The survey says…
September 15, 2016
By Jason Rowe, courtesy of SBAM Approved Partner ASE
The American Society of Employers (ASE) 2016/2017 Salary Budget Survey results have been compiled. Despite economic growth and continued low unemployment, 3% remains the amount Michigan employers are budgeting for employee pay raises in 2017. However, Michigan employers are not alone, according to WorldatWork’s 2016/2017 Salary Budget Survey across the nation most organizations are only budgeting for a 3% increase.
61% of employers are distributing merit dollars across all employee groups, with the largest amount of dollars going to top performers, while low performers receive a smaller amount. Two years ago we saw 43% of employers providing merit dollars mostly to top performers, some merit dollars to average performers and no merit dollars to low performers. This year that number dropped to 29%.
In lieu of lack luster merit budget pools, employers continue to rely on variable pay programs to reward performance, with 83% of employers offering variable pay to at least one employee group. Nationally, WorldatWork reports that 84% of organizations are using a variable pay program. Here in Michigan, the average expected annual bonus payout as a percentage of salary in 2017 remains steady at approximately 5% for both Nonexempt Hourly Nonunion employees and Nonexempt Salaried employees, 9% for Exempt Salaried employees, and 24% for Officers/Executives. When looking at all variable pay program payouts as a percentage of salary on a National level compared to Michigan, we are seeing similar numbers for both Nonexempt Hourly Nonunion employees (5%) and Nonexempt Salaried employees (5%). However, we are seeing much larger payouts for Exempt Salaried employees (12%), and for Officers/Executives (35%).
Much like the rest of the survey data salary structures have been moving at a steady rate for the past several years. Both locally and nationally all employee groups are seeing a 2% salary structure adjustment. At least until the next upheaval in the economy or labor markets, it looks like employers are going to continue with modest raises, variable pay and reward options. The stagnation marks a shift in the way companies choose to reward workers, said Matteo Tonello, a managing director at the Conference Board. Instead of raises, Mr. Tonello said, companies are increasingly awarding performance-based bonuses. Organizations are likely shielding themselves from any economic downturns by not committing to any fixed costs.