Pay Raises Make a Slight Comeback

Employee pay stagnated somewhat during the Great Recession, but now pay raises are no longer coming so far apart, according to one non-profit human resources organization.

WorldatWork, an association of HR professionals that compiles employee compensation data, reported that the average worker waited about 12 ½ months get their latest pay raise. Just two years ago, in 2010, the time between pay raises was averaging more than 13 ½ months. Most employers who adjust their salary structures regularly do so at intervals of one to two years, whereas during the recession the average was closer to 2 ½ years. A sizeable minority of employers even waited as long as 3 years between adjustments to their base pay scales.

The average pay raise this year will be about 3 percent, according to WorldAtWork. For comparison, the overall rate of inflation in the United States in November was 1.8 percent. However, unfolding developments in Washington regarding tax policies make appear that an employee who gets a 3 percent raise wouldn’t actually keep most of that money in his or her pocket. The political deal struck on New Year’s Day puts an end to the 2 percent payroll tax holiday, meaning that if nothing is done to lower Social Security taxes again, an employee with an average-sized raise is going to see a big chunk of it withheld by the federal government.

WorldatWork pointed out that some employers will reward star performers with raises about double that of the average worker, however. Employees who receive promotions can expect raises in the 9-10 percent range.

In general, employers are taking a cautious approach because of the slowness of the economic recovery and the widespread belief that it might be torpedoed by Congress’ failure to reach sound compromises on taxes and government spending.  There is also speculation that raises around the 3 percent level are going to become the “new normal,” rather than rebounding to averages as high as 4.5 percent that held sway for the two decades up until 2009.

In 2009, the average employee raise sunk to a 39-year low of just 2.2 percent. That year, one-third of employers surveyed expected to keep their salary levels steady, whereas this year only 5 percent are keeping their compensation frozen.

As far as timing for those getting raises, WorldatWork says that more companies are moving to a system in which all wage and salary bumps are given at the same time, usually in January or sometime during the first quarter of the year.

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