Raises are back—finally. A new report says roughly 90% of companies will give raises this year, but workers are going to have to earn those fatter paychecks: More than half of companies responding to PayScales’s annual Compensation Best Practices Report say their main reason for giving raises is to reward performance; only about 20% say the increased cost of living is the main reason they give raises.
And don’t hold your breath for a windfall. The vast majority of these say raises will be 5% or less.
Still, this is an improvement. In its annual Compensation Best Practices Report, compensation research company PayScale finds that 85% of responding companies gave raises last year and 89% of companies say they’ll give raises this year. The percentage of companies doling out pay increases has crept up for the past few years, after hitting a low of roughly 30% in 2010, and was above 80% last year. In addition, three quarters of responding companies say they’ve adjusted their compensation structure within the past year.
Smaller companies are more likely to dole out raises to keep valuable workers on board — something to keep in mind if you work at one. Small firms also are more likely to have individualized salary ranges for each position.
About two thirds of respondents say they gave cost-of-living raises last year, with this practice most common in the healthcare and social assistance sector — almost three quarters of these companies gave cost-of-living raises. On the flip side, this is the sector least likely to give workers bonuses.
Companies that rely on large labor pools of lower-skilled workers may give cost-of-living pay increases because there’s not as many good ways to measure performance, and the relative competitiveness of the work often doesn’t demand it. “However, even in industries like retail and healthcare which have a lot of minimum wage positions, there are still highly competitive jobs in segments of their workforce,” like management and IT, PayScale vice president of marketing Tim Low explains.
In more competitive sectors, though, talented workers can command even more. Just over three in five companies said they’ll increase pay for jobs that are in high demand. “We see a strong trend towards pay for performance,” Low said. Professional, Scientific and Tech Services, along with Information, Media, and Telecommunications are the two categories — as defined by PayScale — in which companies are most likely to report that over 50 percent of positions are competitive.
“The trend has been emerging for a while, but it’s part of a greater connection between compensation and business outcomes,” Low says. “The current economy in many sectors gives employees more choices now than they had just a few years ago.”