U.S. employers are reporting a 2.5% average salary budget increase across all employee categories for 2010, which means many employees may expect a base pay raise of around 2.5% before the year is over. However, the size of the raise changes when the employee’s performance is factored in. Low performers can expect to see minimal increases of up to 0.7% or nothing at all, middle performers might expect a nominal base pay raise of 2.4%, and high performers may expect an average of 3.7% (54% higher than a middle performer).
Surveyed employers reported that roughly 24% of employees are rated as high performers, while most are classified as middle performers.
These were just a few of the conclusions drawn from the annual WorldatWork 2010-2011 Salary Budget Survey, the largest survey of its kind with 2,497 respondents representing 15.5 million U.S. employees.
“With underfunded salary budgets this year, employers want the most bang for their buck,” said Anne C. Ruddy, CCP, president of WorldatWork. “They are no longer averse to withholding merit increases for poor performers so they can afford to grant meaningful increases to better performers.”
The survey also found that one in three companies has a separate promotional budget as standard practice. A promotion could mean an additional 7% to 8% increase for the promoted employee’s base salary. In addition, a top performer can expect to benefit from an employer’s variable pay program. “In this economy, being an average performer just doesn’t cut it anymore,” said Alison Avalos, research manager for WorldatWork. “Companies expect performance and are willing to reward employees based on organization success, individual performance or both. Pay for performance is alive and well.” For 2010, employers are budgeting an average of 5% to 12% for variable pay, depending on employee category (e.g., exempt, non-exempt salaried and hourly, officers/executives).
Top Places for Top Performers
Metro area is another variable influencing the size of salary increases for top performers. While surveyed employers reported an average pay increase of 3.7% for exceptional performers, employers in the following metro areas reported above-average base pay increases for the cream of the crop:
Metro Average raise for top performers*
San Jose, Calif. = 4.10%
Boston, Mass. = 4.00%
Portland, Ore. = 4.00%
Seattle, Wash. = 4.00%
Houston, Texas = 4.00%
Detroit, Mich. = 4.00%
Washington, D.C. = 3.90%
Atlanta, Ga. = 3.90%
San Diego, Calif. = 3.90%
Tampa, Fla. = 3.90%
*Based on average pay increases for top performers, percentage of companies awarding raises (not shown) and percentage of employees classified as high performers (not shown).
About the Survey:
WorldatWork collected survey data in April 2010. Survey respondents are WorldatWork members employed in the HR, compensation and benefits departments of mostly large U.S. companies. A total of 2,497 respondents participated. The full report for the WorldatWork 2010-2011 Salary Budget Survey is available at www.worldatwork.org/salarybudgetsurvey. An educational Webinar will be held on August 25 for HR and compensation professionals (the Webinar is free for this year’s survey participants and subscribers).
The Total Rewards Association
WorldatWork (www.worldatwork.org) is a global human resources association focused on compensation, benefits, work-life and integrated total rewards to attract, motivate and retain a talented workforce. Founded in 1955, WorldatWork provides a network of nearly 30,000 members in more than 100 countries with training, certification, research, conferences and community. It has offices in Scottsdale, Arizona and Washington, D.C.
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