Companies will be increasing base salaries 3% again this year. Companies are expecting greater competition for talent in 2016. So, most people will be getting a 3% raise and fewer people will receive no pay increase at all. This is just one of the findings from a recent survey report conducted by Wilson Group, Concord, MA, and sponsored by the BOSE Corporation.
The survey included data from over 50 leading companies in New England, and these companies reflect practices seen in other national and international studies. The survey was published in November, 2015, and looked back on 2015 and asked for projections for 2016.
According to the survey results, only 3% to 5% of employees will NOT be receiving a pay increase. This is down from 8% for the technology and financial industries in previous years. Most pay increases will range from 2.5% to 6.0% based on individual performance.
It will be a good year for bonuses. Virtually all companies use bonus plans, and over half (57%) include all employees. In 2015 the median payout was 100% of the target payout, which means bonuses will meet expectations. The range is from 65% of target payout at the low point, and 122% for the top performing companies. While there are companies not making payouts this year, they were in a small minority.
For 2016, companies are anticipating greater growth. In 2015 44% of the companies reported growth greater than 4%; this number jumps to 62% for 2016. Over 56% of the companies reported plans to increase staff, and only 2% reported decreasing staff levels. The “hot jobs” for 2016 continue to be for all levels in Information Technology, and professional and first level management in Sales and Marketing functions. Professionals in the Finance field will also see increasing job opportunities. Voluntary turnover rates in 2015 were 7.1%, and involuntary turnover (created by terminations, layoffs, etc.) was just 2%.
The issue for base salaries in 2016 will be the assessment needed to implement new FLSA (Fair Labor Standards Act) regulations on overtime pay. There is also pressure to examine the impact of a higher minimum hourly pay rate. Also, companies are looking to better align their bonus performance measures with their strategies and priorities – encouraging better line-of sight metrics and those with a strong link to customer satisfaction and productivity. Very few companies are looking to change their stock or equity award programs. The changes that have been driven by Dodd-Frank and SEC reporting requirements have been made, and only minor modifications are seen with executive and employee equity awards. People will likely see what they received in the recent past.
Companies are making the investments needed to improve their ability to compete for talent, and building better business processes for rewarding performance. These are not major changes, but they are strategically significant. It is clear that companies are recognizing a world of increasing competition, of growth opportunities, and the importance of creating and strengthening their competitive advantage – for business, for people, for leaders. While each company is pursuing different pressures and opportunities, it is clear that 2016 will be a strong year for pay and performance.
Thomas B. Wilson – President, Wilson Group