Projected Employee Salary Increases for 2021

Based on annual pay increase studies released by WorldatWork, Willis Towers Watson and earlier this year, the average salary increase budgets will range between 2.8% and 3.0%. Stephen Miller, CEBS published and released a SHRM article on September 3, 2020 titled, “Salary Increase Budgets Decline for First Time in 12 Years.”

The Willis Towers Watson survey indicated that approximately three quarters of the companies plan to distribute performance bonuses in 2021.  This survey projects bonuses to average 11% of salary for exempt employees and 6.8% to 5.6% for non-exempt employees.

We saw a softening of employee pay adjustments (COLA, General, and Merit) during this year due to the pandemic for our client organizations and businesses. We believe that our public (non-profit) clients will budget between 2% and 3% for 2021 pay increases and our private for-profit clients are planning for closer to 3%.

We have been pleased to see the resiliency of our clients during this very challenging year and we look forward to helping them navigate compensation planning in 2021 and beyond.

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Exercising the Salary Ranges

Blair and I have noticed that some of our clients are not adjusting their salary ranges and this is creating some internal problems which could be avoided.  When organizations don’t adjust their salary ranges or salary steps, then department managers start getting creative with modifying job descriptions and job values with the desire to obtain an increase in base salaries for their department positions.  Once this starts to happen, then everyone gets on the bandwagon to do the same thing.  By adjusting your salary ranges every one to two years, you keep your salary ranges or salary steps close to market as well as you avoid the need to mess with changing job descriptions and job values for the sake of increasing base salaries.  Let’s keep the salary ranges near market whether you have the budget or not to adjust employees’ base salaries. 

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HAPPY POST 4TH of JULY Now that we’re on the backside of the celebratory 4th of July – Independence Day fireworks and picnics, it is time to get back to work with attracting and retaining employees through competitive pay and strategic total rewards benefits. During the recent 4th of July holiday, it was amazing to see how small compacted fireworks create such spectacular nighttime displays of colorful sparks. When lit, these small containers in relative size compared to the resulting expansive firework displays are a profound mystery of awe and yet a technological mastery of increasing proportion. The chemistry of fireworks is based on the theory of combustion, but a simple observation could be made based on the theory of compression. Speaking of compression, many of our compensation clients are experiencing pay compression issues. With tighter labor markets and increasing starting wages for new hires, the pay levels between newly hired employees and employees with one to three years of tenure are getting tighter. The compression of the air-fuel mixture in an internal-combustion engine just before ignition creates powerful energy. The employee energy associated from pay compression issues can be significant until the employer resolves these issues. Identification of pay compression starts the process towards releasing the valve on negative pay comments and the potential of losing tenure employees. Employers without internal pay structures/plans will use a “time in position” percentage of market pay means to determine pay adjustments for employees expressing pay compression concerns with newly hired employees. Employers with internal pay structures/plans that are competitive with market pay means by position will use a “time in position” percentage of the internal job grade pay range midpoint for pay movement decisions that lessen pay compression problems. The average timeframe for an employee to reach their respective position pay range midpoint is a key factor when addressing pay compression in an organization. The private sector employees on the average tend to reach their pay range midpoints within 4 to 5 years. The public sector employees on the average will reach their pay range midpoints in 8 to 10 years depending on the average annual pay percentage increases of 3 to 4% of base pay. Also, the pay range spread will be another key component in determining how quickly employees will reach position pay range midpoints. Let’s hope that your internal pay compression situation can be resolved with firework “Sparklers” instead of huge sky-filling firework displays with M-80 sonic booms! Happy Post 4th of July Boom!   Learn more by visiting or request a free consultation by visiting

Compensation Strategies for Millennials

We have partnered with Equias Alliance, a nonqualified benefits plans and BOLI company, on a few compensation projects and one of its principals, Ken Derks, wrote a recent excellent article titled, “Compensation Strategies to Attract, Retain and Motivate Millennials.”

One of his statements summarizes well where the millennials are financially.  “While millennials have essentially the same financial needs as the generations preceding them, their time horizon to retirement can be 30-plus years or more, which is too far into the future for them to focus on when faced with immediate financial planning decisions, like retiring student debt, purchasing a home and providing for their children’s education.” Ken offers a recommendation to meet the financial needs of the millennials by stating, “For the next generation of leaders, managements and boards should consider nonqualified benefit plans that allow for in-service distributions timed to coincide with events such as a child entering college or to pay off college debt.  Plan payments made to the participant while still employed can be made at some future point such as three, five or ten years.”

As companies are transitioning their work forces from the baby-boomers to the millennials, the importance of providing a competitive base salary coupled with performance-based incentive and retirement plans will help to attract, retain, and motivate the millennials and other generations to follow.

Johanson Group has worked with all types of companies and organizations for the past 44 years in the areas of compensation management, strategic planning, training and development, and management consulting.  We have taken our copyrighted job design and compensation methodologies and created software that is licensed through another company we own, DB Squared.   DBCompensation and DBDescriptions provide the front-end of the total rewards equation.  Please contact us to learn more about our consulting services and software products.  If you would like to contact one of our partner companies, Equias Alliance, their website is

Compensation and Benefits Highlights from the 2017 Annual Surveys

Compensation and Benefits Highlights from
the 2017 Annual Surveys Completed by Johanson Group

 Employee pay adjustments for 2017 will average 3% and merit pay budgets will average between 3.1% and 3.4%.

  • The average employee base pay adjustments for 2018 will increase slightly due to increasing employment demand.
  • Employee average merit pay budgets in 2018 will range from 3.2% to 3.6% but employers are moving forward with increasing variable pay options.
  • National variable pay averages have increased to new levels as employers reward top performers.
  • Employers are beginning to utilize compensation and benefits strategically to attract and retain competent employees.
  • Above average retirement plan matching contributions by employers and profit sharing distributions are effective employee retention tools.
  • Employers will help employees with student loan debt through creative compensation and benefit packages.
  • Health insurance premium increases are partially mitigated by High Deductible Health Plan (HDHP) options with increasing deductibles and out of pocket maximums.
  • Employers are using HSA contributions to help new employees with minimal personal savings to be prepared for unexpected medical expenses.
  • Paid Time Off (PTO) plans are becoming more popular with employers over traditional sick and vacation time off plans.


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