According to a Willis Towers Watson survey of more than 1,000 companies conducted during October and November, about a third of companies boosted their salary-increase projections from earlier in 2021. Companies are now budgeting an overall increase of 3.4% in 2022, compared with the average 3% increase they had budgeted for in June of last year. Employers gave workers an average pay increase of 2.8% in 2021.
What it means for HR leaders
As the Great Resignation phenomena pushes a record number of employees to quit their jobs, many employers are turning to a tried-and-true strategy when looking to keep workers: compensation changes, including bonuses and salary increases. Roughly 74% of companies cite the tight labor market as a reason to increase their budgeting for raises, according to the Willis Towers Watson survey.
“There’s a great repriorization of work, rewards and careers under way, and it’s putting significant pressure on compensation programs for many employers,” says Catherine Hartmann, North America rewards practice leader at Willis Towers Watson.
Among the firms embracing salary increases is accounting giant KPMG, which announced raises for employees twice in the last few months. And many smart employers are going much further than a 3% or 4% salary increase, instead turning to double-digit raises, bonuses, better benefits and more. Experts say it’s a necessary strategy in the tight labor market; otherwise, organizations stand to lose out on talent.
Although salary increases—as well as bonuses—are important, experts say to really make a long-term impact, employers must roll out a strategy that makes employees feel continually supported and valued as well.
“Cash is still king but these incredible signing bonuses we are seeing are not sustainable. Companies are now trying to provide employees with lifestyle experiences that resonate with them,” says Rhonda Marcucci, vice president, HR & benefits technology consulting practice at Gallagher, who will be speaking at HRE’s upcoming Health & Benefits Leadership Conference. The event, April 5-7 in Las Vegas, will address benefits strategies to attract and retain talent in today’s hot job market.
“Employee needs and expectations have changed,” Marcucci says. “Tactics implemented prior to the pandemic may no longer resonate with employees. Employers need a game plan for continuously collecting employee feedback to ensure strategies developed are relevant and enable efforts to attract, retain and engage their workforce.”