U.S. employees in line for another 3% pay raise in 2018, Willis Towers Watson survey finds

ARLINGTON, Va., Aug. 14, 2017 -- U.S. employees hoping for larger pay raises next year will have to wait a little longer. A new survey by Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company, reveals U.S. employers expect to hold the line on pay raises in 2018. The survey of 819 companies also found employers continue to reward their best performers with significantly larger raises to retain their best performers and strengthen their commitment to paying for performance.  

The survey, conducted by Willis Towers Watson Data Services, found that virtually all respondents (99%) are planning to give employees raises next year, with salaries for exempt (i.e., professional), nonmanagement employees to increase 3.0%. That’s the same increase they received in each of the past three years. Employers are also planning 3.0% average salary increases for management and nonexempt employees. Executives can expect slightly larger raises — 3.1% in 2018, 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, 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.”  

Indeed, the survey found exempt employees who received the highest performance ratings were granted an average salary increase of 4.5% this year, about 73% larger than the 2.6% increase given to employees receiving an average rating. Companies gave salary increases of 1.0% to workers with below-average performance ratings.

The survey also found that annual performance bonuses, which are generally tied to company and employee performance goals, are projected to hold steady or decline slightly in 2018 for most employee groups. Exempt employees are projected to receive bonuses that average 10.5% of salary, roughly the same amount companies budgeted for this year. Discretionary bonuses, generally paid for special projects or one-time achievements, are also projected to hold relatively steady compared with bonuses awarded last year and budgeted for this year. This is fairly consistent with recent discretionary bonus increases — for example, 72% of companies paid discretionary bonuses in 2015 versus 75% last year — and demonstrates that while salary increase budgets are holding steady for workers overall, employers are finding ways to recognize and reward employees for specific contributions.

“Employers are rethinking how to administer limited salary budgets. 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. So while organizations may be forecasting 3% increases, the landscape of how and when they are giving increases varies considerably,” said Sandra McLellan, Rewards practice leader, North America at Willis Towers Watson. 

About the survey

The Willis Towers Watson Data Services Salary Budget Survey was conducted between April and July 2017, and includes responses from 819 companies representing a cross section of industries. The survey report provides data on actual salary budget increase percentages for the past and current years, along with projected increases for next year.

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com. 

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