New survey data released by executive compensation consultancy Pearl Meyer show that 70% of organizations implemented larger salary increases this year compared to 2021, with 21% reporting “significantly higher” levels. When polled in November 2021, companies expecting larger increases indicated an average of 4.2%. The data show actual implemented increases were even higher than anticipated at 4.8%.
What it means to HR leaders
The research is the latest to indicate that many organizations are getting more aggressive about salary increases in light of a tight labor market and record-high inflation. Other recent analysis from Gartner found that 63% of executives plan to make compensation adjustments in response to soaring cost-of-living increases.
“Employers are definitely taking these steps to curb the Great Resignation, but they are also taking seriously the pressure employees are facing with the cost of living,” says Rebecca Toman, vice president of the survey business unit at Pearl Meyer.
The Pearl Meyer survey indicates not only are employers implementing salary increases this year—and larger ones than they previously anticipated—but one in four companies (23%) are planning mid-year salary adjustments in addition to their annual cadence, and an additional 8% are considering the action.
That so many firms are planning for a second round of adjustments is “very unusual,” Toman says. “Normally, budgets are set well in advance for an annual rise. This is further indication that a shift is occurring—at least for now—when it comes to setting pay for the established workforce.”
Experts say HR and benefits leaders cannot ignore compensation changes as they think about ways to keep employees in a hot labor market.
Adjusting salaries is “not the only thing, but it’s the biggest thing” when it comes to smart retention strategies, Tony Guadagni, senior principal in the Gartner HR practice, recently told HRE.
“If you have the opportunity, if you’re capable of raising wages, you’re going to do better in terms of retaining your employees than organizations that don’t.”
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