U.S. Workers to Receive only Moderate Pay Raises in 2013

A new Towers Watson survey is predicting moderate pay raises for American workers in 2013 as employers are looking to closely manage costs in a wavering economy. Annual bonuses are also not expected to be fully funded this year. The average projected pay raise in 2013 is 2.9 percent for salaried non-management employees, up only marginally from 2011’s average of 2.7 percent.

“Most U.S. companies continue to keep their salary budgets relatively tight, especially since they are having little difficulty attracting and retaining employees, in general, reflecting the soft labor market,” said Laura Sejen, global practice leader for Rewards at Towers Watson. “At the same time, most organizations are having as much trouble attracting and retaining critical-skill employees as they did during the economic expansion from 2002 to 2007. With base pay remaining a top driver of attraction and retention for these employees, organizations will need to focus on allocating available resources toward rewarding top performers and employees with critical skills.”

Highest-performing, exempt workers can expect to receive an average salary increase of 4.7 percent this year while workers performing below average will receive a meager merit increase of 1.3 percent.

“Companies have been increasing performance expectations for individuals and the organization. Employees are feeling the stress of trying to meet these increasing demands, and many feel unsupported. Organizations that raise the performance bar without also increasing rewards to reflect these efforts are in danger of an erosion of employee engagement and performance,” said Laurie Bienstock, North America Rewards leader at Towers Watson. “Companies will have to make up for these lower funding levels by doing a better job of differentiating rewards between top performers and underperformers.”