Senior Client Partner, ESG and Inclusive Rewards
Raises, Raises, and More Raises
They threatened to quit, and their bosses apparently heard them, raising salaries at rates that haven’t been seen in years.
Hourly pay rose 5.6% over the last twelve months, according to new data from the US government. That’s the best rate in two decades—which makes it the cause of headaches for many chief financial officers. This year, experts say, will be more of the same. Organizations expect to raise pay by an average of 3.5% to 4.0%, according to a new Korn Ferry survey of about 800 companies across the US and Canada. That might not sound like much, but it’s 0.5% to 1.0% higher than what was predicted 12 months ago, says Tom McMullen, leader of Korn Ferry’s North America Total Rewards expertise group. “It’s the craziness for in-demand hourly jobs, the hot economy, and inflation,” he says.
Companies have been on a hiring spree, adding an average of more than 400,000 jobs per month over the past year. At the same time, there have been more than 40 million instances of Americans quitting their jobs to seek higher wages, better benefits, or more meaningful work. A substantial portion of raises have come from firms that were either desperate to attract—or even more desperate to keep—employees.
That’s left a whole swath of employees who haven’t gotten much at all, however. In this era of increasing transparency, they’re finding out what their peers are earning, and inequities could lead to a variety of problems, experts say, including once-loyal employees quitting, lawsuits, and a reputation for unfairness.
“You’ve got to give your loyal employees more—and it’s not 5 to 10 percent increases. It could be 20 to 30 percent increases,” says Jacob Zabkowitz, vice president and general manager for Korn Ferry’s Global Recruitment Process Outsourcing business. McMullen adds that organizations can use numerous tools in place of pay raises, including retention bonuses, special recognition awards, promotions, and stipends covering education and training expenses.
Companies historically have been leery of giving across-the-board pay raises unless absolutely forced to. Firms today are already seeing how such pay bumps are affecting their competitors. For multiple clients of Sheila O’Grady, leader of the Korn Ferry Restaurant sector, the last quarter of 2021 was one of their best-ever sales quarters. But those same companies missed their profit expectations because they were paying more money to so many of their employees, O’Grady says. A firm might have raised hourly wages by just $2, but spread across tens of thousands of employees, O’Grady says, “it’s a big deal.”