Nov. 16, 2012 at 8:43 AM ET
As the economy picks up, slightly higher pay raises are coming with it.
Many U.S. workers can expect to bring home 3 percent more in 2013 than they did this year, according to forecasts from national compensation surveys .
That’s just over the average median pay raise of 2.7 percent to 2.8 percent in 2012. It's also more than the 2 percent to 2.5 percent raise most employees saw immediately after the recession, which started in late 2008, according to a 2013 salary report from Bucks Consultants.
Three percent raises are the new normal, says Ravin Jesuthasan, a compensation expert and managing director with management consultant Towers Watson. “I don’t think anyone should expect merit increases to deviate that much going forward, even if the economy does well,” he says.
Pay raises remain skimpy because unemployment is still high, and because companies continue to keep a lid on fixed costs, including labor, according to Jesuthasan and other compensation analysts.
As earnings at many businesses improve, however, they’re spending more on variable compensation. Put into plain English, that means next year workers can expect to see bigger bonuses or other monetary incentives, things that companies can choose to pay out or not depending on how they’re doing financially.
Top performers, people who do the best at going above and beyond their job descriptions, will see the biggest pay increases of all, roughly 50 percent more than the average worker, says Kerry Chou, a compensation practice leader for WorldatWork, the nonprofit human resources researcher.
During hard times when companies were asking fewer employees to do more for little or no change in compensation, promotions were few and far between. That’s changing, too, says David Van De Voort, a Buck Consultants principal. For 2013, he says, “we’re seeing a nice uptick in the percentage of people offered promotions, and also the size of the pay increase that people get for the promotion has gone up.” Promotions are double-edged swords, though, because more pay comes with more work and responsibility, he says.
Here are other trends compensation experts predict for 2013: