LINCOLNSHIRE, Ill., September 18, 2017 – Despite a strengthening economy and high job rates, most U.S. workers are unlikely to see sizeable increases in their salaries for 2018, according to new research from Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions.
Aon’s 2017 U.S. Salary Increase Survey of 1,062 U.S. companies, projects base pay is expected to be 3.0 percent in 2018, up slightly from 2.9 percent in 2017. Spending on variable pay is expected to be 12.5 percent of payroll— a decrease to levels not seen since 2013.
“The economic outlook for most industries continues to improve with increased demand for goods and services and stronger job creation, but companies remain under pressure to increase productivity and minimize costs,” explained Ken Abosch, broad-based compensation leader at Aon. “As a result, we continue to see relatively flat salary increase budgets across employee groups, with most organizations continuing to tie the majority of their compensation budgets to pay incentives that reward for performance and business results.”
Workers who are not high performers may see an even less share of the compensation pie in the coming years. According to Aon’s survey, more than two-thirds of employers are taking some type of action to increase merit pay differentiation in 2018. Among those:
- 40 percent are reducing or eliminating increases for lesser performers
- 18 percent are using a more aggressive, highly leveraged merit increase grid
- 15 percent are setting more aggressive performance targets
Salaries by Industry and Geography
Workers in most U.S. cities can expect to see salary increases in line with the national average for 2018. However, some may be lucky to see higher-than-average increases in variable pay. These cities include Houston (14.7 percent), New York City (14 percent) and Philadelphia (13 percent).
Aon’s research also shows variation by industry. Workers in the automotive (3.2 percent), computer (3.2 percent), accounting/consulting/legal (3.3 percent) and telecommunications (3.2 percent) industries are expected to see higher-than-average salary increases in 2018, while workers in education (2.7 percent), construction/engineering (2.8 percent) and medical devices (2.8 percent) are expected to see lower-than-average increases. Variable pay budgets by industry vary widely, ranging from 19.3 percent in the pharmaceutical industry and 16.4 percent in banking/finance to 5.3 percent for workers in the health care/medical services field.
“The decrease in projected variable pay spending for 2018 illustrates the power of variable pay to act as a buffer to safeguard organizations from incurring increased costs when results are below expectation,” noted Abosch. “But this also signals a more pessimistic view of corporate performance in the coming year.”
For another view on interpreting Aon’s Salary Increase Survey results, view its Pay Insights blog.
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