In 2012, workers can expect an average pay raise of 2.8 percent, compared to 2.7 percent in 2011 and 2.9 percent in 2010, according to a survey conducted by Buck Consultants.
The survey, Compensation Planning for 2012, also reveals that pay-for-performance continues to be critical, especially considering the importance of effectively managing budgets to retain top performers. In fact, 80 percent of respondents follow a pay-for-performance philosophy; however, this is down from 87 percent in 2010.
"Our research into pay practices reveals that most employers plan to hold the line similar to 2011," says Stephen Mork, principal at Buck Consultants. "Given the slow economic recovery and stubborn unemployment rate, organizations are taking a cautious and conservative approach to compensation planning to stay within their payroll budgets."
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For executives, average promotions range from 5.7 percent for C-suite employees to 7.3 percent for vice president-level employees, the research finds. The most common kind of short-term incentive pay is a company-wide plan with an individual performance component, which remains relatively unchanged from 2010. A combination of stock options and full-value awards are still the most widespread long-term incentive awards for C-suite employees, and broad-based employee groups are most likely to take part in time-based restricted stock plans.
The survey also shows that employers' primary talent-related priorities for 2012 are retention of talent at 62 percent and employee engagement at 56 percent. To retain these top performers, employers are offering new career development opportunities at 64 percent, market pay adjustments at 43 percent, larger base pay increases at 30 percent, increased noncash recognition at 28 percent and larger bonus opportunities at 21 percent.
Additionally, 52 percent of respondents provide hiring or retention bonuses to employees with specialized industry or product knowledge, and referral bonuses are given by 56 percent of respondents. Seventy-seven percent of respondents that offer these bonuses say it gives them a greater chance of getting strong performers. Another 73 percent of respondents communicate their larger salary budgets with managers and employees.
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