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Merit Increase Budgets Remain Steady at 3%

September 12, 2019

By Kevin Marrs, courtesy SBAM Approved Partner ASE

Apparently, we can now add 3% merit increase budgets to death and taxes as certainties in life.  The American Society of Employers released its 2019/2020 Salary Budget Survey last week.  The data for this year’s survey shows that median projected merit budgets (across all employee classifications) for 2020 is 3%.  This is identical to the 3% actual increase seen in 2019.

ASE is not alone in its findings.  In fact, several large consulting firms have also released their results showing similar numbers to ASE.  Mercer’s 2019/2020 U.S. Compensation Planning Survey also showed projected 2020 merit budgets at 3%.  In addition, their survey reported that just 21% of the more than 1,300 U.S. employers surveyed are increasing merit increase budgets for 2020. Most organizations are opting to keep merit increase budgets the same, as they are 2.9% in 2019, which is up only slightly from 2018, and projected to be 3% in 2020.  Mercer noted higher total increase budgets, which were has high as 3.6%, suggesting those were primarily driven by an increase in the number of organizations having ‘additional increase budgets’, which oftentimes are to account for market or pay equity adjustments.

ASE’s findings are also consistent with WorldatWork’s 2019-2020 Salary Budget Survey, which found that merit increase budgets for 2019 were reported at 2.9%, a slight shift upward from 2018. Respondents projected an additional 0.1 percentage point increase in 2020 to a mean and median of 3%.

And, as previously reported in EPTW’s Quick Hits (August 21, 2019), a recent survey by Willis Towers Watson reported that U.S. employers plan to hold the line on budgeted pay raises in 2020. 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). 

Companies continue to reward their star performers with significantly larger pay raises than average performing employees. According to the survey, 49% of companies allocate the largest rewards to top performers.  Just 4% distribute merit dollars evenly across the organization.

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