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Accurate and timely compensation data holds even greater value this year as the dynamic between employee and employer continues to shift. Quiet quitting has given way to outright loud quitting and other forms of pushback as employers demand their teams return to the office.
In the past decade, it seemed that most employers were on equal footing when it came to employee compensation information and forecasting. Competitors had similar salary survey data and made business and labor decisions in roughly similar patterns, leading to steady 2.8% to 3.8% annual pay increases.
Here we are, halfway through 2023 and it seems like the economic factors for managing pay are pointing in varying directions. Early annual planning compensation surveys are predicting budgets above 4.0%, but there is also the continued anticipation of a (mild) recession and some predictions that annual salary increase budgets are going to be smaller this year.
As the tight labor market cemented itself as a long-term challenge, we started looking at not only annual salary increase budgets and actuals delivered, but year-over-year changes seen in salary survey data such as the Mercer Benchmark Database. The per capita changes gives us a look at how much average salaries are changing due to hiring rate increases and off-cycle adjustments. What became very evident was that employers are making off-cycle adjustments and increasing hiring rates, but not consistently. The change in salary data varies by job title and industry.
For those of you who typically purchase salary surveys every couple of years and age the data on the off years by applying some portion of the annual increase budget number, you may want to reconsider that practice.
With the differing labor statistics and complexities, what employers are paying for particular job titles from year to year changes. You shouldn’t rely on adjusting the prior year’s data by adding a percentage, such as the 3.9% merit increase budget for 2023, to reflect future market data. The degree of pay increase varies dramatically by job, particularly when you include the effect of newly hired employees and compression.
First off, we can see that by career level, employee compensation has been increasing at disparate rates. Hourly, or paraprofessional, jobs have continued to move ahead of the rest of the pack and showed more than a 5% year-over-year increase on average from 2021 to 2022. Will the increase be even higher from 2022 to 2023?
When examining the year-over-year change in salary information for individual jobs, the differences are even greater. Some jobs, like the Tax – Senior Manager, are moving consistently, while others, like the entry level Food service worker, have experienced a very large increase from 2021 to 2022. Other job titles, such as the General Office Administration entry level professional and Market Research and Analysis Sr Professional, experienced a higher-than-normal increase from 2020 to 2021, but leveled out a bit in the following year. Then, from 2022 to 2023 many of these jobs slowed in wage growth dramatically. The year-over-year changes in salary survey data are all over the board. Applying an aging factor to the 2022 survey results certainly would not reflect what we’re seeing in 2023 survey results.
The complex labor market HR professionals see in 2023 and beyond means that there is no shortcut or substitution for valid, quality annual salary survey data and compensation reports.
Through a combination of headline events and years of slow incremental change, social issues found their way into the spotlight. Creating a safe and inclusive work environment, flexibility for working caregivers, pay equity or fair compensation, and reskilling employees are essential components of the employee experience and your employer brand.
However, a strong foundation of competitive pay remains essential. Increased pay transparency and access to compensation data through the internet empowers employees to become more critical of current salary or the compensation package connected to new employment offers. Flexibility, company culture, and having a good manager are still necessary for recruiting and engaging employees, but to be considered, total compensation must be competitive.
Some employers are finding various changes are necessary to create an employee value proposition compelling to their current and prospective employees. The needs and wants of today’s employees are wide: some workers are determining where and how their time is most valuable and looking for flexibility in where and how they work, while others are prioritizing meeting monthly expenses or planning for retirement. The closer you are to that sweet spot where the employer, employee, and external perspectives intersect, the better off you are. You need salary surveys, because being confident in your understanding of how the market is moving makes your compensation and overall talent strategy more effective.
Mercer made a significant change in moving to data connector over the past several years, which has streamlined the salary survey participation process and provided a platform for leveraging data across compensation surveys. What does that mean to you? A much richer database of quality compensation data points for you to use in your market pricing, job matching, and compensation assessments.
For example, our renowned general industry survey, the 2023 US Mercer Benchmark Database (MBD), includes data for over 6,000 positions with data from 3,220 companies. Because organizations are providing data for their entire workforce, rather than the limited number of matches for particular survey modules, we've been able to collect and publish salary data for significantly more job titles. This mean you are able to find more of your jobs within a particular salary survey. It also means we have data for more locations, and with how distributed today’s workforce is, that can come in handy.
More jobs and more locations covered means more value for your dollar. With annual survey purchases now a necessity, make sure you’re getting your money’s worth.
Not convinced yet? Give us a call at 866-605-1031. Or if you prefer, send an email — we like that too!