Despite the improving economy, companies have stubbornly withheld salary increases over the past few years, opting instead to fatten the bonus pool. Now, Bloomberg reports, those bonuses will be shrinking, according to a new survey.
Instead, employers are ever-so-slightly increasing salaries, but not enough to make up for the loss. Companies allocated 3% of their budgets to salary increases—a high since the recession—and they plan on allocating 3.1% of their budget next year for raises. (This finding falls in line with another major survey by Willis Towers Watson from this year.)
However, bonus pay decreased this year—and along with it, total spending on compensation. In 2017, companies allocated 15.7% of their total budgets to salary and bonuses. That number dropped to 15.5% this year, and employers are planning on budgeting just 15.2% on pay next year.
The survey, conducted by HR consulting firm Aon Hewitt, questioned 1,026 employers in June and July of this year.
A pay increase is a fixed cost that is hard to take away in economic hard times, short of laying someone off. Instead of straining their budgets on pay, employers have turned to bonuses over the past decade.
Unlike a raise, bonus pay is flexible. Employers are now taking advantage of that flexibility as a tight labor market has forced companies to increase base pay to attract and retain people.
