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Press Release

U.S. employers plan to hold the line on pay raises in 2020, Willis Towers Watson survey finds

Largest raises, discretionary bonuses going to top performers

Total Rewards|Compensation Strategy & Design
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August 8, 2019

ARLINGTON, VA, August 8, 2019 — U.S. employees hoping for larger pay raises next year may be disappointed. A new survey by leading global advisory, broking and solutions company Willis Towers Watson (NASDAQ: WLTW) reports U.S. employers plan to hold the line on budgeted pay raises in 2020, despite low unemployment and a tight labor market. Some employers, however, are projecting modestly larger discretionary bonuses next year, while others are adding separate promotional budgets in their efforts to supplement employee salaries — with the goal of rewarding top talent.

The 2019 General Industry Salary Budget Survey, conducted by Willis Towers Watson Data Services, found salary increases are expected to hold steady in 2020 for exempt, non-management employees (3.1%), management employees (3.1%), nonexempt hourly employees (3.0%) and nonexempt salaried employees (2.9%). Companies are budgeting slightly smaller increases for executives (3.1% in 2020 versus 3.2% this year). Virtually all companies (96%) plan to give raises next year, the same percentage as this year; however, more companies are formalizing their promotional increase budget (30%), which is up significantly since last year. Pay raises have hovered around 3% for the past decade. The last year employers provided larger increases was 2008 (3.8%).

Companies continue to reward their star performers with significantly larger pay raises than average performing employees. According to the survey, employees receiving the highest possible rating were granted an average increase of 4.6% this year, 70% higher than the 2.7% increase granted to those receiving an average rating.

“Despite an extremely tight labor market, most employers are either not willing or fiscally unable to increase their fixed costs across-the-board by bolstering their salary budgets,” said Catherine Hartmann, North America Rewards leader at Willis Towers Watson. “Instead, many companies are doubling down on providing significantly larger market adjustments to employees in high-skill roles and selective pay raises to their top performers. Some employers are also recognizing the contributions of these employees with better annual incentives and discretionary bonuses.”

The survey found companies are projecting discretionary bonuses — generally paid for special projects or one-time achievements — will average 5.9% of salary for exempt employees, compared with 5.3% of salary granted for bonuses last year. Slightly larger discretionary bonuses are also planned for managers and salaried, nonexempt employees. Annual performance bonuses, which are generally tied to company and employee performance goals, are projected to decline modestly for most employee groups compared with bonuses paid last year.

“While most companies are keeping their salary budgets steady, we are also seeing many companies getting creative with base pay beyond the traditional annual merit increase. For instance, some employers are carving out increase pools for their high-potential and top performing employees, setting aside premium pay for highly valued skills, considering “market adjustments” for critical segments and providing more frequent increases outside of the annual cycle for in-demand jobs. Even with low unemployment rates, some clients are feeling uncertain about what the market will bear in 2020 and, therefore, continue to be selective on where they spend their compensation dollars,” concluded Hartmann.

About the survey

The Willis Towers Watson Data Services General Industry Salary Budget Survey was conducted between April and July 2019, and includes responses from 858 companies representing a cross section of industries. The survey report provides data on actual salary budget increase percentages for the past and current years, along with projected increases for next year.

The 2019 General Industry Salary Budget Survey – U.S. report is available for purchase here.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.