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Pay Raises Focus on Rewarding Top Performers
Priority given to retaining and engaging high achievers

By Stephen Miller, CEBS  8/12/2014

The average raise in base pay within the U.S. is expected to be 3 percent in 2015, up slightly from 2.9 percent in 2014, 2.8 percent in 2013 and 2.7 percent in 2012, according to Mercer’s 2014/2015 US Compensation Planning Survey. These findings are in line with 2015 salary projections previously reported by SHRM Online.

Salary increases for top-performing employees—roughly 8 percent of an organization's workforce—will be higher as companies continue to focus on retaining and engaging high achievers, the survey revealed. 

Five-year trend of average U.S. base pay increases


Source: Mercer, 2014/2015 US Compensation Planning Survey. Includes companies budgeting 0% pay increases.


“Employee engagement and retention continue to be a top priority for employers,” Mary Ann Sardone, a partner in Mercer’s talent practice, told SHRM Online. “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 includes responses from more than 1,500 midsize and large employers across the U.S. and reflects pay practices for more than 16 million workers.

Differentiation for Top Performers

As organizations strive to balance reward programs with budgets and the need to retain critical talent, they are analyzing key segments of their workforce and concentrating rewards on top performers.

Mercer’s survey shows the highest-performing employees received average base pay increases of 4.8 percent in 2014 compared to 2.6 percent for average performers and 0.1 percent for the lowest performers, indicating that the marketplace for top talent remains competitive.

Average Base Pay Increases as a Function of Performance

 

Percent of workforce

Average pay increase

Highest rated

8%

4.8%

Next-highest rated

28%

3.7%

Middle rated

57%

2.6%

Low rated

7%

0.9%

Lowest rated

2%

0.1%

Source: Mercer, 2014/2015 US Compensation Planning Survey. Based on companies with a five-point rating scale.


(For more on distribution guidelines, see the SHRM Online article Improving Performance Evaluations Using Calibration.)

Differentiation for Growth Sectors

Compared to the average pay increase of 3 percent 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 percent. Other industries expect to award less next year, including consumer goods at 2.8 percent and nonfinancial services at 2.8 percent. 

Average base pay increases by industry

           
Source: Mercer, 2014/2015 US Compensation Planning Survey.

 

 

(For a look at salary budget variances among major U.S. metro areas, see the SHRM Online article Salary Budget Increases Show Broad Consistency.)

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

Also see: 

Variable Pay Spending Spikes to Record High, SHRM Online Compensation, Sept. 2014

Salary Budget Increases Show Broadly Consistency, SHRM Online Compensation, Aug. 2014

Base Salary Rise of 3% Forecast for 2015, SHRM Online Compensation, July. 2014

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