Highlights of the survey:
- 18.2% of respondents are awarding merit increases (averaged across all employee types) of up to 2.5% in 2014 and 46.1% are awarding increases of more than 2.5%
- 21% of survey participants awarded an increase of 2.51–3% for “Meets requirements” and 12.9% awarded that amount for “Exceeds requirements.”
- The biggest challenge for respondents is “economy/revenue uncertainty.”
Thanks to all 1,130 people who participated! Here are the results:
2014 Merit Increases
The results of BLR’s 2014–2015 Pay Budget Survey show 18.2% of employers awarding merit increases (averaged across all employee types) of up to 2.5% in 2014 and 46.1% awarding increases of more than 2.5%, with 4.6% awarding increases above 5% of base pay.
The breakdown of employee types shows 15.2% of employers awarded merit increases of up to 2.5% to senior management, 17.5% awarded that amount to management, 17.3% awarded it to nonmanagement salaried exempt employees, 20.3% awarded the same to hourly office employees, and 20.7% awarded up to 2.5% of base pay as an increase to hourly nonoffice employees. Among employers awarding merit increases in 2014, the most commonly awarded amount is 2.5–3%. On average, 35.7% (down from 38.1% in 2013) of responding employers withheld merit increases in 2014.
A peek at the maximum increase tied to a performance scale of 1–5 shows that 21% (up from 19.9% in 2013) of survey participants awarded an increase of 2.51–3% for a score of 2.01–3 (meets requirements) and 12.9% (down from 17.4% in 2013) awarded that amount for a score of 3.01–4 (exceeds requirements). A score of 4.01–5 (far exceeds requirements) resulted in merit increases of 4.51–5% of base pay for 11.1% of survey participants.
At the other end of the scale, 90.2% (down from 95% in 2013) of survey participants did not reward employees who failed to meet the requirements of their jobs and 60.2% didn’t reward employees needing improvement. Of those who did, however, 2.7% awarded up to a half percent of base pay for employees who failed to meet requirements and 7.7% awarded a half-percent increase to employees who need improvement.
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2014 General Increases (not tied to performance)
General increases in 2014 are comparable to merit increases, with 19.1% of employers awarding (on average) up to 2.5% in 2014 and 22.7% awarding increases of more than 2.5%, with 2% awarding increases above 5% of base pay.
The breakdown of employee types shows 15.9% of employers awarded general increases of up to 2.5% to senior management, 19.1% awarded that amount to management, 18.9% awarded it to nonmanagement salaried exempt employees, 20.6% awarded the same to hourly office employees, and 21.1% awarded up to 2.5% of base pay as an increase to hourly nonoffice employees. On average, 58.2% (down from 62.5% in 2013) of responding employers withheld general increases in 2014.
2014 Maximum Individual Increases
An average of 12.8% awarded 2.51–3% as their maximum individual increase, though an average of 5% of survey participants awarded more than 10% of base pay. At 14.5% each, hourly office and nonoffice employees were the largest employee groups receiving the former and, at 9%, senior management was the largest group receiving the latter.
2014 Rate Range Adjustments
On average, 21.1% of employers responding to our survey made adjustments of 2.5% or less to their exempt employee rate ranges and 16% made adjustments of 2.51–5% to that same group. Also, 2.1% made adjustments of 5–10%, while an average of 1.3% adjusted their exempt ranges by 10% or more. An average of 59.2% made no adjustment to exempt salary ranges in 2014.
For hourly office workers, 24.4% of the responding employers made rate range adjustments of 2.5% or less and 15.8% made adjustments of 2.51–5%, while 1.7% increased the rate range by 5–10%. An adjustment of over 10% was made by 0.6% and 57.5% made no adjustment to their hourly office employees’ rate ranges.
A little over 21% of the responding employers made rate range adjustments of 2.5% or less to their hourly nonoffice workers and 16.2% made adjustments of 2.51–5%. Rounding out this group, 1.1% of employers made rate range adjustments of 5–10%, while 0.4% made adjustments of over 10% and 60.2% made no adjustment to their hourly nonoffice rate ranges.
2014 Biggest Challenge in Determining Increases
When asked to describe their biggest challenge in determining 2014 salary increases, 41.1% (down from 46% in 2013) of survey participants cited budget constraints as the issue. Myriad other challenges were also noted, including:
- Economy/revenue uncertainty, 13.5%
- Finding usable market data, 9.4%
- Maintaining competitiveness, 8.4%
- Performance management, 8.2%
- How to fairly allocate the increase pool, 5.5%
- Getting senior management approval/buy-in, 4.1%
- Healthcare reform and increasing benefits costs, 3.9%
- Unrealistic employee expectations, 1.8%
While 5.2% of survey respondents offered bonuses in lieu of raises, 45.5% (up from 41.9% in 2013) paid bonuses in addition to salary increases, and 17.6% (down from 19.3% in 2013) awarded some of both depending on employee pay type in 2014.
On average, 46.3% paid bonuses to their exempt employees in 2014, with 16.6% offering amounts of 5% or less and 29.7% awarding amounts greater than 5%. In comparison, 31.8% of those surveyed awarded bonuses to their hourly office workers, with 22.2% offering 5% or less and 9.7% awarding amounts greater than 5%. Hourly nonoffice workers were awarded bonuses by 27.3%, with 20.5% offering 5% or less and 6.7% awarding amounts greater than 5%.
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A look at the details reveals that 30% of survey participants paid their senior management team members bonuses above 10% of base pay and 18.9% awarded the remainder of their management team members at that level, while 6.7% awarded their nonmanagement exempt employees bonuses of above 10%. At the other end of the spectrum, 29.9% awarded their hourly office employees bonuses of up to 10% and 25.9% of our survey participants awarded their hourly nonoffice employees bonuses of up to 10% of their base pay.
2015 Issues and Challenges
The wage-related issues survey participants expect to have at the end of 2015 include:
Trying to keep up with competitors’ wage rates
40.5% ( up from 27% last year)
Dealing with budget constraints
18% (down from 24% last year)
Impact of the Affordable Care Act and rising benefits costs
6.9% (down from 13% last year)
Maintaining company profitability and/or an uncertain revenue stream
Achieving internal equity
In tomorrow’s Advisor, the rest of the survey results, plus an introduction to the all-things-compensation-in-one-place website, Compensation.BLR.com.