2021 is Coming Soon - How Will You Plan for Salary Budget Increases?

In the last few months so much has drastically changed about our world. What hasn’t changed is the need for profitable companies to budget for salary increases next year. Though unemployment remains higher than it has been in many years, retaining top talent is still a pressing priority for employers.    

I’ve always advised my clients to look at compensation as more than just a salary; instead I advise companies to take a comprehensive view of how an employee is rewarded. Compensation isn’t a one-size-fits-all strategy. Yet a compensation program compliant with the California Fair Pay Act that still keeps your highly productive employees engaged should be the goal. (This will go a long ways towards keeping your company productive and profitable.)

With this in mind, let’s look at the numbers to formulate our planning. The World at Work Salary Budget Survey 2020-2021 results indicate average actual merit increases for 2020 across industries in the United States will average around 2.9%. Meanwhile, budgeted merit increases for organizations in all industries are projected to average 2.7% in 2021, down from about 3.2% average actual for 2019. (As a point of comparison, before the 2008-2010 downturn, average merit budgets were about 4% for a number of years.)

Ultimately, employers need to be aware of salary budget trends, and pay at least market rates for their jobs. After all, acquiring and retaining top employees is driven by organizational culture fit and strong leadership more than any other factor. If you are interested in learning about my approach to compensation, I encourage you to read this profile of me in Forbes. Also, feel free to contact me at laura@conoverconsulting.com to learn about ways we can partner to best compensate your people.