According to a new survey, organizations are holding the line on salary increases for U.S. employees.

Mercer’s 2018/2019 US Compensation Planning Survey shows salary increase budgets for 2018 are 2.8%—no change from 2017—and projected to be only 2.9% in 2019, despite the tightening labor market and a high rate of workers voluntarily quitting their jobs.

The study also revealed that newly available investment dollars resulting from federal tax reform have generally not gone to salary increase budgets, with only 4% of organizations earmarking some of their anticipated tax savings for that purpose. Of that small group, 53% plan to increase their budget by less than 1% of payroll.

Risky Business

Mercer Partner and North America Rewards Practice Leader Mary Ann Sardone said in a statement that she believes companies are taking a risk by not investing more in their payroll budgets.

"By continuing to hold the line on salary increase budgets, they risk losing their top performers to competitors who are spending more dollars to attract key talent because it's easier to justify. It's an investment issue that companies should reconsider as they look toward building their workforce for the future.

"While employers initially responded to the tax rate drop with one-time spot bonus awards and some proactive minimum wage increases, little of this money is being invested in the annual pay increase," added Sardone.

"As the market continues in the same trajectory, those employers that focus on the budget needed for their strategic workforce plan rather than just following the pack will stand out."


About the survey: Mercer’s 2018/2019 US Compensation Planning Survey, which is the largest survey of its kind and has been conducted annually for more than 25 years, includes responses from more than 1,500 midsize and large employers across the U.S. The survey results capture seven employee segments: executive, management, professional (sales), professional (non-sales), office/clerical/ technical, trades/production/service, and unionized employees across multiple industries.