Most US companies plan to give employees pay raises and annual bonuses next year despite the economic fallout from the pandemic, according to a survey of more than 1,000 employers conducted by Willis Towers Watson.
The survey found companies are projecting average salary increases of 2.8% for all employees in 2021, including exempt, nonmanagement and management employees; the increase is 2.7% for nonexempt salaried and hourly employees as well as executives.
Companies granted employees increases between 2.5% and 2.7% this year, below the 3% companies had budgeted before the pandemic hit. Salary increases have hovered around 3% for the past decade. Only 7% of companies are not planning pay increases next year, down significantly from 14% this year, an indication that many organizations are projecting a turn toward normalcy in 2021.
The hard-hit healthcare and retail industries are projecting a slight bump but still fall shy of pre-pandemic levels with salary increases projected to average 2.6% and 2.8%, respectively. The insurance and nondurable goods industries expect above-average increases of 2.9% and 3.0%, respectively.
“This has been the most challenging compensation planning year for many companies since the Great Recession,” said Catherine Hartmann, North America Rewards practice leader at Willis Towers Watson. “However, unlike then, companies have been hit differently depending on their industry, the nature of how work gets done and the type of talent they need.”
The survey also found companies continue to reward star performers with significantly larger pay raises than average-performing employees. Employees receiving the highest possible rating were granted an average increase of 4.7% this year, 68% higher than the 2.8% increase granted to those receiving an average rating.
Three-quarters of companies, 76%, are planning to award annual performance bonuses next year, roughly the same percentage as this year. Bonuses are projected to average 11% of salary for exempt employees, while bonuses for nonexempt salaried and hourly employees will average around 6.8% and 5.6%, respectively.
The Willis Towers Watson Data Services General Industry Salary Budget Survey was conducted between April and July 2020. It includes responses from 1,010 companies representing a cross section of industries.