Human Resources News & Insights

Will average raise break the 3% barrier in 2014?

So how’s your organization’s raise budget looking for 2014?  

Pay increase budgets at U.S. employers have picked up from all-time lows in 2009, going from an average of 2.2% to 2.9% in 2013, according to a recent WorldatWork study. And the average raise for 2014 in the U.S. is projected to be 3.1% — which, if achieved, would be the first average increase above 3% since 2008.

Other results of the study:

Companies located in or reporting data for employees in Houston, Los Angeles and San Francisco reported the highest actual increases in 2013, averaging 3.1%. Employers in Baltimore, Cincinnati, Detroit and Phoenix reported the lowest overall average salary increase budgets at 2.8%. Most metropolitan areas reported average salary budget increases ranging from 2.8% to 3.1% for 2013, up slightly from 2.7% to 2.9% in 2012.

Pay increase budgets for public administration hit an all-time low of 1.3% in 2010 and 2011, but have risen to 2.3% in 2013. The mining, quarrying, and oil and gas extraction industries are far above national figures, with average 2013 salary budget increases at 4.1%.

Tepid salary increase budgets aren’t stopping employers from rewarding talent. Survey respondents from U.S. companies are focusing on:

  • Bonuses. Organizations are using other forms of cash and non-cash forms of compensation, including sign-on/hiring bonuses, spot bonuses, retention bonuses and project completion bonuses.
  • More frequent adjustments. Adjustments to base salaries outside of the normal periodic (merit) increase have also increased substantially, at 72% this year compared to a low of 35% in 2010.
  • Variable Pay. Depending on employee category, 81-91% of eligible U.S. employees received variable pay for 2012. For officers/executives, 94% were eligible for variable pay in 2012, though only 91% were actually paid it in 2013.
  • Increased differentiation based on performance. For 2013, high performers can expect a 4.1% average pay increase compared to only 2.7% for middle performers (a 152% difference).

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