Inflation and Talent Retention Needs Spur Salary Hike
More than one-quarter of respondents are considering midyear adjustments.
In an effort to attract and retain talent, organizations are responding to high inflation by bumping up salary increases in 2022.
A recently released survey by executive compensation advisor Pearl Meyer found that companies gave salary increases of nearly 5% for all employee groups in 2022 after two decades of total base salary increases in the low-3% range. The survey, which included input from over 300 companies, also found nearly one-third of respondents considering or planning for the prospect of midyear salary increases for key employees and top performers.
Among the respondents, 70% of companies reported salary increases that were either slightly or significantly higher than those handed out in 2021. Rebecca Toman, vice president, survey business unit, for Pearl Meyer, cited high inflation as a reason for the elevated increases, but also pointed to the demands of the job market.
“There are jobs where there just aren’t enough people to fill the positions. We have seen some staggering numbers with the Great Resignation. It’s like the perfect storm with inflation and shortages of talent available.”
The increases to total base salary – with Toman quick to point out that the number does not include long-term incentives – are similar across the board, with a total increase for all employee groups of 4.8%. There is a variance, however, in midyear salary increases. While the majority of companies (64%) is not planning for a midyear salary increase, 23% of respondents are, and 8% are giving it consideration. According to the report, midyear salary increases are not expected to be awarded across the organization. Performance and position will be the basis of 36% of the midyear increases. Twenty percent stated that midyear bumps will be provided to certain targeted positions and employee categories, and 15% reported that they would be provided to key critical employees only.
“They’re not going to be cost-of-living type increases,” says Toman. “We see that companies are being very thoughtful and strategic about who might get these increases. These are going to be the employees that are in high-demand roles or roles that are critical to the mission of the organization.”
When asked about the increases and whether they can be viewed as an ongoing trend or a temporary reaction to inflation and labor shortages, Toman expressed doubts about their viability in the long term.
“We survey on annual salary increases every year, and we’ve never seen anything like this. It’s hard to believe that increases of this size can be sustainable.”