Human Capital

Pay Increases to Remain Flat in 2020: Study

Employers are setting aside more for discretionary bonuses to top performers.
Lauren MuskettAugust 8, 2019

U.S. employers are not planning big pay increases in 2020, despite a tight labor market, according to a survey from Willis Towers Watson.

The 2019 General Industry Salary Budget Survey found employers are budgeting pay increases of between 2.9% and 3.1% for management employees, non-management employees, nonexempt hourly employees, and nonexempt salaried employees. Companies are planning pay raises of 3.1% for executives, down from 3.2% this year.

Companies are projecting discretionary bonuses — typically 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, the survey found.

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The last big bump in pay came in 2008 when employers raised pay 3.8%. Raises have remained flat at about 3% per year for the last decade.

“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,” said Catherine Hartmann, North America rewards leader at Willis Towers Watson.

Companies are continuing to reward star performers with significantly larger pay raises than they are giving to average performers. 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.

“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,” she said. “Some employers are also recognizing the contributions of these employees with better annual incentives and discretionary bonuses.”

“Even with low unemployment rates, some clients are feeling uncertain about what the market will bear in 2020 and, therefore, continue to be selective on where they spend their compensation dollars,” Hartmann said.

The survey included responses from 858 companies representing a cross-section of industries. It was conducted between April and July of this year.

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