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Relentlessly Tethered: Early 2013 Salary Increase Projections Mirror 2012

Relentlessly Tethered: Early 2013 Salary Increase Projections Mirror 2012

After hitting an all-time low in 2009, with salary increases dropping to an average of 2.2 percent, the projected average salary increase of three percent for 2013 may sound appealing. However, according to WorldatWork, the movement is not coming from larger pay increases being awarded. The movement, instead, is coming from the number of organization reporting zero percent increases. For WorldatWork’s 2012-2013 Salary Budget Survey, the number of organizations reporting frozen salary budgets has plummeted from 33 percent of employers in 2009 to a mere five percent for 2012-2013.

Although the number of organizations breaking out of salary budget freezes has increased, according to the Society for Human Resource Management (SHRM), nearly 38 percent of employees in the United States do not expect to receive above-inflation pay raises for 2013. However, American workers were more optimistic than their global counterparts.

With the actual increases for 2012 being reported at 2.8 percent (WorldatWork), the scarcely increasing expectations for 2013 continue to reflect a slow economic recovery. According to Business and Legal Report’s (BLR) 2012-2013 Pay Budget Survey, the most common increase amount specified for next year’s increases for exempt and nonexempt/hourly office employees continues to remain between 2.5 and three percent and for hourly non-office employees between two and 2.5 percent. While the United States remains on the lower end of the global scale for salary increases compared to growth markets such as India, China, and Brazil reporting an average projected increase of 10.7%, 8.8%, and 7.2%, respectively (WorldatWork), Japan remains at the bottom with a mere 2.7 percent increase projection for 2013.

The war for talent particularly for senior leaders and employees with specialized skills rages on. Organizations must continue to be competitive in cash compensation even as they expand the range of other rewards in order to attract, motivate, and retain their critical talent,declares Adam Sorensen, GRP, Global Practice Leader for WorldatWork.

Sorensen’s statement concerning cash compensation versus benefits begs the question of how employers can balance compensation and benefits as the economy continues its slow climb out of the abyss of recession. NorthgateArinso’s 2012 Pay Optimism Scale survey suggested that 73.3 percent of U.S. respondents believed that their organization has not adapted to the condition of the economy by increasing non-compensatory benefits. However, salary increases should not be under recognized as a source of retention for key talent over benefits. The offer of more extensive benefits is attractive, but, as the old adage says, money talks.

As the economy is making a slight turn for the better, organizations that have incorporated salary budget freezes over the past three years, could consider that even a small increase in salary budget, paired with attractive benefits could help retain the old or draw in new talent. No matter how small the movement, it is human nature to be drawn toward change that is for the better, hich is something to consider regarding salary budget increases for 2013. Still, it appears we are in for a slow journey toward pre-2009 increases, yet again, with increases projected to be up by just two-tenths from the actual increases in 2012.

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