Reviewing Compensation Packages
As the new year approaches, it is time for employers to consider salary increases for the 2020 year. The results produced by WorldatWork, an association of Total Rewards professionals, predict that salary increases will remain the same as 2019 or slightly increase by .1% from this year. This slight increase is due to an uncertain U.S. economy, low unemployment, increased investment in pay equity and increase in minimum wage rates. In addition, employees are changing the way they think about their jobs, and salary is only a component of a compensation package. Employees are looking for a great work experience, great life experience and additional perks in a package, which makes employers consider how their compensation packages are structured. Employers are also finding ways to provide incentives throughout the year outside of the annual cycle and implementing nonqualified plans to reward their key executives is one way to do so.
According WorldatWork, in 2019, salary budgets were at 3.2%. This year, the average is predicted to increase to 3.3%.
- 3.2% for exempt salaried workers
- 3.3% for officers and executives
- 3.1% for nonexempt employees
- 3.2% for nonexempt hourly
Similarly to WorldatWork, Willis Towers Watson’s “2019 General Industry Salary Budget Survey” had similar results:
- 3.1% for exempt and non-management employees
- 3.1% for management employees
- 3.0% for nonexempt hourly workers
- 2.9% for nonexempt salaried employees
- 3.1% for executives
With the uncertainty of the U.S. economy in the upcoming months and years, companies are trying to be more strategic in how they spend their compensation dollars. Some are predicting slower economic growth in the next two years, causing companies to be more conservative.
In looking at your 2020 plans, you must determine what is best for your Company and employees, while planning for any future market turns. Begin with reviewing your Company’s current objectives and compensation packages and see how the salaries and benefits compare with those goals. Would additional incentives and bonuses entice your employees more than a larger increase in compensation? With a competitive employment market, consider adding a nonqualified plan (Short-Term or Long-Term Incentive Plans, Supplemental Executive Retirement Plan or a Deferred Compensation Plan) to recruit, reward and retain key executives. In this last quarter of 2019, make plans now as to what you would like to have accomplished with your compensation goals for 2020, 2021 and beyond.