Supply-demand pendulum starts to favor employee pay hikes

America's economic recovery may be anemic, but it's strong enough to improve the outlook for pay increases in the coming months, concludes the 2013-2014 salary budget survey from WorldatWork, an association of human resource and benefits professionals at U.S. and international firms.

Data were gathered in the spring over a five-week period that overlapped with Food Processing's Salary and Job Satisfaction survey. While the magazine's survey focused on pay hikes received over the prior 12 months, WorldatWork queried companies about salary budgets for the coming 12 months. WorldatWork received input from 5,207 HR professionals overseeing 15 million workers, including employees at 75 U.S. and Canadian food and beverage companies. Study subscribers gain access to industry-specific benchmarks for merit and general pay increases.

"Organizations are beginning to pay more attention to retention of employees as the economy continues to improve," WorldatWork concludes. Nonetheless, compensation budgets have not returned to their pre-Recession levels: average salary budgets increased 2.9 percent for the 12 months ending in May 2013, compared to 3.9 percent in 2008. Still, that was an improvement over 2011 and 2012, when companies budgeted 2.8 percent more.

For the 12 months ending in May 2014, corporations are budgeting an additional 3.1 percent for salaries, though the survey points out that actual increases have failed to meet budgeted amounts in each of the last four years. Most companies in WorldatWork's survey are bumping pay budgets 2%-4%. Fewer than 6 percent have frozen their budgets, down from 33 percent in 2009.

In lieu of cash, companies are relying more heavily on nonfinancial carrots to retain staff members, particularly their top performers, the study's authors suggest. Career development and programs that expose employees to wider work experiences help reduce turnover by increasing the "value proposition" of a job, they say, adding that compensation may be workers' most important consideration, it typically ranks as the fifth or sixth reason for leaving a job. Some companies are emphasizing the "total rewards package" in their workforce communications, such as flex-time and telecommuting options. Sign-on bonuses and promotions drawn from other budgets also are being given more frequently to top performers.

Job level and industry affect salary bumps. Actual and projected salary increases for officers and executives exceed overall averages for 2011 through 2014, while line workers are least likely to share proportionately in expanded pay budgets. Salaried staffers typically reflect the norm. Workers in mining and oil-and-gas extraction have outgained the market in recent years, and construction workers are expected to join them in the top quartile in the coming year, due to a labor shortage created when experienced workers left the industry in the wake of the housing bust.

Manufacturing employees enjoyed salary budget increases that were higher than the overall average in 2012 and 2013. The actual increase of 3 percent for manufacturing budgets in last year exceeded the 2.65 percent average increase found in Food Processing's survey.

Smaller is better when salary budgets are viewed in relation to organization size. Companies with fewer than 500 employees consistently report higher budget increases than larger ones, with firms employing more than 20,000 workers usually bumping budgets the least. Company revenues are a less reliable indicator of a growing salary purse, though firms with revenues under $100 million are the most generous when budgeting more for salaries.