As the coronavirus recession continues to impact organizations nationwide, many firms have had to lay off or furlough employees. But now, as the country begins to open up, employers must make decisions about their remaining employees. One big decision: 2020 salary increases.
Since 2009, average salary increases have risen each year since their all time low in 2008 due to the Great Recession.
“As the economy recovered following the financial collapse in 2008, we first saw a gradual rise in salary increase budgets, then a leveling off,” said Sue Holloway, director at WorldatWork. “Over the past two years with low unemployment rates and increased competition for talent, we saw a bigger jump in salary increase budgets.”
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WorldatWork’s 2020 Salary Budget Survey surveyed about 5,000 employers to understand what firms were doing with salary budgets in this volatile market.
In 2019, WorldatWork reported an average salary increase across all industries of 3.2%. This year, the average increase dropped to 2.9%. Though 70% of firms still plan to increase salaries between 3% and 4%, many employers are opting to forgo increases altogether due to the pandemic.
The survey reports that all industries surveyed have median salary increases at 3%, with the exception of the educational services industry, which had a median salary increase of 1%. On the flip side, the industries that showed no change from 2019 were the public administration industry and the accommodation and food services industry.
“There's unevenness [in the impact of the coronavirus],” says Catherine Hartmann, rewards practice leader for North America at Willis Towers Watson. “Certain industries have been hit and particularly challenged like healthcare and retail.” Hartmann notes that, in its uneven impact, this recession is different from the Great Recession, so firms have to respond differently than they may have then.
Holloway warns that the pandemic’s effect on salary budget data may not yet be fully realized. Because of this, WorldatWork plans to update the survey in October to see the continual impact of the recession.
As the impact of the pandemic continues to be realized, Hartmann urges firms to remain cautious while still taking steps to recruit and retain employees.
“Caution is wise, but [employers] also have to manage that there still is a war for talent, for particular skills and knowledge areas,” Hartmann says. “So while [employers] should remain justifiably cautious, they might want to adopt strategies that balance employee engagement with protecting their core business and financials.”
