Whether or not HR plays a key role in setting or approving raises within an organization, these practitioners need to know about what employers are paying and how these decisions are made.
In a new survey of compensation and other pay practices in 2018, employers observed that the greatest challenge they faced in determining salary increases was budget constraints. Other challenges include administering compensation, a competitive salary market, and management approval/buy-in.
General salary increases were modest. Most commonly, staff from senior management to hourly non-office staff received an increase of between 0.01% and 3%. Only about 10% of respondents said employees received no increase, and few gave staffers a raise of over 5%. The vast majority gave merit raises. Respondents identified individual merit/performance as the most important factor that affects salary increases, followed by company performance. Of those companies that doled out bonuses, about half of these windfalls were in addition to base pay increases; only 6% were given instead of pay increases.
Asked what role human resources plays in setting raises at their organization, nearly half said that HR plays a major role in deciding the companywide level for raises. Most commonly, employers said that HR helps supervisors with tough pay decision, reviews each department’s raises, or approves each employee’s raises. Only 20% said that HR plays no role in setting raises.
Not surprisingly, 93% of respondents said they haven’t made any decisions about 2019 increases and bonuses for employees. Of those who are looking ahead, they anticipate that increases in 2019 will be comparable to those in 2018. However, fewer respondents said that 2019 bonuses will be in addition to base pay increases, and only 2% said they would be given instead of regular increases.
When asked about pay programs that inspire employees to achieve higher levels of performance, employers identified sales commissions and performance bonuses as the greatest motivators. Most employers said senior management has primary responsibility for designing and implementing such pay programs. However, 23% said the HR department played this role.
Responses made it clear that organizations put a great deal of thought into what various positions will be paid. Most respondents said they determine the salary range for a new job based on comparisons against similar positions within the organization, industry data, and research from the local job market.