As concerns regarding the global economy continue, U.S. workers’ salaries are only marginally increasing; however, there's the chance for workers to balance low base pay increases through performance-based awards, according to a new survey by Aon Hewitt, the global human resources solutions provider.
For salaried exempt workers, base pay growth hit 2.8 percent in 2012, a slight increase from 2.7 percent in 2011, the survey finds. Salary growth hit a record low of 1.8 percent in 2009 but has continued to climb slowly upward.
The survey projects that pay increases are expected to rise slightly in 2013 with salaries for executives, salaried exempt and salaried nonexempt workers are expected to grow 3 percent in 2013.
"It is unlikely that salary increases will reach pre-recession levels of 4 percent or higher any time soon," says Ken Abosch, compensation marketing, strategy and development leader at Aon Hewitt. "Companies are more impacted by the global economy than ever before as a result organizations continue to be conservative with their spending, but we anticipate that attitude will remain even after the economy rights itself — holding down spending on base pay is the new normal."
To minimize fixed costs while encouraging engagement and top performance, 90 percent of respondent offer variable pay or performance-based awards that must be re-earned each year. This figure is similar to that in 2011. For salaried exempt workers, respondents say they have spent 12 percent on variable pay in 2012 as opposed to 11.6 percent in 2011, and variable pay spending is estimated to grow to 12.1 percent in 2013.
The survey finds that nonunion hourly workers faced the largest gain in variable pay in 2012 as respondents spent 6 percent on variable pay rewards in 2012 over 5.2 percent in 2011. Despite the growth, that figure is expected to drop to 5.6 percent in 2013.
"Organizations are being more strategic with the limited compensation dollars they have to spend," Abosch says. "They are spending less on base pay increases for all workers and instead are rewarding high-performing workers with larger performance-based awards. This allows them to better control spending while still providing incentives for their best employees."
Certain U.S. cities are expected to see higher salary increases than the national average in 2013, including Denver at 3.6 percent; Austin, Texas, Dallas, Detroit and San Diego, Calif., at 3.4 percent; and Houston and Kansas City at 3.3 percent. Cities that are believed to face lower-than-average increases in 2013 are San Francisco at 2.7 percent and Chicago and Minneapolis at 2.8 percent.
Among the industries surveyed, the highest salary growth for 2013 is expected to occur in mining and milling at 3.8 percent; computers, related products and energy at 3.6 percent; and automotive and vehicle manufacturing at 3.3 percent. The industries with the lowest estimated increases are education at 2.5 percent; rubber, plastic and glass at 2.6; government at 2.6 percent; and health care and medical services also at 2.6 percent.