Skip to main content
  • Foundation
  • Executive network
  • CEO Circle
  • Enterprise Solutions
  • Linkage Logo
  • Store
  • Sign In
  • Account
    • My Account
    • Logout
    • Global
    • India
    • MENA
SHRM
About
Book a Speaker
Join Today
Renew
Rejoin Now
Renew
  • Membership
  • Certification
    Certification

    Smiling asian student studying in library with laptop books doing online research for coursework, making notes for essay homework assignment, online education e-learning concept
    Get Certified!

    Be recognized as an HR leader with your SHRM-CP or SHRM-SCP credential.

    • How to Get Certified

      Demonstrate your ability to apply HR principles to real-life situations. No other HR certification compares.

      • How to Get Certified
      • Eligibility Criteria
      • Exam Details and Fees
      • SHRM-CP
      • SHRM-SCP
      • Which Certification is Best for Me
      • Certification FAQs
    • Prepare for the Exam

      Give yourself the best chance to pass your SHRM certification exam.

      • Exam Preparation
      • SHRM BASK
      • SHRM Learning System
      • Instructor-Led Learning
      • Self-Study
      • Study Aids & Add-ons
    • Recertification

      Recertify your SHRM Credentials before your end date!

      • Specialty Credentials
      • Qualifications
  • Topics & Tools
    Topics & Tools

    Stay up to date with workplace news and leverage our vast library of resources to streamline day-to-day HR tasks.

    The white house in washington, dc.
    Executive Order Impact Zone

    Do not abandon, but evaluate and evolve. It is about legal, equal opportunity for all.

    • News & Trends

      Follow breaking news and emerging workplace trends.

      Legal & Compliance

      Stay informed on workplace legal updates and their impacts.

      From the Workplace

      Explore diverse perspectives from your peers on today's workplaces.

      Flagships

      Get curated collections of podcasts, videos, articles, and more produced by SHRM.

    • HR Topics
      • AI in the Workplace
      • Civility at Work
      • Compensation & Benefits
      • Inclusion & Diversity
      • Talent Acquisition
      • Workplace Technology
      • Workplace Violence Prevention
      SEE ALL
      SHRM Research
    • Tools & Samples

      Access member resources and tools to streamline HR tasks.

      • Forms & Checklists
      • How-To Guides
      • Interactive Tools
      • Job Descriptions
      • Policies
      • Toolkits
      SEE ALL
      Ask an Advisor
  • Events & Education
    Events & Education

    SHRM25 in San Diego, June 29 - July 2, 2025
    Join us for SHRM25 in San Diego

    Register for the World’s Largest HR Conference being held on June 29 - July 2, 2025

    • Events
      • SHRM25
      • The AI+HI Project 2025
      • INCLUSION 2025
      • Talent 2026
      • Linkage Institute 2025
      SEE ALL
      Webinars
    • Educational Programs

      Designed and delivered by HR experts to empower you with the knowledge and tools you need to drive lasting change in the workplace.

      Specialty Credentials

      Demonstrate targeted competence and enhance credibility among peers and employers.

      Qualifications

      Gain a deeper understanding and develop critical skills.

    • Team Training & Development

      Customized training programs unique to your organization’s needs.

  • Business Solutions
  • Advocacy
    Advocacy

    Make your voice heard on public policy issues impacting the workplace.

    Advocacy
    SHRM's President & CEO testifies to Congress on "The State of American Education"
    • Policy Areas
      • Workforce Development
      • Workplace Inclusion
      • Workplace Flexibility & Leave
      • Workplace Governance
      • Workplace Health Care
      • Workplace Immigration
      State Affairs

      SHRM advances policy solutions in state legislatures nationwide.

      Global Policy

      SHRM is the go-to for global HR leaders and businesses on workplace matters.

    • Advocacy Team (A-Team)

      SHRM’s A-Team is a key member benefit, giving you the tools, insights, and opportunities to shape workplace policy and drive real impact.

      Take Action

      Urge lawmakers to support policies that create lasting, positive change.

      Advocacy & Legislative Resources

      Access SHRM’s curated policy materials and content.

    • SHRM-Led Coalitions
      • Generation Cares
      • The Section 127 Coalition
      • Learn More & Partner with SHRM Government Affairs
  • Community
    Community

    Woman raising hand in group
    Find a SHRM Chapter

    Easily find a local professional or student chapter in your area.

    • Chapters

      Find local connections from over 607 chapters and state councils and create your personalized HR network.

      SHRM Connect

      Post polls, get crowdsourced answers to your questions and network with other HR professionals online.

      SHRM Northern California

      Join SHRM members in the greater San Francisco Bay area for local events and networking.

    • Membership Councils

      Learn about SHRM's five regional councils and the Membership Advisory Council (MAC).

      • Membership Advisory Council
      • Regional Councils
    • Volunteers

      Learn about volunteer opportunities with SHRM.

      • Volunteer Leader Resource Center
Close
  • Membership
  • Certification
    back
    Certification
    Smiling asian student studying in library with laptop books doing online research for coursework, making notes for essay homework assignment, online education e-learning concept
    Get Certified!

    Be recognized as an HR leader with your SHRM-CP or SHRM-SCP credential.

    • How to Get Certified

      Demonstrate your ability to apply HR principles to real-life situations. No other HR certification compares.

      • How to Get Certified
      • Eligibility Criteria
      • Exam Details and Fees
      • SHRM-CP
      • SHRM-SCP
      • Which Certification is Best for Me
      • Certification FAQs
    • Prepare for the Exam

      Give yourself the best chance to pass your SHRM certification exam.

      • Exam Preparation
      • SHRM BASK
      • SHRM Learning System
      • Instructor-Led Learning
      • Self-Study
      • Study Aids & Add-ons
    • Recertification

      Recertify your SHRM Credentials before your end date!

      • Specialty Credentials
      • Qualifications
  • Topics & Tools
    back
    Topics & Tools

    Stay up to date with workplace news and leverage our vast library of resources to streamline day-to-day HR tasks.

    The white house in washington, dc.
    Executive Order Impact Zone

    Do not abandon, but evaluate and evolve. It is about legal, equal opportunity for all.

    • News & Trends

      Follow breaking news and emerging workplace trends.

      Legal & Compliance

      Stay informed on workplace legal updates and their impacts.

      From the Workplace

      Explore diverse perspectives from your peers on today's workplaces.

      Flagships

      Get curated collections of podcasts, videos, articles, and more produced by SHRM.

    • HR Topics
      • AI in the Workplace
      • Civility at Work
      • Compensation & Benefits
      • Inclusion & Diversity
      • Talent Acquisition
      • Workplace Technology
      • Workplace Violence Prevention
      SEE ALL
      SHRM Research
    • Tools & Samples

      Access member resources and tools to streamline HR tasks.

      • Forms & Checklists
      • How-To Guides
      • Interactive Tools
      • Job Descriptions
      • Policies
      • Toolkits
      SEE ALL
      Ask an Advisor
  • Events & Education
    back
    Events & Education
    SHRM25 in San Diego, June 29 - July 2, 2025
    Join us for SHRM25 in San Diego

    Register for the World’s Largest HR Conference being held on June 29 - July 2, 2025

    • Events
      • SHRM25
      • The AI+HI Project 2025
      • INCLUSION 2025
      • Talent 2026
      • Linkage Institute 2025
      SEE ALL
      Webinars
    • Educational Programs

      Designed and delivered by HR experts to empower you with the knowledge and tools you need to drive lasting change in the workplace.

      Specialty Credentials

      Demonstrate targeted competence and enhance credibility among peers and employers.

      Qualifications

      Gain a deeper understanding and develop critical skills.

    • Team Training & Development

      Customized training programs unique to your organization’s needs.

  • Business Solutions
  • Advocacy
    back
    Advocacy

    Make your voice heard on public policy issues impacting the workplace.

    Advocacy
    SHRM's President & CEO testifies to Congress on "The State of American Education"
    • Policy Areas
      • Workforce Development
      • Workplace Inclusion
      • Workplace Flexibility & Leave
      • Workplace Governance
      • Workplace Health Care
      • Workplace Immigration
      State Affairs

      SHRM advances policy solutions in state legislatures nationwide.

      Global Policy

      SHRM is the go-to for global HR leaders and businesses on workplace matters.

    • Advocacy Team (A-Team)

      SHRM’s A-Team is a key member benefit, giving you the tools, insights, and opportunities to shape workplace policy and drive real impact.

      Take Action

      Urge lawmakers to support policies that create lasting, positive change.

      Advocacy & Legislative Resources

      Access SHRM’s curated policy materials and content.

    • SHRM-Led Coalitions
      • Generation Cares
      • The Section 127 Coalition
      • Learn More & Partner with SHRM Government Affairs
  • Community
    back
    Community
    Woman raising hand in group
    Find a SHRM Chapter

    Easily find a local professional or student chapter in your area.

    • Chapters

      Find local connections from over 607 chapters and state councils and create your personalized HR network.

      SHRM Connect

      Post polls, get crowdsourced answers to your questions and network with other HR professionals online.

      SHRM Northern California

      Join SHRM members in the greater San Francisco Bay area for local events and networking.

    • Membership Councils

      Learn about SHRM's five regional councils and the Membership Advisory Council (MAC).

      • Membership Advisory Council
      • Regional Councils
    • Volunteers

      Learn about volunteer opportunities with SHRM.

      • Volunteer Leader Resource Center
Join Today
Renew
Rejoin Now
Renew
  • Store
    • Global
    • India
    • MENA
  • About
  • Book a Speaker
  • Foundation
  • Executive network
  • CEO Circle
  • Enterprise Solutions
  • Linkage Logo
SHRM
Sign In
  • Account
    • My Account
    • Logout
Close

  1. Topics & Tools
  2. Workplace News & Trends
  3. Compensation & Benefits
  4. 3% Salary Increases Put Greater Focus on Variable Pay
Share
  • Linked In
  • Facebook
  • Twitter
  • Email

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus convallis sem tellus, vitae egestas felis vestibule ut.


Error message details.

Copy button
Reuse Permissions

Request permission to republish or redistribute SHRM content and materials.


Learn More
News

3% Salary Increases Put Greater Focus on Variable Pay

Restrained pay raises likely to continue next year

August 7, 2017 | Stephen Miller, CEBS

A pen is pointing at a graph on a paper.


With salary increase budgets expected to remain at 3 percent for both 2017 and 2018, employers are continuing to leverage variable pay to differentiate rewards for high-performers.

"With a tight job market and reported financial gains, we might have expected to see more growth in salaries," said Kerry Chou, WorldatWork senior practice leader. "In the United States in particular, there are factors that might explain this plateau in growth, including the increased use of variable pay or noncash-based rewards."

Variable Pay

As companies hold down base pay increases to maintain a handle on fixed costs, "employees are still seeing increases in pay through improved variable pay plan payouts," Chou said.

The percentage of organizations using variable pay vehicles—such as annual or quarterly bonuses based on individual, team and organizational goal achievement—rose 1 percentage point for the third straight year, to 85 percent in 2017, according to research from WorldatWork, an organization of total rewards professionals, in its 2017-2018 Salary Budget Survey report.

Variable Pay Programs

Budgets for variable pay awards, representing a median percentage of base pay, are differentiated by employee classifications. Individual rewards within these groups will vary based on an employee's job performance rating.

 

Nonexempt Hourly Nonunion

Nonexempt Salaried

Exempt Salaried

Officers/ Executives

Average percent paid, 2016

5.0%

5.0%

11.0%

34.0%

Projected percent paid, 2017

5.0%

5.0%

12.0%

35.0%

Source: WorldatWork.

The median is the middle value after listing reported budget increase expectations in successive order. Outliers, or extreme values on either the high or low end, have less effect on the median than on the mean, which is the mathematical average.



The report reflects the results of a survey of WorldatWork members, most of whom work at large companies. Survey data was collected from March 27 through May 5 and included 1,819 respondents from U.S. organizations with at least 10 employees. "Top level" results from the survey were released last month.

[SHRM members-only guide: How to Establish Salary Ranges]

Merit Salary Increase Awards

Base salary increases are being awarded to 89 percent of employees in 2017, on average. For high-performers, the anticipated 2017 median merit increase award remains at 4.0 percent, the same as last year. 

2017 Merit Increase Awarded by Performance Category

Results are shown for the median percentage. 

 

High Performers

Middle Performers

Low
Performers

Percentage of employees estimated to be rated in this category

22%

70%

5%

Average merit increase estimated for this performance category

4.0%

3.0%

0.0%

Source: WorldatWork.

Minor Regional Differences

As in recent years, a comparison of salary budget increases among employers in different states for 2017 showed little variance. The average (mean) increases ranged slightly from 2.9 percent to 3.1 percent, with the median at 3.0 percent for every state.

Metropolitan areas showed a bit more average salary budget variance this year, ranging from 3.0 percent to 3.3 percent.

"The metropolitan areas that show the highest percentages, such as the Pacific Northwest, Los Angeles, Dallas or Atlanta, tend to be in regions of the U.S. that are driven by high-tech or minimum-wage increases," Chou noted.

No city came in below the 3 percent number. The highest average salary budget increases this year were in:

  • Atlanta: 3.3 percent.
  • Dallas: 3.2 percent.
  • Los Angeles: 3.2 percent.
  • Portland, Ore.: 3.3 percent.
  • San Francisco: 3.2 percent.
  • San Jose, Calif. 3.2 percent.
  • Seattle: 3.2 percent.

These findings also may in part reflect local and state government increases to minimum-wage rates, Chou said.

Another View of Merit Pay

Separately, New York City-based compensation firm Empsight shared preliminary results from its 2017 Policies Practices and Merit Report during a webcast at the end of July. The findings are based on mostly multinational and Fortune 500 companies in the firm's client database (70 percent with revenues above $5 billion).

The firm provided this comparison of merit increase budgets for 2017 and 2018.

Merit Increase Budget for 2017

Employee Category

Mean

25th Percentile

Median

75th Percentile

Executive

2.79%

2.50%

3.00%

3.00%

Management

2.76%

2.50%

3.00%

3.00%

Professional

2.77%

2.50%

3.00%

3.00%

Support/Nonexempt

2.78%

2.50%

3.00%

3.00%

Source: Empsight.

-----

Merit Increase Budget for 2018

Employee Category

Mean

25th Percentile

Median

75th Percentile

Executive

2.81%

2.50%

3.00%

3.00%

Management

2.82%

2.50%

3.00%

3.00%

Professional

2.82%

2.70%

3.00%

3.00%

Support/Nonexempt

2.82%

2.70%

3.00%

3.00%

Source: Empsight.


"Overall, merit budgets remained the same from 2016 levels across all industries," said Susan Bell, principal consultant at Empsight. While slightly higher budgets were found in the professional service, pharmaceutical, energy and consumer product sectors, "overall, merit budgets remained the same from 2016 levels across all industries," she said.

"The forecast appears slightly higher in 2018 merit projections versus 2017, but not by much," she noted. "Expectations are that spending will remain the same."

Total compensation increase budgets, which include merit increases, promotions and special adjustments, ranged between one-quarter to one-third percent on top of merit increases, Empsight found.

Total Compensation Budget Forecast for 2018

Employee Category

Mean

25th Percentile

Median

75th Percentile

Executive

3.22%

3.00%

3.00%

3.50%

Management

3.23%

3.00%

3.00%

3.50%

Professional

3.23%

3.00%

3.00%

3.50%

Support/Nonexempt

3.24%

3.00%

3.00%

3.50%

Source: Empsight.


"The 2018 forecast expects about the same spending across job levels, which is up only slightly from 2017," she noted. Overall total compensation budget increases are forecast to increase 3.25 percent (mean) and 3.00 percent (median) for 2018, compared with 3.21 percent (mean) and 3.00 percent (median) for 2017.

"Companies tend to target the median of the marketplace for both base and total cash compensation," added Jeremy Feinstein, Empsight managing director.

"For almost the last eight years, it's been a 3-percent merit world," limiting employers' ability to use pay to foster employee retention, he noted.


Star Performers Reap Rewards

Despite U.S. employers holding the line on base pay raises in 2018, employers continue to find ways to reward their best performers, a new survey by consultancy Willis Towers Watson shows, revealing a consensus with other recent pay forecasts.

The survey of a cross-section of 819 companies, conducted between April and July 2017, found that:

  • Virtually all respondents (99 percent) are planning to give employees raises in 2018.

  • For exempt, nonmanagement employees, salaries are expected to increase 3 percent on average—the same increase they received in each of the past three years.

  • For management and nonexempt employees, employers are also planning 3 percent average salary increases.

  • Executives can expect slightly larger base pay raises—3.1 percent in 2018, which is, however, slightly less than executives received this year and in 2016.

"Most companies are not under any significant pressure to increase their salary budgets in the near term," said Laura Sejen, managing director for human capital and benefits at Willis Towers Watson. "Companies are relying more on variable pay, such as annual incentives and discretionary bonuses, to recognize and reward their best performers. At the same time, they are rewarding star performers with significantly larger increases while granting minimal increases to their weakest performers."

The survey, for instance, showed that:

  • Exempt employees who received the highest performance ratings were granted an average salary increase of 4.5 percent this year.

  • Employees receiving an average rating received salary increases of 2.6 percent.

  • Workers with below-average performance ratings received salary increases of 1.0 percent.


Variable Pay Trends

Annual performance bonuses, generally tied to company and employee performance goals, are projected to hold steady in 2018 for most employee groups:

  • Exempt employees are projected to receive bonuses that average 10.5 percent of salary, roughly the same amount companies budgeted for this year.

  • Discretionary bonuses, generally paid for special projects or one-time achievements, are projected to hold relatively steady compared with bonuses awarded last year and budgeted for this year.

"Employers are rethinking how to administer limited salary budgets," said Sandra McLellan, rewards practice leader, North America, at Willis Towers Watson. "Some organizations are moving away from differentiating increases based on an employee's previous year's performance altogether while others are focusing on rewarding employees for skills development."


Related SHRM Articles:

2019 Salary Budgets Inch Upward Ever So Slightly, SHRM Online Compensation, July 2018

Where's the Wage Growth?, SHRM Online Compensation, June 2018

Short-Term Pay Incentives Offered to More Workers at Private and Smaller Companies, SHRM Online Compensation, May 2018.

Employers Try Better Ways to Measure and Reward Performance, SHRM Online Compensation, August 2017

2018 Salary Increase Budgets Expected to Rise 3% in the U.S., SHRM Online Compensation, July 2017

More Competition for Talent Is Leading to Rise in Wages, SHRM Online Talent Acquisition, July 2017

Evolving Company Culture from Base Pay to Variable Rewards, SHRM Online Compensation, June 2017


Communication
Compensation
Salary Surveys

Artificial Intelligence in the Workplace

​An organization run by AI is not a futuristic concept. Such technology is already a part of many workplaces and will continue to shape the labor market and HR. Here's how employers and employees can successfully manage generative AI and other AI-powered systems.



Related Content

Kelly Dobbs Bunting speaks onstage at SHRM24
(opens in a new tab)
News
Why AI+HI Is Essential to Compliance

HR must always include human intelligence and oversight of AI in decision-making in hiring and firing, a legal expert said at SHRM24. She added that HR can ensure compliance by meeting the strictest AI standards, which will be in Colorado’s upcoming AI law.

(opens in a new tab)
News
A 4-Day Workweek? AI-Fueled Efficiencies Could Make It Happen

The proliferation of artificial intelligence in the workplace, and the ensuing expected increase in productivity and efficiency, could help usher in the four-day workweek, some experts predict.

(opens in a new tab)
News
How One Company Uses Digital Tools to Boost Employee Well-Being

Learn how Marsh McLennan successfully boosts staff well-being with digital tools, improving productivity and work satisfaction for more than 20,000 employees.

HR Daily Newsletter

Stay up to date with the latest HR news, trends, and expert advice each business day.

Success title

Success caption

Manage Subscriptions
  • About SHRM
  • Careers at SHRM
  • Press Room
  • Contact SHRM
  • Book a SHRM Executive Speaker
  • Advertise with Us
  • Partner with Us
  • Copyright & Permissions
  • Post a Job
  • Find an HR Job
Follow Us
  • LinkedIn
  • Facebook
  • Twitter
  • Instagram
  • YouTube
  • SHRM Newsletters
  • Ask An Advisor

© 2025 SHRM. All Rights Reserved

SHRM provides content as a service to its readers and members. It does not offer legal advice, and cannot guarantee the accuracy or suitability of its content for a particular purpose. Disclaimer


  1. Privacy Policy

  2. Terms of Use

  3. Accessibility

Join SHRM for Exclusive Access to Member Content

SHRM Members enjoy unlimited access to articles and exclusive member resources.

Already a member?
Free Article
Limit Reached

Get unlimited access to articles and member-exclusive resources.

You've reached the limit of 1 free article this month. Join to access unlimited articles and member-only resources.

Already a member?
Free Article
Exclusive Executive-Level Content

This content is for the SHRM Executive Network and Executive Content Subscription members only.

You've reached the limit of 1 free article this month. Join the Executive Network and enjoy unlimited content.

Already a member?
Free Article
Exclusive Executive-Level Content

This content is for the SHRM Executive Network and Executive Content Subscription members only.

You've reached the limit of 1 free article this month. Join and enjoy unlimited access to SHRM Executive Network Content.

Already a member?
Unlock Your Career with SHRM Membership

Please enjoy this free resource! Join SHRM for unlimited access to exclusive articles and tools.

Already a member?

Your membership is almost expired! Renew today for unlimited access to member content.

Renew now

Your membership has expired. Renew today for unlimited access to member content.

Renew Now

Your Executive Network membership is nearing its expiration. Renew now to maintain access.

Renew Now

Your membership has expired. Renew your Executive Network benefits today.

Renew Now