The safe way on pay

With the US economy still uncertain, employees will see average salary increases of 3% in 2017, Korn Ferry finds. Top talent may get more.

In the upcoming year, US employers will send their staffs a clear message in their paychecks about how conservatively they see the nation’s economy faring: For the sixth year in a row, Americans, from clerks to executives, can expect to see a moderate 3% median base salary increase in 2017, new research released by the Hay Group division of Korn Ferry finds.

“The 3% base salary increase has become a bit of a broken record during the past several years,” said Tom McMullen, Hay Group’s North American total rewards expertise leader.

He explained that the 2017 salary increase estimate is consistent with actual 3% pay hikes reported by companies that the firm surveyed in 2016. These projected and actual increases have remained nearly constant since the end of the recession. They reflect employers’ consistent conservative attitude toward base salary increases, especially in light of uncertain economic conditions.

The vigor of the US economy, which has recorded a tepid 2% or so average annual growth rate for a half-dozen years now, has been a central concern for companies, policymakers, and politicians. It’s a hot-button issue in the 2016 presidential race, and, for many Americans, one of its clearest indicators comes back to jobs and pay.

After US labor officials reported decidedly weak May jobs figures, the numbers for June and now July have been much more robust, including with wage gains. But economy-watching executives, such as Korn Ferry CEO Gary Burnison, caution organizations and their leaders about over reliance on short-term employment data in forecasting macro-economic trends. They also caution that the US and global economies are struggling with great uncertainty in Europe, especially after the British vote to withdraw from the European Union, and weaknesses in Asia, notably in China and Japan.

“Our survey data is indicative of a mixed economic outlook,” McMullen said. “While we’ve had upward pressure in wages due to the lowest unemployment in seven years and minimum wage increases, many organizations are still uncertain of their economic outlook. This, coupled with relatively low inflationary pressures, is causing many organizations to keep growth in fixed costs, such as salaries and benefits, in check.”

To be sure, top talent who performs in the workplace can also be considered for compensation that exceeds national averages: “We typically see top performers in organizations receiving between 1.5X and 2X the median salary increases for employees,” McMullen said. “So top-performing individuals could expect to receive salary increases upwards of 6% to 8%.”

Further, he noted, in companies surveyed by the firm, “there is a willingness to provide compensation upside through short- and long-term incentive plans and financial recognition programs. Organizations are willing to provide handsome cash payments using these programs if they get the corresponding performance from the organization and its employees.”