Salaries are expected to increase slightly more in 2012 than 2011, however the greatest focus will remain on variable pay, according to a recent survey.
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Get Your Report Now!The U.S. Salary Increase Survey, published annually by Aon Hewitt, found that organizations expect base salary increases of 2.9% for salaried exempt, executives, salaried nonexempt, and nonunion hourly workers. The only group in the study that differed was union workers, who have a projected salary increase of 2.7 percent.
Compared to 2011, the projected salary increases are moderately higher. In 2011 the groups had slightly lower percentage gains. Executives and salaried nonexempt employees experienced an average 2.8 percent increase, salaried exempt and nonunion hourly a 3.7 percent increase, and union workers a 2.7 percent increase.
Variable pay plans, or performance-based compensation, reached an all-time high in 2011, with most respondents (92 percent) implementing this type of program. This is a significant increase compared to 2005, when 78 percent of employers offered variable pay.
Aon Hewitt's survey also shows the majority (86 percent) of employers will fund variable pay based on company performance, though some are funding it through reduced merit increases and reductions in head count (5 percent each). Just 2 percent of companies are budgeting for variable pay through reduced spending on benefits, while only 1 percent are doing so through pay freezes.
"The growing use of variable pay, along with lower salary increases, represents the new normal in compensation practices for employers nationwide," explained Ken Abosch, Aon Hewitt's Compensation group leader. "This pay mix creates greater motivation for employees to be productive and greater flexibility for employers to compensate based on individual and company performance. However, this does create a need for performance discussions throughout the year, so employees know what they are doing well and areas for improvement in order to maximize productivity and potential pay opportunity."
Source:
Aon Hewitt