August 14, 2020

Salary Survey Data Indicates Decrease in Salary Increase Budgets 

According to recent survey data released by WorldatWork, a nonprofit organization focused on providing data related to total rewards, the US workforce experienced a decline in salary increase budgets for the first time since 2008. The 2020-2021 Salary Budget Survey reports an average salary budget increase of 2.9%, down from 3.3% that was predicted prior to the pandemic.

What’s more, although 84% of organizations surveyed report that they will pay some type of salary increase, there is a significant number of organizations who plan no salary budget increase for 2020. 
The annual survey included responses from 4,754 organizations and covers data from almost 14 million employees from 19 countries. 

Highlights from the survey include:

  • Industry: While most industry shifts in salary increase budgets are downward, public administration and accommodation and food services were least affected this year, showing no change from 2019. Although stable this year, public administration is projected to have one of the largest falls in 2021. At 1.5%, educational services saw the lowest salary increase budgets.
  • Merit pay: Average merit increase budgets for 2020 were reported at 2.6%, a 0.3% drop from 2019.
  • Performance-based pay: Even though the size of all salary increase budgets, including merit budgets, declined in 2020, organizations continue to differentiate base pay-related awards. Average performance-based pay increases for 2020 are expected to fall to 2.5% for middle performers and 3.6% for high performers.
  • Pay-equity adjustments: 65% of responding organizations expect to make pay adjustments in 2020 to remediate pay equity issues, and about the same number are anticipating pay equity adjustments in 2021.
  • Metro areas: Denver and Seattle saw the largest average salary increase budgets in 2020.
  • Around the globe: India saw the largest swing in salary increase budgets, dropping from 9.9% in 2019 to 8.4% in 2020. However, India’s 8.4% reflects the largest salary increase budget in the world.

Updated survey data in October could change projections, but for now respondents indicated that their 2021 salary budget increases will likely mirror 2020.

In addition to lower salary increases, companies are also re-evaluating their incentive pay programs. As a result of the pandemic, many organizations are anticipating a reduction of payouts from their short-term incentive plans, performance-based long-term incentive plans and sales incentive plans. 

Sources: WorldatWork, “Salary Increase Budgets Fall for First Time in 12 Years” SHRM, “ Employers Adjust Pay and Incentives Amid Economic Turmoil”

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