Due to a growing job market, pay raises for U.S. employees are improving. The average raise in base pay is expected to be 3.0% in 2015, up slightly from 2.9% in 2014, 2.8% in 2013 and 2.7% in 2012, according to a new survey by Mercer.
These results are indicative of a steadily increasing trend, the research firm says. Additionally, salary increases for top-performing employees – 8% of the workforce – will be higher as companies continue to focus on retaining and engaging top talent.
“Employee engagement and retention continue to be a top priority for employers,” said Mary Ann Sardone, partner in Mercer’s Talent practice. “As a result, employers recognize that they need to reward top-performing employees. And while pay is still most important, they’re continuing to provide rewards beyond compensation in the form of training and career development.”
Mercer’s most recent survey on compensation trends, which has been conducted annually for more than 20 years, includes responses from more than 1,500 mid-size and large employers across the U.S. and reflects pay practices for more than 16 million workers. The survey results are captured for five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service.
Differentiation for top performers
The range between increases to high-performing employees and those given to lower performing employees continues to widen. Mercer’s survey shows the highest-performing employees received average base pay increases of 4.8% in 2014 compared to 2.6% for average performers and 0.1% for the lowest performers
“Differentiating salary increases based on performance has become the norm,” said Rebecca Adractas, principal in Mercer's Rewards consulting business. “It’s an effective way for employers to recognize top performers without increasing budgets dramatically. Investing in those employees that are driving organizational performance has become a competitive necessity.”
Differentiation for growth sectors
In addition to differentiation seen across various employee performance segments, variations exist among industry sectors. Compared to the average pay increase of 3.0% in 2015, organizations within high-performing industries plan to grant higher raises. The Energy industry is among the highest with a projected average pay increase of 3.5%. In contrast, other industries expect to award less next year, including Consumer Goods at 2.8% and Non-Financial Services at 2.8%.
“The marketplace for top talent remains competitive,” said Ms. Adractas. “Stable growth sectors, like the oil and gas industry, are boosting salaries for employees in an effort to retain and engage the necessary talent to continue at existing performance levels and remain competitive.”