Workers to Receive Modest Pay Raises in 2012

October 20, 2011 ( – Workers can expect modest pay raises averaging 2.8% next year, compared to 2.7% in 2011 and 2.9% in 2010, according to a survey by Buck Consultants. 
Buck’s survey, “Compensation Planning for 2012,” also found pay-for-performance will continue to play a critical role, given the importance of effectively allocating budgets to retain top performers. Eighty percent of respondents have a pay-for-performance philosophy, although this is down from 87% last year.

“Our research into pay practices reveals that most employers plan to hold the line similar to 2011,” said Stephen Mork, Principal at Buck Consultants. “Given the slow economic recovery and stubborn unemployment rate, organizations are taking a cautious and conservative approach to compensation planning to stay within their payroll budgets.”   

Average promotion increases range from 5.7% (for C-suite employees) to 7.3% (at the vice-president level).

The most prevalent type of short-term incentive pay is a company-wide plan with an individual performance component. These bonuses are relatively unchanged from last year.

A blend of stock options and full value awards (time- and performance-based restricted stocks) remain the most prevalent long-term incentive awards for C-suite employees. Broad-based employee groups are most likely to participate in time-based restricted stock plans.

Buck’s survey found that organizations’ top talent-related priorities for 2012 are retention of talent (62%) and employee engagement (56%).

Actions for retaining top performers include: new career development opportunities (64%), market pay adjustments (43%), larger base pay increases (30%), increased non-cash recognition (28%), and larger bonus opportunities (21%).

Other findings from the survey include:

•  Fifty-two percent of organizations offer a hiring or retention bonus to employees with specialized industry or product knowledge.

•  Referral bonuses are offered by 56% of employers. More than three-quarters (77%) of respondents who provide these bonuses cite a better chance of getting a strong performer.

•  Seventy-three percent of respondents communicate their pay increase budgets with managers and employees.

The survey was conducted in August and includes responses from more than 280 employers in a variety of industries.