14 Sep Stalemate: A Look at Salary Budget Increases for 2017-2018
By Lauren Belcher at Phillip Blount and Associates
Despite our growing economy and rising stock market, one thing remains consistent – salary budget increase projections. National, industry-wide projections are stagnant, for the fourth consecutive year at a projected median of 3.0 percent (average, 3.2 percent) for 2017-2018. (WorldatWork) According to Willis Towers Watson, variable pay (i.e., discretionary bonuses or annual incentives) are becoming more popular as ways to reward top performers along with increases, with top employees even receiving increases up to 4.5 percent in 2017.
Although salary increases are at a stalemate, many organizations are planning more significant pay increases for 2017 than were given in 2016. The healthcare and chemicals industries are among the top sectors that are planning larger pay increases this year, representing 24 and 29 percent of responding organizations, respectively. (CompAnalyst)
Globally, salary increase budgets will, predominately, remain between 2.0 to 5.0 percent (Economic Research Institute) Sources from MarketWatch and Korn Ferry Hay Group cite rising cost of benefits, global competition, and pressure on wage growth as possible causes for the halt in increases.
As we look at total salary budget increases nationally, the average pay increase, in all fifty (50) states is projected to be between 3.0 – 3.2 percent for 2018. Average actual increases, across the nation, were 2.9 – 3.0 percent in 2017. Industries that are leading in 2018 projected increases include Construction; Professional Scientific, and Technical Services; Wholesale Trade; and “Other Services” reporting projected increases between 3.4 to 3.5 percent. Industries reporting the lowest average projections, approximately 2.6 – 2.9 percent, include Public Administration and Educational Services. (WorldatWork)
Size of organization seems to be a deciding factor for projected 2018 increases with smaller organizations (i.e., with 499 or fewer employees, or $30 million or less in revenue) reporting, on average, increases one- to three- tenths higher than their larger counterparts. (WorldatWork)
As we look forward to 2018, though we may not see larger increases in salary budget, the nation is certainly experiencing growth. According to Economic Research Institute (ERI), our national gross domestic product (GDP) is projected to grow by 2.5 percent, while consumer price increase (CPI) and unemployment rates are expected to slowly decrease to 2.4 and 4.6 percent, respectively.
For the fourth successive year, salary budget increases are expected to remain around the 3.0 – 3.2 percent mark nationally and 2.0 to 4.0 percent across most industries. It is hopeful that if we continue to experience economic growth, we will see projections begin to surpass the 3.0 percent mark and rise to pre-2009 levels in the coming years.