rebecca Adractas, Principal in Mercer's Rewards consulting business. “It’s an effective way for employers to recognize top performers without increasing budgets dramatically. Investing in those employees that are driving organizational performance has become a competitive necessity.”

Differentiation for growth sectors

In addition to differentiation seen across various employee performance  segments, variations exist among industry sectors. Compared to the average pay increase of 3.0% in 2015, organizations within high-performing industries plan to grant higher raises. The Energy industry is among the highest with a projected average pay increase of 3.5%. In contrast, other industries expect to award less next year, including Consumer Goods at 2.8% and Non-Financial Services at 2.8%. See Figure 3.

“The marketplace for top talent remains competitive,” said Ms. Adractas. “Stable growth sectors, like the oil and gas industry, are boosting salaries for employees in an effort to retain and engage the necessary talent to continue at existing performance levels and remain competitive.”

To download a summary of the survey results, visit http://info.mercer.com/compensation-planning-survey-2014-executive-summary.html. To purchase the survey results, visit www.imercer.com/cps or call 800 333 3070.

About Mercer

Mercer is a global leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 42 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and human capital. With over 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights.

Figure 1: Five-year trend of average base pay increases*

Source: Mercer, 2014/2015 US Compensation Planning Survey

*Based on companies including 0s budgets

Figure 2: Average base pay increases as a function of performance*

 

Percent of Workforce

Average Pay Increase

Highest-rated

8%

4.8%

Next Highest-rated

28%

3.7%

Middle-rated

57%

2.6%

Low-rated

7%

0.9%

Lowest-rated

2%

0.1%

Source: Mercer, 2014/2015 US Compensation Planning Survey 

*Based on companies with a five-point rating scale

Figure 3: Average base pay increases by industry

Source: Mercer, 2014/2015 US Compensation Planning Survey  

 

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