The Good and Bad News About Next Year’s Pay Raises

A new employer survey reveals that 2016 will likely come with a pay raise for most American workers. Find out how much you can expect.

If you’re hoping for a bump in pay next year, here’s the good news: You’ll probably get one. Now for the not-so-great news: Your pay raise will likely be small, averaging about 3 percent.

That was the finding of a new survey of more than 1,100 U.S. companies by professional services firm Towers Watson. The expected 3 percent bump in pay is on par with the average 3 percent raise for the past two years.

“To a large extent, 3 percent pay raises have become the new norm in corporate America. We really haven’t seen variation from this level for many years,” said Sandra McLellan of Towers Watson. “While most organizations are finding the talent they need at current salary levels, we are seeing more employers prioritizing how their salary budgets are being spent, especially in light of their ongoing difficulty in attracting and retaining top performers or employees with critical skills.”

Although 3 percent may not sound like much, it’s still ahead of inflation, which was 0.1 percent in June, or about 1.7 percent if you leave out food and gas prices, according to CNN Money.

Towers Watson noted that the number of companies giving employees a pay raise has been on the rise since the recession in 2008, when many companies temporarily ditched raises.

Of course, job performance plays a significant role in the pay increase an employee receives. The survey found that exempt workers who earned the highest performance ratings averaged a 4.6 percent raise in 2015, compared with the 2.6 percent pay bump earned by employees who were given average job ratings. Workers who performed below average received less than a 1 percent raise in 2015.

“We’ve seen many companies make dramatic changes to their approach to performance management, including eliminating formal performance reviews or taking a ‘ratingless’ approach to reviews. Many organizations are rethinking whether linking base salary increases primarily to last year’s performance makes sense or if this should be the role of short-term-incentive and bonus programs,” said McLellan.

For more on the growing number of corporations that are bidding farewell to the time-consuming and costly job performance reviews, read “Woo-Hoo! Companies Junk Performance Reviews.”

Also, check out “Want a Raise? Quit Your Job.”

Did you receive a pay raise this year? What do you think of the estimated 3 percent bump in pay for 2016? Share your comments below or on our Facebook page.

Stacy Johnson

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