Employee raises and bonuses are returning in 2021
Another familiar sight in the coming year: Top performers seeing the highest pay increases.
Some good news: Raises and bonuses are back on the table at most companies for 2021.
According to a new survey from Willis Towers Watson, companies in the United States are projecting average salary increases of 2.8% for all employees in the coming year. That number includes exempt, nonmanagement and management employees. The average salary increase for nonexempt salaried and hourly employees is projected to be 2.7%. Executives are also in line for a 2.7% increase.
Where companies granted increases at all for 2020, those fell between 2.5% and 2.7%. Salary increases have hovered around 3% for the past ten years.
Related: How companies are adjusting their compensation plans
In another encouraging sign, only 7% of companies said they were not planning pay raises for 2021. In 2020, that number was 14%.
Bonuses are expected to average 11% of salary for exempt employees, up slightly from 10.9% in 2020 but down from 11.7% in 2019. Nonexempt salaried and hourly employees will average 6.8% and 5.6% respectively, up slightly from 6.7% and 5.5% in 2020 but down from 7.1% and 5.8% in 2019. Average bonuses for executives is projected at 47.5%, down slightly from 2020′s 47.8%. Management is up slightly at 21.8%, from 21.7% in 2020.
The survey found that 76% of companies responding are planning to award performance bonuses in 2021, which is roughly the same percentage as this year.
Health care and retail industries are projecting average salary increases at 2.6% and 2.8% respectively, falling shy of pre-COVID levels. Insurance and nonendurable goods industries will see employees receiving above-average salary increases of 2.9% and 3.0%, respectively.
What hasn’t changed? The “star performer” salary disparity. Employees receiving average performance ratings saw an average increase of 2.8%. Those receiving the highest possible performance ratings saw an average increase 4.7%—68% higher than those with average ratings.
“This has been the most challenging compensation planning year for many companies since the Great Recession,” said Catherine Hartmann, North America Rewards practice leader at Willis Towers Watson. “However, unlike then, companies have been hit differently depending on their industry, the nature of how work gets done and the type of talent they need. While many companies managed to avoid cutting salaries during the pandemic, most have reduced the size of this year’s salary budgets and are holding the line on increases for next year. At the same time, companies continue to embrace variable pay and other reward initiatives to recognize and help retain their best performers.”
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