Workplace of Choice

The numbers are out it looks like 3% is the "magic number" for 2012 merit budgets.  The national HR consulting firms surveyed US companies in the late spring to determine what companies are budgeting for 2012 and found that, on average, companies are expecting to spend 3% on merit increases next year.  Additionally, Mercer is reporting that 97% of companies are planning to grant merit increases in 2012 and pay freezes and pay cuts have also diminished dramatically -- good news!  There are some geographical differences among projected increases, but the median for the major cities surveyed remains 3.0%.  In contrast, Aon Hewitt's annual U.S. Salary Increase Survey found that there was some variance by industry with some industries planning higher than average merit budgets, while others are scaling back a bit. 

The industries that can expect to see the highest salary increases include:

• Energy/oil/gas (3.6%)
• Real estate (3.6%)
• Construction/engineering (3.5%)
• Telecommunications (3.2%)
• Not-for-profit (3.2%)

The lowest increases are projected to be in:

• Government (1.7%)
• Building materials (2.5%)
• Research/development (2.5%)
• Rubbers/plastics/glass (2.6%)
• Education (2.6%)

As you go through the merit increase cycle, keep in mind that merit increases are a tool you can use to retain, reward and develop talent.  As the market uncertainty continues, encourage Managers and Employees to check in with each other… a simple question along the lines of “How are things going” can facilitate an honest and open conversation between an Employee and their Manager.  Now, more than ever, is the time to communicate honestly and openly about current company business conditions and increase percentages. 

Whatever you determine your merit budget to be, with good planning and a thoughtful process you can make the money go a long.  What are you strategies for determining how your budget is dispersed?  How do you use your merit budget to retain key performers?

Note: the following data sources were used to capture 2012 merit increase budget projections: