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Forecasted 2013 U.S. Base Salary Increases Remain Stable
Employers focus on nonfinancial rewards to retain talent

By SHRM Online staff  7/19/2012
 

 

U.S. employees can expect median base salary increases of 3 percent in 2013, according to research released in July 2012 by Hay Group, a management consultancy. These increases are consistent with forecasted base salary increases reported for the previous two years. After factoring in annualized consumer price index growth at 2.2 percent, the resulting inflation-adjusted pay movement for 2013 is a net gain of 0.8 percent, after employees saw an estimated 0.6 percent inflation-adjusted net loss in 2012.

"With the economy continuing to grow slowly, it is not surprising that salary increases have followed suit," said Jeff Blair, Hay Group's U.S. productized services leader. "Relatively low annual salary increase budgets are limiting the financial rewards available to employers. As a result, organizations are increasingly focused on improving employee engagement and creating a positive work climate for employees."

According to Hay Group's research:

  • Median 3 percent pay increases are being reported for executives, middle management, supervisory and clerical positions.
  • The 3 percent increase holds fairly steady across most industries, except the oil and gas and luxury retail sectors, which report 3.3 percent and 3.5 percent median increases, respectively.

"Sectors with increases above the general industry median often have more optimistic business performance outlooks," said Tom McMullen, Hay Group's North American reward practice leader. "Some sectors rebounded more quickly and have higher margins than other industries, which may explain why projected base salary increases are higher."

Approaches to Retaining Talent

Moreover, "in most industries we see organizations seeking to remain competitive by placing greater emphasis on variable pay programs, career development opportunities, meaningful job designs and nonfinancial recognition programs," McMullen noted. "Organizations are devoting more time and energy to better understanding what employees truly value in their reward package and modifying their programs to reflect those preferences. Quite often, it's the lack of attention to some of the nonfinancial rewards that drive good employees out of organizations, so this can go a long way toward improving employee engagement and retention."

Hay Group's forecast results are based on data provided by small- to large-size U.S. organizations across a wide range of industries, from March through June 2012.

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