About that pay raise next year: Don’t expect much of a bump in salary, and bonuses may be hard to come by as well, except for those perceived as high performers.
Salary increases are expected to be nearly flat next year at 3 percent, up slightly from 2.9 percent in 2017, according to an annual survey released this week by Aon. Meanwhile, the amount of money companies are allocating to bonuses is expected to decline slightly to 12.5 percent of payroll.
“Given that we have a strengthening economy, very strong job creation, corporate results are very strong, it’s a little bit puzzling that we’re not seeing pressure on these numbers to try to push them upwards,” said Ken Abosch, compensation leader at Aon Hewitt, a Lincolnshire-based consulting division of Aon.
While companies are remaining tight with salary increases, they are working harder to weed out the slackers and reward top performers, with more than two-thirds of employers taking action to increase merit pay differentiation in 2018, according to the report.
“We’re seeing organizations taking a little bit more of a courageous approach to channeling the dollars they have to the individuals who are contributing the most,” Abosch said.
The report, which surveyed 1,062 U.S. companies, found most cities in line with the projected 3 percent salary increase but found higher-than-average bonus pay increases in Houston, New York and Philadelphia.
Chicago is expected to see a 3 percent increase in salaries but lower-than-average spending on bonuses at 11.9 percent, the survey said.
While the unemployment rate is down and job growth has been steady, nominal wage growth is at 2.5 percent year over year, preventing a “full recovery” from the Great Recession, according to the Economic Policy Institute, a nonprofit Washington, D.C., think tank.
“As the unemployment rate comes down, you would expect to see stronger wage growth,” said Elise Gould, senior economist for the institute.
What’s keeping wages down, Gould said, is “slack” in the labor market: people not actively looking for jobs but still interested in finding work.
“Because of that, employers know that they don’t have to offer higher wages to attract or retain the workers they want,” Gould said.
Salary increases vary by industry, according to the Aon survey, with those in automotive, accounting and telecommunications expected to do better than most. Poor-performing industries include education and construction.
Abosch said employees can improve their chances at a raise by choosing an industry that is “more aggressive” in compensation, but no less important is simply signing on with a successful company, which generally “throws off funding” to employees of all levels.
The most important factor may be the hardest to control, however, he said.
“You want to be in a place where you are perceived to be a very strong contributor, a high performer, with the hope that you will be able to get a bigger portion of the salary increase and bonus pie,” Abosch said.