If your firm isn’t bumping up employees’ pay next year, you may have some trouble hanging on to your best and brightest.
Reason: Recent surveys from Towers Watson, Mercer and the Conference Board predict employees will see pay increases of 3% on average in 2011, which is significantly more than what they got in 2010.
And pay freezes are likely to be the exception rather than the norm.
The Mercer study found that just 2% of employers plan across-the-board pay freezes in 2011. That’s down from the 13% of companies who did so in 2010.
The improving economy isn’t the only reason for the pay shift. Fearing that employees will bolt as economic conditions continue to improve, employers are making a play to hang on to their top talent.
And many companies are focusing their energy on the cream of the crop – by basing salary increases and bonuses almost exclusively on performance.
According to the Mercer study, employers plan to structure employees’ salary increases as follows:
- a 4.5% pay increase for the highest-rated workers
- a 2.7% salary bump for average performers, and
- a 0.5% increase for the lowest-rated employees.
The message firm are sending is clear: With limited budgets, only the most-deserving employees can expect sizable financial rewards.
If your company absolutely can’t bump up workers’ pay, there’s no reason to hit the panic button just yet. But you probably have to do something to make sure your top performers don’t run to companies that are boosting pay.
Example: It may be time to get a little more generous in terms of the flexible scheduling and telecommuting benefits you offer.