As the economy steadies, so do pay raises for US employees. Mercer’s newest survey results show that the average raise in base pay is expected to be 2.9% in 2014, modestly rising from 2.8% in 2013 and 2.7% in 2012 and 2011. Moreover, salary increases for top-performing employees – about 7% of the workforce – will be higher as companies continue to focus on retaining top talent. See Figures 1 and 2.
“Employers recognize that their greatest challenge is to retain their top performers to avoid post-recessionary flight of these valuable assets. This means they have to reward and recognize them,” said Jeanie Adkins, Partner and Co-Leader of Mercer’s Rewards practice. “This includes providing higher pay increases along with other non-cash rewards such as training opportunities and career development.”
Mercer’s most recent survey on compensation trends, which has been conducted annually for more than 20 years, includes responses from nearly 1,500 mid-size and large employers across the US and reflects pay practices for more than 13 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. To find out more about the survey results, visit www.imercer.com/cps or call 800 333 3070. For more information about enhancing employee rewards and engagement programs, visit http://www.mercer.com.
Workforce segmentation and employee engagement
As organizations look for enhanced ways to pay for performance, they are segmenting their workforce first and foremost by high-performing as well as high-potential employees. As a result, companies are rewarding these employees with significantly larger increases than those in the lower-performing categories. Mercer’s survey shows that the highest-performing employees received average base pay increases of 4.6% in 2013 compared to 2.6% for average performers and 0.2% for the lowest performers.
“In an improved economy top performers continue to get salary increases nearly twice that of an average performer which indicates that pay for performance is alive and well in the annual merit process,” said Catherine Hartmann, Principal in Mercer's Rewards consulting business. “Differentiation of salary increases based on performance is now commonplace and remains an effective way for employers to recognize those employees that enhance the company’s competitiveness and contribute to its success.”
In addition to workforce segmentation, organizations are studying the key drivers of employee engagement and targeting certain groups, such as high-potentials or those with critical skills, with enhanced reward programs. Moreover, they are investing in a variety of practices to strengthen employee engagement and help improve work-life balance overall for employees. According to Mercer’s survey, some of the more prevalent practices include sponsored conferences, professional development events, additional non-monetary recognition awards, and enriched job sharing/flexible hours.
“Employers are clearly starting to see the value of assessing and addressing their workforce needs systematically,” said Ms. Hartmann. “They recognize that engaged employees are less likely to seek job opportunities outside of the company, and therefore, have a more positive influence and impact on both team and business performance.”
Mercer is a global consulting 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 20,000 employees are based in more than 40 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 52,000 employees worldwide and annual revenue exceeding $10 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.