What’s Old is New Again: 3 Percent Base Salary Increases Forecasted To Continue In 2017

LOS ANGELES, Aug. 4, 2016 — For the sixth year in a row, U.S. employees can expect to see a moderate 3 percent median base salary increase in 2017, according to new research released by the Hay Group division of Korn Ferry (NYSE:KFY), the preeminent global people and organizational advisory firm. This figure is consistent with actual pay increases of 3 percent reported by the surveyed companies in 2016. These projected and actual increases have remained nearly constant since the end of the recession and reflect employers’ consistent conservative attitude toward base salary increases.

There is also consistency across most industries and employee groups in regard to median pay increases. All employee groups -- from clerical to executive -- are indicating about a 3 percent median increase. “The 3 percent 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.

However, the 3 percent median pay increase number doesn’t necessarily mean that all employees should expect to receive this number. There is a reasonable spread of practices across organizations in the survey. Organizations at the 90th percentile consistently indicate a 3.5 percent increase budget across all employee groups, while the 10th percentile is showing 2 percent across all groups. “We typically see top performers in organizations receiving between 1.5X and 2X the median salary increase for employees,” added McMullen. “So top performing individuals could expect to receive salary increases upwards of 6 to 8 percent.”

“Our survey data is indicative of a mixed economic outlook. 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,” said McMullen. “This coupled with relatively low inflationary pressures is causing many organizations to keep growth in fixed costs, such as salaries and benefits, in check.”

“On the other hand, we’re seeing 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,” added McMullen.

About the survey

Korn Ferry Hay Group’s forecast results are based on the latest data available from Hay Group’s U.S PayNet database, provided by participants representing more than 850 U.S. organizations from March through June 2016. Actual pay data is gathered from the same group of respondents and tabulated in July each year. This is Hay Group’s 37th year of conducting the survey. Typical respondents to the survey include compensation professionals in the Human Resources departments of small to large U.S. organizations across a wide range of industries. Hay Group’s U.S. PayNet database represents compensation practices for more than 2,200 companies and more than 4.3 million employees.

Korn Ferry Hay Group’s Global PayNet database contains data for more than 20 million job holders in 24,000 organizations across more than 110 countries. Click here to learn more about PayNet.

About Korn Ferry

Korn Ferry is the preeminent global people and organizational advisory firm. We help leaders, organizations, and societies succeed by releasing the full power and potential of people. Our nearly 7,000 colleagues deliver services through our Executive Search, Hay Group and Futurestep divisions.