Considering today's uncertain economic state, U.S. employers are expecting to give employees moderate pay raises in 2012, though they anticipate fully funding annual bonuses for workers in 2011 because of increased corporate profits, according to new Towers Watson survey.
The survey, which interviewed 773 U.S. companies, reveals that companies are anticipating an average of 2.8 percent pay increases in 2012 for salaried nonexecutive employees. This is an increase from the 2.6 percent average raise workers received in 2011 and 2010. Respondents also expect similar raises in 2012 for executives and nonexempt employees.
"Until the economy shows some solid and consistent improvement, most companies are keeping their salary budgets relatively tight," says Laura Sejen, the rewards global practice leader at Towers Watson. "At the same time, companies also recognize the need to reward their top performers or risk losing them to competitors and, as a result, continue to differentiate pay raises based on individual performance."
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The survey also finds that workers with the highest performance ratings will see 4.5 percent median salary increases this year, an 80 percent increase over workers with average ratings at 2.5 percent. Workers rated with below-average performances will receive only 1.4 percent median raises.
Based on a separate Towers Watson survey of 316 North American companies, employers are averaging projected bonus funding for current-year performance at 101 percent of target, which makes this the second consecutive year that companies fully funded annual bonuses. In 2010, employers funded annual bonuses at 111 percent of target.
"Despite the recent economic turmoil, many companies are experiencing stronger profits and higher revenues this year," Sejen says. "Since funding of annual bonus pools is typically based on these financial measures, companies are anticipating being well positioned to fund their annual bonus pools at target or better at year-end."
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