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In order to provide up-to-date compensation planning information as our economy continues to evolve, we will continue to administer our US and Canadian Compensation Planning surveys as pulse surveys with our next editions in August and November. We conducted our March 2021 US Compensation Planning Survey1 and welcomed responses from more than 1,000 participants. The questions about actual increases, incentives, and structure adjustments confirmed that there was little to no change from what employers predicted they would do at the end of 2020. However, additional questions provided new insights around planning for minimum wage increases and how skills are beginning to influence performance management.
With 41% of participating organizations reporting that COVID-19 had little impact on their financials in 2020, half responded that their salary increase budget for 2021 was unchanged or similar to that of prior years. The actual average merit increase delivered so far in 2021 was 2.8%, but that number dips to 2.5% when including those companies that did not deliver increases. Total increases were slightly higher at 2.9%, decreasing to 2.6% when factoring in those not providing increases. Of those companies that indicated COVID-19 had a high impact on their financials, the average merit increase was 2.7%, but the average fell to 1.7% when including those not giving increases.
Similarly, the majority of organizations reported little impact to both short- and long-term incentive payouts or grants.
Salary structures, still the dominant form of salary management, were adjusted 2.2% on average, with some companies, such as those in high-tech, implementing a higher adjustment, averaging 2.7%.
The Raise the Wage Act of 2021 would increase the federal minimum wage from $7.25 to $15 over the next 4 years. Several states, including California, Illinois, and Massachusetts, have already passed state legislation committing to implementing the $15/hour minimum wage over the next few years.
So, are employers preparing for this wage increase? Not overwhelmingly, no. Of the 173 respondents who indicated they have a population of hourly workers who would be impacted, 50% did not set aside a separate budget to cover the impact of an increase in hourly wages. Perhaps it’s just not on their agenda yet, given that even the states who have committed to the increase will roll it out gradually over a period of time.
Although 82% of organizations reported that they continue to assess the employees’ achievement of goals when determining performance, skills are now part of the discussion for many. Employers indicated that they look at the attainment of new skills (34%), the proficiency in skills in the current job (58%), as well the potential to develop additional skills (15%).
Is your organization starting to discuss incorporating skills into your talent strategy? If not, or if you’re early in your journey, perhaps taking a look at Mercer’s latest thinking on acquiring flexibility and agility through skills-based practices might be helpful.
As we move into the second quarter, past a very busy time for many HR and Rewards professionals, one thing is for certain. This year, we’re facing new challenges and addressing new issues. Creating a flexible — remote and/or hybrid — workforce will start to dominate our discussion. Policies need to be developed, communications drafted, and governance put into place. The new shape of work may become a priority, stretching our thinking in new ways.
But don’t lose sight of the fundamentals. Remember that ensuring you are investing in the right jobs, people, and skills for your organization is critical for retention and attraction. Use this time to identify where you may need to conduct additional benchmarking or analysis. Doing so will allow you to effectively utilize new salary survey data when it is released later this year.
So far, 2021 is looking like an improvement from last year in many ways. Make sure you have the insights and data to make it great for you and your organization.
Questions? Call 866-605-1031 or email us at firstname.lastname@example.org.
1This is the first of 3 pulse surveys that we will conduct in 2021. To participate in the next survey, sign up for notifications.