Salaries in the US have changed dramatically since last year — and not equally across industries, job families, and levels. How fast are salaries increasing and how can your organization deal with these changes?
To help you stay abreast of these salary trends, Mercer collects annual data from more than 5.6 million incumbents. The 2022 Mercer Benchmark Database/Total Remuneration Survey results may be startling, but they are essential for constructing your organization’s HR strategies for the coming year.
Salary increases continue to rise
With significant factors, such as inflation, flexible work, and turnover, affecting the jobs market, US salary increases are hitting higher numbers in 2022 than we’ve seen the past several years. Mercer’s US Compensation Planning Pulse survey reported that actual
total salary increases given in 2022 averaged 3.8%, compared with 3.0% in 2021 and 3.1% in 2020.
Employers report that when determining increases for 2022, and likely beyond, they are primarily considering three factors:
- Turnover/retention issues
- Labor shortages
- Cost of labor
Although inflation is clearly having an impact on the labor market, it is not a factor driving base pay increase decisions, because inflation is related more to cost of living, which fluctuates over time. Employers learned in previous challenging economic times that adjusting base pay based on changes in cost of living was not a prudent move. (We should note that some employers are attempting to provide a bit of relief for employees, from the rising costs, by adjusting things like mileage reimbursement or providing allowances or spot bonuses, which are not necessarily tied to performance.)
Unlike in prior years, paraprofessionals saw the largest percentage salary increase in 2022, with their salaries growing an average of 6.7%. (That compares to just 3.5% growth in 2021.) Professionals saw their salaries increase by 4.9% and management, by 5.4%. Executives showed a 5.0% average base pay increase.
How industries and job families are impacted differently?
Even though salaries are increasing across the board, not all industries or job families are experiencing the same level of growth. Labor-intensive industries — those relying on hourly labor — are most affected by labor shortages and thus show higher than average year over year pay increases. The following industries are seeing the largest increases in base salary:
- Retail: +7.3%
- Hospitality (Food Service and Lodging): +7.2%
- Product and Skilled Trades: +7.2%
- Logistics: +7.1%
- Supply Chain: +7.1%
- Other Manufacturing: +7.1%
Which individual jobs are commanding the highest year over year increases?
According to the Mercer Benchmark Database (MBD) survey, the top five biggest movers in terms of pay increase are mostly entry level para-professional roles, with one exception.
- Forklift Operations — Entry Para-Professional: +15.0%
- Warehouse/Distribution Center Order Support — Entry Para-Professional: +13.5%
- User Experience Design (UXD) — Team Leader (Professionals) : +13.2%
- Manufacturing Assembly — Entry Para-Professional: +12.9%
- Plant/Facilities Infrastructure Technician — Entry Para-Professional: +12.7 %
Wage increases are even greater than they first appear
As significant as these numbers might seem, the true impact of these current labor trends is not wholly reflected in annual comparisons. Real-time wage pressures in the midst of a tight labor market are resulting in increased off-cycle activity — which most organizations do not budget for. If we look at the wage movement of same employees in the same jobs, we are seeing an average increase of 4.9%, which compares to just a 3.8% total increase delivered through the annual increase cycle. Internal equity adjustments, market adjustments, and actions to defray compression caused by increased hiring rates make up these off-cycle increases.
The importance of incentives
Another way employers are responding to the current hot job market is by delivering pay through incentives. Both short-term incentives (STIs) and long-term incentives (LTIs) are coming in well above target. Half of all employers who had STI plans in place paid out over target in 2022. Similarly, 61% of companies awarded LTIs at 100% or more of the target, with 15% being 150% or more of the target. Incidentally, the most popular LTI vehicles include restricted shares (offered by 62% of organizations offering LTIs), performance shares (53%), and stock/share options (29%).
What’s next and what can you do?
If current labor trends continue, expect salaries to continue to climb. Employers project that they will budget 3.8% for merit increase and 4.2% for total salaries increases for 2023.
How can your company compete in this persistently competitive labor market? Here are some of the ways you can attract and retain talent in times of high turnover and high inflation:
- Monitor the market and get clear on the reasons behind your pay increases (cost of labor vs. cost of living)
- Uncover the root causes behind turnover and establish KPIs to make progress
- Understand the life situations and critical needs of your population segments
- Use unique retention strategies for different employee populations
- Consider the workforce most impacted by inflation; that is, those close to or below the living wage
- Increase pay transparency on multiple fronts — what you pay for, how often it is reviewed, and even how the ranges are defined
Understanding the Mercer Benchmark Database Salary surveys
Mercer has been offering HR professionals comprehensive salary data from a broad range of industries for more than 20 years. The Mercer Benchmark Database delivers salary survey data organized into nine functional modules, providing a one-stop shop for current and trusted industry insights.
Mercer conducted the 2022 Mercer Benchmark Database/Total Renumeration Survey during March and April of 2022. Our researchers interviewed representatives from 3,205 organizations, representing 6,002 jobs. Participating organizations have an average net revenue of 6.7 billion US$ and come from a variety of industries. Services (Non-Financial) and Health Care Services represented the biggest sectors in the survey, representing 13% and 12% of organizations surveyed, respectively. Other significant industries represented include Other Manufacturing (11%), Energy (9%), Life Sciences (9%), and Other Non-Manufacturing (7%).
Participating organizations come from across the United States, with 25% located in the North Central region, 22% in the Southeast, 19% in the Northeast, 18% in the South Central region, and 16% on the West Coast. Dallas-Fort Worth-Arlington, New York-Newark-Jersey City, Chicago-Naperville-Elgin, and Los Angeles-Long Beach-Anaheim were the largest metropolitan areas represented, representing more than 15% of all respondents.
Contact us today to access the complete Mercer Benchmark Database or any of the other comprehensive pay management surveys and reports in our catalog.