FOUR "WARNED" – Four Percent Increases The Norm Again Next Year

August 2, 2000 ( - The average annual pay increase for American workers is expected to come in at about 4% in 2001, for the eighth year in a row.

The consistency may be the result of an increased emphasis on variable pay programs to reward employees, according to preliminary survey data from William M. Mercer’s US Compensation Planning Survey.

Mercer’s survey found that since 1997 nearly half (49%) of respondents have increased the number of employees eligible for short-term incentives, while a similar number (45%) have increased the target payout level for those awards. 

Consistent Pattern

“The projected increases for 2001 are remarkably consistent with pay increases awarded to employees from 1994 through 2000,” says Steven E. Gross, Mercer’s US practice leader for employee compensation. “Despite what we hear about the tight labor market and continued difficulties in attracting and retaining good employees, employers appear determined to hold the line on fixed salary costs by limiting annual increases.”

Another key factor may be the relatively consistent inflation readings during this period. 

Surveyed companies projected the following average pay increase budgets for 2001:

  • Executive  – 4.4%
  • Management  – 4.3%
  • Technical/Professional  – 4.3%
  • Nonexempt Clerical/Technician  – 4.2%
  • Nonunion Hourly – 4.0%

The full results of the 2000/2001 US Compensation Planning Survey will be published in late August. 

An online presentation of market trends and detailed data from the 2000/2001 US Compensation Planning Survey will be posted on Mercer’s new web site, , in early September.