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Why Annual Employee Pay Adjustments Aren’t Moving Up As Fast As Expected

Why Annual Employee Pay Adjustments Aren’t Moving Up As Fast As Expected

Over the past five plus years, the average salary budget adjustment for base salaries has hovered around three percent (3%).  Each year, several of the large compensation consulting companies will conduct annual surveys for their clients to determine what the average projected base salary budget adjustment will be for the next year.  For the last few years, it looked as though the average increase was going to be heading north of 3%, but in reality, that hasn’t happened.  We started wondering what is causing the adjustment to remain flat each year and we think we have determined one of the reasons.

The baby boomers aren’t retiring at age 65 and this is causing several organizations to continue to employ them at their higher salary levels compared to the younger generations with less time in their respective companies.  We believe that as more of the baby boomers finally retire, this will help to realign and shift salary dollars to the younger employees.  We should finally see annual salary budgets moving above 3% and without significant new salary dollars added to the annual payroll budget.

 

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