Will You Be Giving Pay Raises in 2015?
The U.S. economy rounded out 2014 “in a sweet spot of robust growth, sustained hiring and falling unemployment, stirring optimism that a postrecession breakout has arrived,” stated the Wall Street Journal in a recent article that thoroughly analyzed various factors affecting the state of affairs in our country. In mid-December, consumer sentiment was the highest it’s been in 8 years, revealed analysts after the release of the Thomson-Reuters/University of Michigan preliminary index of consumer sentiment, which rose to 93.8 in early December from a final reading of 88.8 in November.
What might this cautious optimism mean to the bottom line of employers such as yourself? New research from XpertHR shows that two in every three employers are set to increase pay rates in the year ahead, with most looking to award an extra 3% in 2015. The U.S. Pay Planning 2015 survey found that among the factors driving these upcoming pay increases were “the improvement of employee productivity, better organizational performance and ability to pay, and the need to recruit and retain key employees. Pressure from employees to keep pace with rising prices is a relatively minor factor.”
The survey, which gathered projections from HR and reward specialists in 166 organizations nationwide, found that only 7.5% plan not to give salary raises in 2015. While 27.8% were unsure at survey time, 64.8% are confident of giving pay increases in the coming year. At least two thirds of these raises are expected to be merit-based since surveyed employers expressed the desire to reinforce the correlation between pay and performance.
As you decide whether or not to give your employees a raise in pay, it’s important to consider more than just optimistic consumer sentiment or economic projections for growth. Keep in mind that the skills gap and shortage of knowledge workers have created a candidate’s market. “If you want to have a good strong team and remain competitive, you’ll need to reckon with fair market compensation,” says Scott Kuethen, Amtec’s CEO. “Trying to save a few dollars may result in poor performance, diminished employee engagement, and loss of the competitive edge you need to stay profitable.”
Giving your workers a small pay raise can demonstrate that you want to keep them, increase their loyalty, and enhance employee retention. When you do the math, you may find that the cost of a pay raise is relatively small in comparison to the amount of effort, time, and money you’ll need to invest in sourcing, selecting, hiring, and training harder-to-find new workers if your best employees should decide to leave. And if the economy is truly improving as it seems to be, giving performance-based raises can ultimately increase your bottom line.