HR Forecasts 3% Pay Raise All Around in 2015

Author: Mark Crail, Head of Salary Surveys and HR Data Benchmarking Services

December 29, 2014

Two in every three employers are set to increase pay rates in the year ahead, with most looking to award an extra 3% in the 2015 pay round, according to exclusive XpertHR research.

The US Pay Planning 2015 survey, which obtained forecasts from HR and reward specialists in 166 organizations on 627 separate employee groups, found that 64.8% are confident of making a pay award of some sort in the coming year.

Just 7.5% said there would be no award next year, with a further 27.8% unsure at this stage.

The factors most commonly cited as driving pay awards up in the year ahead are improvements to employee productivity, better organizational performance and ability to pay, and the need to recruit and retain key employees.

However, pressure from employees to keep pace with rising prices is a relatively minor factor. Over the 12 months prior to September 2014, the CPI-W inflation figure (Consumer Price Index for Urban Wage Earners and Clerical Workers) stood at just 1.7%.

Across the board, in organizations of all sizes and in every sector of the economy, the forecast increase in the pay budget stands at a median (or mid-range figure) of 3%. Fewer than one in four expect to budget for less than that, while a further one in four plans to add 4% or more to pay.

But the reality of many employees could be very different. Two in three pay awards are merit based, and that figure looks set to rise as employers say their top reward priority is to strengthen the link between pay and performance.

The deck is also stacked in favor of senior managers, with one in four expected to take home a raise of 5% or more in 2015.

The survey shows that the final few months of the year are among the busiest for those working in reward, with more than half (52.8%) of all organizations setting their pay budgets in the run-up to the end of 2014, and one in three awards (36.1%) taking effect in January.