Salaries for U.S. workers continue to rise incrementally, but workers can offset low base pay increases through performance-based awards, new research reveals.
Aon Hewitt, the global human resources solutions business of Aon plc (NYSE: AON), Lake Forest, Ill., published this finding in a summary of results from a survey of more than 1,300 U.S. companies.
The survey finds that base pay increases for salaried exempt workers were 2.8% in 2012, up marginally from 2.7% in 2011. Salaries have inched upwards year-over-year since 2009 when pay increases reached an all-time low of 1.8%.
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% in 2013.
“It is unlikely that salary increases will reach pre-recession levels of 4.0% or higher any time soon,” says 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."
According to the 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% of companies offered at least one variable pay program, in line with 2011.
Overall spending on variable pay as a percentage age of payroll continues to rise steadily for salaried exempt workers. In 2012, companies spent 12.0% on variable pay, compared to 11.6% in 2011.
Spending is expected to rise slightly to 12.1% in 2013.Nonunion hourly workers saw the biggest jump in variable pay in 2012.
As a percentage of payroll, employers spent 6.0% on variable pay rewards for nonunion hourly workers in 2012, compared to 5.2% in 2011. However, spending is expected to fall slightly to 5.6% in 2013 for this group.