3% Salary Increases Put Greater Focus on Variable Pay

With salary increase budgets expected to remain at 3 percent for both 2017 and 2018, employers are continuing to leverage variable pay to differentiate rewards for high-performers.

"With a tight job market and reported financial gains, we might have expected to see more growth in salaries," said Kerry Chou, WorldatWork senior practice leader. "In the United States in particular, there are factors that might explain this plateau in growth, including the increased use of variable pay or noncash-based rewards."

Variable Pay

As companies hold down base pay increases to maintain a handle on fixed costs, "employees are still seeing increases in pay through improved variable pay plan payouts," Chou said.

The percentage of organizations using variable pay vehicles—such as annual or quarterly bonuses based on individual, team and organizational goal achievement—rose 1 percentage point for the third straight year, to 85 percent in 2017, according to research from WorldatWork, an organization of total rewards professionals, in its new 2017-2018 Salary Budget Surveyreport.

The report reflects the results of a survey of WorldatWork members, most of whom work at large companies. Survey data was collected from March 27 through May 5 and included 1,819 respondents from U.S. organizations with at least 10 employees. "Top level" results from the survey were released last month.

[SHRM members-only guide: How to Establish Salary Ranges]

Merit Salary Increase Awards

Base salary increases are being awarded to 89 percent of employees in 2017, on average. For high-performers, the anticipated 2017 median merit increase award remains at 4.0 percent, the same as last year.

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