Earlier this month, Mercer conducted the 2020 US Compensation Survey – Monthly Pulse. Given the current economy and dynamism of the labor market, we decided to take the “pulse” of employers right now to find out how the COVID-19 crisis may or may not have impacted 2020 salary increase budgets and implementation.
Timing is everything
Given the timing of the pandemic (Q1), many companies (83%) had already budgeted for annual increases and had already implemented or will according to the original plan. Had the real impact hit the US even a few weeks later, the choices employers made to salary increases might have been different.
Increases are lower than expected
At this point, for those organizations that have implemented merit and total increases, the averages are 2.5% and 2.7%, respectively. This does include zeros, meaning those organizations that have chosen to freeze or even reduce salaries.
A relatively small percentage (17%) had not yet established budgets for 2020 annual increases. Of those companies that had not established budgets, the majority are taking a “wait and see” approach.
Some faring better than others
Within the numbers, there’s a bit more to the story in terms of differentiation by industry (or “sector”) — there are highs and lows in terms of impact.
Some of the sectors appearing to better weather the storm are Banking/Financial services, Insurance/Re-insurance, and Life Sciences. Others such as Mining & Metals, Other Non-Manufacturing, and Retail & Wholesale seem to have had to make the largest reductions in employee increases.
Healthcare is an interesting story. While their numbers reported in this pulse survey seem to show that they are implementing merit and annual increase as planned (around 2.8%) and above the national average, we do expect this to change.
With recent news indicating the costly treatment of COVID-19 patients and reduction/delay in elective procedures starting to impact financials, we’re seeing layoffs and hearing that healthcare organizations are planning to freeze salaries, eliminate bonuses, and look for other cost saving ways to stay afloat.
Return to work on the horizon
As organizations move from responding to this crisis to figuring out how to return to work, even if it doesn’t look as it did before, we expect to see compensation planning numbers continue to change. Consider this April report a baseline and stay tuned to see how trends emerge.
To stay abreast of the trends and prepare for 2021 compensation planning, be sure to participate in the US Compensation Planning Pulse Survey – May edition.
Note: All numbers are averages and include zeros.