Employers Boosting 2019 Salary Increase Budgets

How will employers reward and retain their top employees with the tight labor market?
By: | December 26, 2018 • 2 min read
salary increase budgets

With the tight labor market, low unemployment and booming economy, some employers are starting to reevaluate their compensation budgets in an effort to reward and retain their top employees. According to Mercer’s 2018/2019 US Compensation Planning Survey Update, employers are projecting their average total increase budgets (which includes merit and promotional budgets) to be 3.4 percent, up slightly from 3.2 percent anticipated six months ago. Notably, of the approximately 30 percent of employers projecting higher total increase budgets, changes were primarily reflected in promotional increases whereas merit increases remained the same at 2.9 percent.

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The top reasons cited for higher projected budgets are: greater competition for workforce or anticipated labor shortages (31 percent), change in base salary structure or competitive positioning to market (26 percent) and business performance stronger than expected (14 percent).

“As employers evaluate their future workforce needs, they are starting to think and act differently than they have in the past,” says Mary Ann Sardone, a partner and Mercer’s North America rewards practice leader. “Concerned about retaining employees in an environment with high competition and low unemployment, higher promotional budgets signal more investment in career growth and promotion from within.”

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High rates of employees voluntarily leaving their jobs may be a factor, as well. According to Mercer’s 2018 U.S. Turnover Study, the top reasons that employees voluntarily leave organizations are base pay, promotion opportunity and career change.

“With a tight job market and confidence in the economy, voluntary turnover is at an all-time high,” says Sardone. “It is important that employers recognize the critical talent they have by getting pay and promotions right—or they risk losing employees to competitors that may offer better salaries and the opportunity for more career growth.”

Web Editor Michael J. O’Brien has been with HRE for more than a decade and holds a degree in economics from Boston College. He can be reached at [email protected]