Unanimity on 2013 Salary Forecasts Holding Up


By Stephen Miller, CEBS August 15, 2012

U.S. salary budget forecasts for 2013 are continuing to be rolled out by pay consultants/researchers and, while there are some differences around the margins, the consensus remains steady for an average budget increase of 3 percent.

A brief recap: Mercer expects that among midsize and large employers across the U.S., the average raise in base pay is expected to be 2.9 percent in 2013, up slightly from 2.7 percent in 2012 and 2011, and 2.3 percent in 2010. This was in line with a Hay Group forecast showing an average 3 percent salary budget increase for 2013, for a net inflation-adjusted pay gain of 0.8 percent, after employees saw an estimated 0.6 percent inflation-adjusted net loss in 2012. WorldatWork similarly predicted a 3 percent expected increase in 2013 up from 2.8 percent in 2012, in line with The Conference Board's findings.

In addition, Aon Hewitt expects 2013 base pay to rise 3 percent for executive, salaried exempt and salaried nonexempt positions, and to increase 2.9 percent for nonunion hourly and 2.6 percent for union positions.

Similarly, companies are planning pay increases that will average 2.9 percent in 2013 for their salaried non-management employees, according to the Towers Watson Data Services Salary Budget Survey of 857 U.S. companies, conducted in June and July of 2012. Exempt workers who receive the highest performance ratings will be in store for an average salary increase of 4.7 percent in 2012, which is roughly 50 percent more than workers with average ratings will receive (3.2 percent), Towers Watson found. Workers with below-average performance ratings will receive average merit increases of 1.3 percent.

So it's no surprise to find that U.S. salary merit increases for 2013 also are forecasted to be 3 percent at median, according to a survey of 270 large, multinational companies by Empsight International LLC, an HR consultancy. The firm said its forecast represents a 1.3 percent real income gain above the 1.7 percent all-items inflation index through June 2012.

Several of the consultancies note that employers anticipate the 3 percent increase despite a recent spate of mixed to gloomy economic news relative to the growth levels in the U.S. and the continued uncertainty relative to the sovereign debt issue in Europe.

Countering Skills Shortages

“Large companies have moved away from salary freezes over the past two years and now have significant concerns in relation to employee retention, pay competitiveness and skill shortages,” said Vincent McHugh, managing director of Empsigh. “With graduate unemployment for those 25 and over at 4.1 percent, those concerns are well founded for professional positions,” he added.

Demonstrating his point, his firm's survey found that:

  • 69.4 percent of companies rated employee retention as a concern.
  • 62.1 percent reported compensation competitiveness as a concern.
  • 52.3 percent reported skill shortages as a concern.

Interestingly, WorldatWork, an association of total rewards professionals, also forecasts a 3 percent salary budget increase but points to relatively high general unemployment as restraining base pay raises—showing that whether one views 3 percent as high or low may be a matter of perspective. (WorldatWork did note, however, that 3 percent as an average might seem higher given that in 2013 fewer employers will keep overall base salary frozen as compared with 2011 and 2010).

Among other Empsight survey findings, for 2012:

  • 76.9 percent of companies indicated that their actual base salary practice aligns with their desired competitive position in the marketplace.
  • 75.4 percent set their base salary competitive position at the median of the marketplace.
  • 9.2 percent of companies reported providing catch-up or remedial salary increases.
  • The budget allocated for promotional increases had a median value of 0.50 percent.

Forecasted Merit Increase Budget for 2013 by Revenue



$30 billion and above



$15-30 billion



$10-15 billion



$5-10 billion



$3-5 billion



$1-3 billion



Source: Empsight International LLC,
2012/13 Policies, Practices & Merit Report.

The average, or mean, is the grand total divided by the number of data points.

The median is the middle value in a sample sorted into ascending order. The median is less likely to be skewed by outliers than the average/mean.

Stephen Miller, CEBS, is an online editor/manager for SHRM.


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