2010 Pay Hikes Pegged at Average 2.5%

July 20, 2010 (PLANSPONSOR.com) – U.S. employers are reporting a 2.5% average salary budget increase across all employee categories for 2010.

The WorldatWork 2010-2011Salary Budget Survey, according to a news release, found an employee’s performance affects the size of the raise. Low performers can expect to see minimal increases of up to 0.7% or nothing at all, middle performers might expect a nominal base pay raise of 2.4%, and high performers may expect an average of 3.7% (54% higher than a middle performer). Surveyed employers reported that roughly 24% of employees are rated as high performers, while most are classified as middle performers. 

“With underfunded salary budgets this year, employers want the most bang for their buck,” said Anne C. Ruddy, president of WorldatWork, in the news release. “They are no longer averse to withholding merit increases for poor performers so they can afford to grant meaningful increases to better performers.”  

The survey also found that one in three companies has a separate promotional budget as standard practice. A promotion could mean an additional 7% to 8% increase for the promoted employee’s base salary.  

In addition, a top performer can expect to benefit from an employer’s variable pay program. For 2010, employers are budgeting an average of 5% to 12% for variable pay, depending on employee category (e.g., exempt, non-exempt salaried and hourly, officers/executives).  

“In this economy, being an average performer just doesn’t cut it anymore,” said Alison Avalos, research manager for WorldatWork, in the news release. “Companies expect performance and are willing to reward employees based on organization success, individual performance or both. Pay for performance is alive and well.”  

WorldatWork collected survey data in April 2010. Respondents are WorldatWork members employed in the HR, compensation, and benefits departments of mostly large U.S. companies. A total of 2,497 respondents participated.  A preliminary data report is at http://www.worldatwork.org/waw/adimLink?id=39152.

Top Salaries for Top Performers 

Metro area is another variable influencing the size of salary increases for top performers. While surveyed employers by WorldatWork reported an average pay increase of 3.7% for exceptional performers, employers in the following metro areas reported above-average base pay increases for the cream of the crop: 

Metro                                 Average raise for top performers* 

San Jose,                           4.1% 

Boston                                4% 

Portland                              4% 

Seattle, Washington          4% 

Houston                              4% 

Detroit                                4% 

Washington, D.C.             3.9% 

Atlanta                                3.9% 

San Diego                         3.9% 

Tampa                               3.9% 

*Based on average pay increases for top performers, percentage of companies awarding raises (not shown) and percentage of employees classified as high performers (not shown).  Source: WorldatWork