The Overture Group is an IMA member search and compensation consulting firm…
Its déjà vu all over again. Yes, the phenomenon of having the feeling that the situation currently being experienced has already been experienced in the past.
Nearly every company in WorldatWork’s annual salary survey is planning modest salary increases for 2018. The average projected increase is 3%, the same increase for the past six years.
This continues the long-term trend of modest salary increase budgets as companies continue to operate in a low inflation environment without the ability to increase their prices. With low revenue growth rates and some employee costs, such as health care growing double digits, CEOs have to offer modest salary increases to protect their profit margins.
The Overture Group Insight
Considering the strong stock market and rumors of some labor shortages, it is somewhat surprising that salary budgets have not increased.
The global economy is strong, and the U.S. economy is expected to expand further due to the current presidential administration’s eased regulatory and tax policy. And, of course, the stock market is at all-time highs.
However, salary increases are still modest. Why? Some believe improved productivity due to technology is responsible. Technology continues to replace workers in many areas, and competition from lower-cost global labor markets, are among the reasons why. Companies continue to use technology to try to do more with fewer workers. Another reason is healthcare costs. Companies must look at their total compensation cost, including benefits, and many companies are facing dramatic increases in healthcare costs.
Most employers say that workers can make more, if the company does well, with cash bonuses or incentives. However, many of these plans don’t work. Employees remain suspect about their chances for a payout, as company performance is largely out of their control. For these plans to be effective, companies must establish a clear line-of-sight between employees’ job activities and the incentive plan goals.
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