Expect average pay increases of 3% or less in 2018 | Fin24
 
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Expect average pay increases of 3% or less in 2018

Apr 16 2018 05:15
Carin Smith

Cape Town - Employees can expect an average salary increase of about 3% in 2018, according to the 2018 Compensation Best Practices Report by American company PayScale.

South African companies also took part in this global survey.

About 84% of organisations surveyed indicated that they plan to give base pay increases this year. The average increase isn’t expected to change much from 2017, with 73% of employers estimating an average of 3% or less.

The highest base pay increase given to an employee (excluding promotions) was greater than 10% for 40% of organisations, with 13% of organisations giving an increase that was 20% or higher.

About 71% of organisations offer some form of variable pay like bonuses or commissions.

According to PayScale, a one-size-fits-all approach to allocating increases doesn’t tend to be very motivating to employees, especially to high-performing employees.

In general, it seems that more organisations are relying on variable compensation to drive the types of behaviours they want to see among their employees.

Top-performing organisations tend to consider pay to be an ongoing dialogue with employees, not an annual event that comes and goes.

Perception

The perception about a company's commitment - or lack of commitment - to fair payment of employees is a top priority for Millennials (roughly those between 20- and 37 years old) as well as Baby Boomers (those between 54 and 73), the report found.

"Talent is watching and making value judgments on how organisations craft their pay philosophy and practices. If those don’t align with the culture or sit well with employees, they may take their skills elsewhere," says Tim Low, senior vice president of PayScale.

The company collects data from organisations globally on how they pay and how they manage the business of compensation.

Low quotes Larry Fink, CEO of international asset management firm Blackrock, as having said in an open letter to business leaders that "many individuals around the world are facing low rates, low wage growth and inadequate retirement systems". Fink challenged companies to "do the right thing".

"We believe that organisations that make choices to balance the interests of shareholders and employees, and communicate these clearly, will win the perception game that has put talent in a stronger position than it has been in for quite some time," Low says in the report.

"Compensation, done well, is about your organisation’s realisation that you are playing a talent game and a perception game, and to win you must approach what you pay, how you pay and why you pay as key pillars of your talent strategy."

In Low's view, retaining top talent is just as important as attracting new talent for a company.

"You need to show your existing and future employees that you care about them, their lives and their quality of life. Acknowledge the value they bring to your organisation’s success," he says.

The report found that 59% of respondent companies globally are very concerned about employee retention.

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