updated September 17, 2019
Recent pay-forecast studies are in broad agreement that 2020 pay raises will be, on average, only minimally larger than employees pocketed this year.
Salary-increase budgets for U.S. employers are projected to grow next year by just 0.1 percent above the actual average budget increase for 2019, confirming that wage growth isn't accelerating much despite record-low unemployment, shows WorldatWork's 2019-2020 Salary Budget Survey: Top-Level Results.
U.S. salary budgets are projected to rise by an average (mean) of 3.3 percent in 2020, up from an actual year-over-year increase of 3.2 percent for 2019 and 3.1 percent in 2018, according to the WorldatWork's survey data, collected through May 2019 from more than 6,000 responses, including from companies making no salary adjustments.
In the table below, the mean is the mathematical average, and the median is the middle value after listing expected budget increases in successive order. Outliers, or extreme values on either the high or low end, have the bigger effect on the mean and less on the median.
Total U.S. Salary Budget Increases
|
Employee Category |
Projected 2020 Mean |
Projected 2020 Median |
Actual 2019 Mean |
Actual 2019 Median |
| Nonexempt hourly, nonunion | 3.3%
| 3.0% | 3.2% | 3.0% |
|
Nonexempt salaried | 3.2% | 3.0% | 3.1% | 3.0% |
| Exempt salaried | 3.3% | 3.0% | 3.2% | 3.0% |
| Officers/executives | 3.3% | 3.0% | 3.3% | 3.0% |
|
All |
3.3% |
3.0% |
3.2% |
3.0% |
Source: WorldatWork 2019-2020 Salary Budget Survey: Top-Level Results.
WorldatWork, an association of total rewards professionals, also reports that:
- In 2019, the overall average salary structure adjustment is 2.2 percent, representing an upward shift from 2 percent in 2018. The projection for 2020 is holding steady at 2.2 percent.
- For employees receiving promotional increases, the size of the average base pay increase rose to 8.9 percent, up from 8.7 percent a year earlier.
"Companies need to recognize that while the salary budget increases are relatively modest, in the current work landscape salaries are just one component in a compensation package," said Alison Avalos, director at WorldatWork. "Other
recent research indicates that beyond salary, total rewards benefits that provide a great work experience and a great life experience are valued highly by employees, and companies are addressing these needs to remain competitive."
Salary.com, which provides compensation data and analytics, similarly projects that salary-increase budgets
will again see median growth of 3 percent in 2020 in all employee categories. The firm expects the following mean salary-budged increases for 2020:
-
Executives: a 3.2 percent rise, unchanged from 2019.
-
Other managers: a 3.3 percent rise, up from 3.1 percent.
-
Exempt employees: a 3.3 percent rise, up from 3.2 percent.
-
Nonexempt employees: a 3.3 percent rise, unchanged from 2019.
More than 1,600 HR professionals across diverse industries participated in
Salary.com's 2019-2020 U.S. and Canada National Salary Budget Survey, which closed in June.
"In today's war for talent, market pay rates for many jobs are far outpacing annual salary-increase budgets," said Chris Fusco, Salary.com senior vice president of compensation. "Given that median increases have remained flat at 3 percent for nine years in a row, organizations competing for talent in today's market must think differently about how they allocate increases across top performers, employees with hot jobs and skills and high-potential employees."
Consultancy Willis Towers Watson's 2019 General Industry Salary Budget Survey—U.S., conducted in late April through early July 2019, with responses from 858 organizations, similarly found that among companies granting salary increases, 2020 average base pay raises are projected as follows:
-
Executives: 3.2 percent, up from 3.1 percent in 2019.
-
Management, excluding executives: 3.2 percent, unchanged.
-
Exempt, nonmanagement employees: 3.2 percent, up from 3.1 percent.
-
Nonexempt salaried employees: 3.1 percent, unchanged.
-
Nonexempt hourly employees: 3.1 percent, up from 3.0 percent.
Even with low unemployment rates, "some clients are feeling uncertain about what the market will bear in 2020 and, therefore, continue to be selective on where they spend their compensation dollars," said Catherine Hartmann, North America Rewards leader at Willis Towers Watson. For instance, "some employers are carving out increase pools for their high-potential and top performing employees, setting aside premium pay for highly valued skills, considering market adjustments for critical segments and providing more frequent increases outside of the annual cycle for in-demand jobs."
More of the Same
Fewer than one-fourth (21 percent) of U.S. employers are increasing merit increase budgets for 2020, with the majority opting to keep merit increase budgets the same, according to HR consultancy
Mercer's 2019/2020 US Compensation Planning Survey, which likewise pegs 2020 salary budgets to increase 3.0 percent, up from 2.9 percent in 2019. Mercer's survey includes responses from more than 1,300 mid-size and large employers across the U.S.
"Employers are taking a more holistic 'employee experience' view when it comes to investments in the workforce, but the annual merit increase budget is a line item that doesn't appear to be moving much," said Mary Ann Sardone, Mercer's U.S. talent solutions leader. "Investments in other programs related to wellbeing, career development and technology are getting the attention of employers in an effort to better meet the needs of their employees."
Compensation advisory firm Empsight's August 2019
Policies, Practices & Merit Survey Report, based on responses from 251 large U.S. companies, looks at 2020 pay from a variety of perspectives, including the outlooks below.
______________
Forecasted Merit Increase Budget for 2020
Participating companies were asked to indicated the forecasted merit increase budget for 2020, if known.
| |
Mean |
25th Percentile |
Median |
75th Percentile |
Overall Forecasted Merit Increase Budget
| 2.93% | 3.00%
| 3.00% | 3.00% |
| Executive | 2.95% | 3.00% | 3.00% | 3.00% |
| Management | 2.95% | 3.00% | 3.00% | 3.00% |
| Professionals | 2.94%
| 3.00% | 3.00% | 3.00% |
| Support / Nonexempt | 2.92%
| 3.00% | 3.00% | 3.00% |
Source: Empsight,
Policies, Practices & Merit Survey Report.
______________
Forecasted Total Increase Budget for 2020
Participating companies were asked to provide the forecasted total percentage salary increase budget (merit + promotional + special competitive adjustment) for 2020
|
Mean |
25th Percentile |
Median |
75th
Percentile |
|
Forecasted Total Increase Budget | 3.28% | 3.00% | 3.00%
| 3.50% |
| Executive | 3.22% | 3.00% | 3.00% | 3.50% |
Management
| 3.23% | 3.00% | 3.00% | 3.50% |
| Professionals | 3.22%
| 3.00% | 3.00% | 3.50% |
| Support / Nonexempt | 3.21%
| 3.00% | 3.00% | 3.50% |
Source: Empsight,
Policies, Practices & Merit Survey Report.
Mercer's survey also reports total increase budget data as a combination of merit increases, cost of living adjustments, across the board increases, promotional increase budgets and additional or other increase budgets. Mercer projects total increase budgets to rise 3.6 percent in 2020, up from 3.5 percent in 2019 tand 3.3 percent in 2018.
"This signals that companies are seeing the need for pay increases beyond merit-based raises to address market and pay equity adjustments given today's hypercompetitive labor market," said Sardone.
Mercer's survey also showed that:
-
54 percent of organizations budget separately for promotional increases, up from 51 percent last year. The average promotional budget represented 1.0 percent of payroll in 2019, down slightly by 0.2 percent vs. 2018.
-
All employee groups saw a year-over-year increase in promotional increases. The average promotional increase received by an employee was 9.3 percent, climbing 1.5 percent from last year.
Bureau of Labor Statistics Finds Modest Wage Growth In a finding that's along the same lines as the surveys noted above, wages and salaries for private industry workers
increased 3.0 percent for the 12-month period ending in June 2019 compared with an annual increase of 2.9 percent in June 2018, the U.S. Bureau of Labor Statistics (BLS) reported July 31 in its quarterly Employment Cost Index.
Update: In August, average hourly earnings for all employees on private nonfarm payrolls rose by 11 cents to $28.11, following 9-cent gains in both June and July, the BLS reported Sept. 6 in its Employment Situation release. Over the past 12 months,
average hourly earnings have increased by 3.2 percent.
|
[SHRM members-only how-to guide: How to Establish Salary Ranges]