“Until the economy shows some solid and consistent improvement, most companies are keeping their salary budgets relatively tight,” said Laura Sejen, Rewards Global Practice Leader at Towers Watson. “At the same time, companies also recognize the need to reward their top performers or risk losing them to competitors and, as a result, continue to differentiate pay raises based on individual performance.”
According to the survey, workers who receive the highest performance ratings will be in store for median salary increases of 4.5% this year, which is 80% more than workers with average ratings, who will receive 2.5%. Workers with below-average performance ratings will receive median merit increases of 1.4%.
Employers Expect to Fully Fund Annual Bonuses
A separate survey of 316 North American companies conducted by Towers Watson found that companies’ average projected bonus funding for current-year performance is 101% of target, marking the second consecutive year that companies are able to fully fund their annual bonuses for workers. Companies funded annual bonuses in 2010 at 111% of target.
“Despite the recent economic turmoil, many companies are experiencing stronger profits and higher revenues this year. Since funding of annual bonus pools is typically based on these financial measures, companies are anticipating being well positioned to fund their annual bonus pools at target or better at year-end,” said Sejen.