Does Your Company Plan to Give Raises In 2015?

Several management consulting firms, including Hay Group and Towers Watson, recently forecast that U.S. workers at large companies can expect a median base salary increase of 3% in 2015. And small and midsize companies will probably offer raises in the 2% range. What are you going to offer—and why should you?

Will your company stay competitive?

Economists expect wage increases to accelerate later this year as the 6.1% unemployment rate continues to fall, and some sectors will see even stronger raises.

Oil and gas industry employees, for example, can expect 4% pay hikes. Hourly wages at American private-sector companies are climbing, too. The reason companies are focusing on pay:

• As the economy improves, so do the chances that your employees will leave. Better pay won't always improve retention, but if you've been stingy with raises for the past few years, you might be at risk of seeing more employees jump ship if they see their peers getting paid more.
• Variable pay is also on the rise. According to another recent study, a high percentage of firms are also planning to compensate their employees via performance bonuses and other incentive pay as well as salary increases.
• Some companies are taking a strategic approach to salary levels. For example, one prominent financial advisory firm just increased base salaries for junior and midlevel bankers by 25%. Why? Because bonuses occur later in the year, the organization wants to keep people motivated in the short term.
• It's the right thing to do. If your company's performance is improving, you should share the profits with the people who contributed to your success.

If your company is slow to adjust to the upward trend, you risk losing key talent—and you may end up having to pay new hires even more. If you can't offer a 3% or more raise across the board, at least identify which employees you really can’t afford to lose and give them a raise immediately. Remember, you're only as strong as your best employees and rewarding their efforts, loyalty, and talents is crucial.

What are your plans for offering raises in 2015? Do you have strategies for variable pay? Please feel free to share your thoughts below. And if you need help managing your payroll in 2015, CPP offers many different payroll solutions across New York State.  Give us a call today.