90% of Organizations Are Maintaining Salary Increase Budgets, For Now
47th WorldatWork Annual Salary Budget Survey Reveals Impact of Pandemic on Salary Budgets
August 11, 2020
August 11, 2020 — Scottsdale, Ariz. – In the midst of marketplace uncertainties, salary increase budgets are still in play at most organizations. The longest-running survey of its kind, now in its 47th year, WorldatWork’s Salary Budget Survey provides CEOs, Chief Financial Officers and HR professionals with comprehensive, year-over-year data to design competitive compensation plans and Total Rewards strategies that attract and retain high-performing employees. The data covers nearly 14 million employees from 19 countries. Industry and geographic breakout information can be customized in numerous ways for the U.S. and Canada in the “Online Reporting Tool,” allowing users to create in-depth analyses to build reports by geographic region, industry, state/province, etc. (Journalists: for a copy, contact email@example.com.)
The detailed survey covers base salary increases, merit budgets, salary structure adjustments (U.S. and Canada), promotional increases (U.S.), variable pay plans (U.S.), pay equity adjustment budgets (U.S.), and more. An update survey will be fielded in October 2020 to offer further insights into salary budget strategies during these extraordinary times.
“As the economy recovered following the financial collapse in 2008, we first saw a gradual rise in salary increase budgets, then a leveling off, but over the past two years with low unemployment rates and increased competition for talent, we saw a bigger jump in salary increase budgets,” said Sue Holloway, Director, WorldatWork. “Now, the sudden jolt of the pandemic has driven a higher percentage of organizations indicating a zero salary increase budget for 2020. More than 70% of companies are still giving increases in the 3% to 4% range, but we recognize the impact of the pandemic will lag. The October results of the updated survey will give a better indication of the future state of salary budgets.”
The national total salary budget increase average fell this year, dropping to 2.9%, a pronounced departure from the projected increase to 3.3% average. Contributing to the decline in average salary increase budgets is the significant increase in the percentage of organizations indicating a 0% salary budget increase for 2020, nearly 10 times higher than 2019. Respondents project that salary budget increases for 2021 will mirror 2020.
While most industry shifts in salary increase budgets are downward, Public Administration and Accommodation and Food Services were least impacted this year, showing no change from 2019. Although stable this year, Public Administration is projected to have one of the largest falls in 2021. At 1.5%, Educational Services saw the lowest salary increase budgets.
Average merit increase budgets for 2020 were reported at 2.6%, a 0.3% drop from 2019.
Even though the size of all salary increase budgets, including merit budgets, declined in 2020, organizations continue to differentiate base pay-related awards. Average performance-based pay increases for 2020 are expected to fall to 2.5% for middle performers and 3.6% for high performers.
Sixty-five percent of responding organizations expect to make pay adjustments in 2020 to remediate pay equity issues, and about the same number are anticipating pay equity adjustments
Among U.S. metro areas, Denver and Seattle saw the largest average salary increase budgets in 2020.
Internationally, India saw the largest swing in salary increase budgets, dropping from 9.9% in 2019 to 8.4% in 2020. However, India’s 8.4% reflects the largest salary increase budget in the world.