Employers in the U.S. are budgeting salary increases of 3.4 per cent in 2022, according to a new survey by WTW, formerly known as Willis Towers Watson.
The survey, which polled more than 1,000 U.S. employers, found 32 per cent of respondents raised their salary increase projections in recent months. Employers boosted their projected average salary increase from three per cent in June 2021 to 3.4 per cent six months later. Employers gave employees an average pay increase of 2.8 per cent in 2021.
The quick rise in salary increase projections for this year comes as what’s been dubbed “The Great Resignation” shows no signs of abating, according to a press release. “There’s a great reprioritization of work, rewards and careers under way and it’s putting significant pressure on compensation programs for many employers,” said Catherine Hartmann, North America rewards practice leader at WTW, in the release.
“As with their responses to the pandemic, employers are looking to be resilient and adaptable in their approach. For instance, as a result of recognizing that labour shortages, and not inflation, are the primary driver of growing salary budgets, many employers are targeting certain segments such as hourly workers, digital talent and workers with in-demand skills to receive higher pay.”
Employer concerns over the ability to hire and retain talent far outweighed other factors for boosting salary increases. Nearly three-quarters (74 per cent) of respondents cited the tight labour market for increasing budgets from prior projections, while just over a third (34 per cent) cited anticipated stronger financial results and 31 per cent cited inflation or the rising cost of supplies.
“While companies are boosting salary budgets, bigger pay raises alone won’t be enough to help address their attraction and retention challenges,” said Lesli Jennings, senior director of work and rewards at WTW, in the release.
“Supplemental tactics, including sign-on bonuses, equity and cash retention and recognition enhancements, plus employee experience drivers such as enhanced career enablement, emphasis on mental well-being, focus on [diversity, equity and inclusion] and learning and re-skilling opportunities can combine to improve the effectiveness of a compensation program. Winning the talent race will require employers to continue to be creative and comprehensive with their total rewards strategy.”