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Survey Shows Marginal Rise in Salary Increases in 2012

Survey Shows Marginal Rise in Salary Increases in 2012

A new survey by Aon Hewitt reveals that salaries for U.S. workers continue to rise incrementally as concerns remain about the stability of the global economy. However, workers have the potential to offset low base pay increases through performance-based awards.

According to Aon Hewitt’s survey of more than 1,300 U.S. companies, base pay increases for salaried exempt workers were 2.8 percent in 2012, up marginally from 2.7 percent in 2011. Salaries have inched upwards year-over-year since 2009 when pay increases reached an all-time low of 1.8 percent.  Pay increases are expected to rise slightly in 2013. For executives, salaried exempt and salaried nonexempt workers, Aon Hewitt projects base pay increases of 3.0 percent in 2013.

“It is unlikely that salary increases will reach pre-recession levels of 4 .0 percent or higher any time soon,” said Ken Abosch, compensation marketing, strategy and development leader at Aon Hewitt. “Companies are more impacted by the global economy than ever before, as a result organizations continue to be conservative with their spending, but we anticipate that attitude will remain even after the economy rights itself—holding down spending on base pay is the new normal.”

Historical U.S. Salary Increases

2009

2010

2011

2012

2013

 (projected)

Executive

1.4%

2.4%

2.8%

2.9%

3.0%

Salaried Exempt

1.8%

2.4%

2.7%

2.8%

3.0%

Salaried Nonexempt

1.9%

2.4%

2.8%

2.7%

3.0%

Nonunion Hourly

2.0%

2.4%

2.7%

2.7%

2.9%

Union

2.2%

2.5%

2.6%

2.5%

2.6%

Performance-Based Awards

According to Aon Hewitt’s report, employers continue to offer variable pay, or performance-based awards that must be re-earned each year, as a primary way to drive performance and increase engagement while minimizing their fixed costs. In 2012, 90 percent of companies offered at least one variable pay program, in line with 2011.

Overall spending on variable pay as a percentage of payroll continues to rise steadily for salaried exempt workers. In 2012, companies spent 12.0 percent on variable pay, compared to 11.6 percent in 2011. Spending is expected to rise slightly to 12.1 percent in 2013.

Nonunion hourly workers saw the biggest jump in variable pay in 2012. As a percentage of payroll, employers spent 6.0 percent on variable pay rewards for nonunion hourly workers in 2012, compared to 5.2 percent in 2011. However, spending is expected to fall slightly to 5.6 percent in 2013 for this group.

“Organizations are being more strategic with the limited compensation dollars they have to spend,” explained Abosch. “They are spending less on base pay increases for all workers, and instead, are rewarding high performing workers with larger performance-based awards. This allows them to better control spending, while still providing incentives for their best employees.”  

Historical U.S. Variable Pay Increases
2009 2010 2011 2012 2013 (projected)
Salaried Exempt 12.0% 11.3% 11.6% 12.0% 12.1%
Salaried Nonexempt 6.5% 6.0% 6.3 6.2% 6.0%
Nonunion Hourly 5.8% 5.3% 5.2 6.0% 5.6%
Union 6.6% 4.6% 5.0 4.9% 4.5%

Salary Increases by City

According to Aon Hewitt’s survey, workers in some U.S. cities can expect to see salary increases higher than the national average in 2013. These cities include Denver (3.6 percent); Austin, Dallas/Fort Worth, Detroit and San Diego (3.4 percent); and Houston and Kansas City (3.3 percent). Cities that can expect lower-than-average increases in 2013 include San Francisco (2.7 percent), Chicago and Minneapolis/St. Paul (2.8 percent).

Salary Increases by Industry

The industries that can expect to see the highest salary increases in 2013 include mining/milling (3.8 percent); computers/related products and energy (3.6 percent); and automotive/vehicle manufacturing (3.3 percent). The lowest increases are projected to be in education (2.5 percent), rubber/plastic/glass, government and health care/medical services (2.6 percent).

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7 comments

  1. I’m glad salaries are inching up, but as long as inflation is growing faster than salaries, people will experience more hurt.

  2. I agree with you, Gary, on this point. It is great that salaries are ‘inching’ up little by little, but inflation has outpaced it. But, this is good information to know.

  3. While these salary increases certainly give us some hope, we have to keep in mind that the 2011 inflation rate was 3.2%; so these increases do not even keep up with inflation. In addition, many businesses are asking their current staff to do more, rather than hire new people. So their pay raises are certainly well-deserved.
    David Burke recently posted..Rules for Fools

  4. It is interesting how people can “play” with numbers and even project into the future what will happen. That may have been true in the past, but our present is unlike any other. In fact it is being referred to as the New Normal.

    The reports I have been reading don’t give the same results. How can salaries go up when the economy is going down? That is a lot of wishful thinking on the part of those who don’t understand economics. 2013 and 2014 may just turn out worse than you would hope.

    Perhaps we need to work at becoming more resilient so we can make it through the next few years in better shape than those who prefer to be an ostrich.

    Ask yourself, why are salaries for educators, government and medical personnel not increasing as much? Maybe it is because the money just won’t be there. Now ask “Why?”
    Gary Gile recently posted..Peanut butter, Sugar, and Truth…

  5. I’m sorry to see San Francisco on the lower end of increases but if a company improves because of worker performance that seems like an appropriate way to reward with more pay.

  6. Like Pat, I’m glad to see that my home city of Dallas, TX is expected to see the larger increase. With that being said, the percentage still seems a little low.

  7. I’m happy to see that Denver, my home, will have higher than average salary increases. However, education and medical care will decrease. How will we keep up with the rest of the world if we can’t attract and keep good educators and medical personal?

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