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U.S. employees in line for slightly larger pay raises in 2019, Willis Towers Watson survey finds

Modestly larger discretionary bonuses also projected


August 14, 2018

U.S. employers are projecting slightly larger pay raises for employees in 2019 as the unemployment rate has fallen sharply and the job market has tightened.

ARLINGTON, VA, August 14, 2018 — The survey also found employers rewarded their top performers with the biggest raises this year and are projecting modestly larger discretionary bonuses next year in their ongoing effort to reward and retain the best performing employees.

The 2018 General Industry Salary Budget Survey, conducted by Willis Towers Watson Data Services, found U.S. employers project to give exempt, nonmanagement employees (i.e., professional) average pay increases of 3.1% in 2019, compared with 3.0 this year. Nonexempt hourly employees can also expect larger increases next year — 3.0% in 2019 versus 2.9% this year. Employers are planning smaller increases for executives (3.1% versus 3.2%), while steady increases are planned for management employees (3.1%) and nonexempt, salaried employees (3.0%). Only 3% of companies plan to freeze salaries next year. Pay raises have hovered around 3% for the past decade. The last year employers provided significantly larger increases was 2008 (3.8%).

The survey also found companies continue to reward their “star” performers with significantly larger pay raises than average performing employees. Employees receiving the highest possible rating were granted an average increase of 4.6% this year, 70% higher than the 2.7% increase granted to those receiving an average rating.

“After a decade of consistently flat pay raises, we are witnessing a slight uptick as companies are feeling pressure to boost salaries, given the low unemployment rate and the best job market in many years,” said Sandra McLellan, North America Rewards business leader at Willis Towers Watson. “While companies have been able to hold the line on raises, the tides are changing. Many companies are establishing slightly larger salary budgets while at the same time focusing on variable pay such as annual incentives and discretionary bonuses to recognize and reward their best performers.”

Indeed, the survey found companies are projecting discretionary bonuses — generally paid for special projects or one-time achievements — will average 5.9% of salary for exempt employees, slightly larger than companies budgeted for this year. Slightly larger discretionary bonuses are planned for managers and salaried, nonexempt employees. Annual performance bonuses, which are generally tied to company and employee performance goals, are projected to hold steady or decline slightly in 2019 for most employee groups.

“A growing number of companies are coming to grips with the fact that employees are more willing to change companies to advance their careers and to talk openly about their pay. As a result, organizations are facing increased pressure entering next year to devise a focused strategy and plan on how to allocate their precious compensation dollars or risk losing some of their best talent,” said McLellan.

About the survey

The Willis Towers Watson Data Services General Industry Salary Budget Survey was conducted between April and July 2018, and includes responses from 814 companies representing a cross section of industries. The survey report provides data on actual salary budget increase percentages for the past and current years, along with projected increases for next year.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has more than 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.

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