Compensation rises in the Washington region in 2012

Compensation for workers in the Washington region rose 2.1 percent in 2012 after remaining virtually flat the previous year, a new survey shows.

The median salary increase was the largest the area has seen since 2010, according to data compiled by consulting firm Akron on behalf of the Human Resource Association of the National Capital Area, but still fell short of the region’s 3.2 rate of inflation in 2011.

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The bump in pay may be short-lived, what with the “fiscal cliff” looming and the possibility that a slowdown in federal spending could be a major drag on local businesses, especially government contractors.

But for now, experts say the willingness to dole out modest raises could be a sign that employers are targeting their top-performing workers to keep them from jumping ship during the slow economic recovery.

Companies figure “it’s not going to get any worse. We’ve adjusted, and we’ve let go of people who aren’t really adding value. We’ve done as much as we can to reduce costs, ” said Angelo Kostopoulos, president of Akron. Now, “let’s make sure that we hold on to the right people.”

And that may be a smart strategy. Brian Kropp, managing director of CEB, the Arlington-based corporate research firm formerly known as the Corporate Executive Board, said highly-skilled workers are becoming less concerned about job security and more willing to move on if they get a better offer.

“Their mind-set has been shifting,” Kropp said.

At Aronson, a Rockville-based accounting and consulting firm that employs about 225 people, the company has boosted its budget for payroll this year as part of a broader effort to hang onto talented workers.

“Competition is driving salary increases,” said Dawn Bailey, Aronson’s director of human resources.

Payrolls grow

The survey also found that turnover in the workforce is up 1 percent from last year, rising to 17 percent from 16 percent. It’s a slight change, but still shows more churn in the labor market. And among government contractors — one of the largest segments of the local workforce — turnover is significantly higher: 22 percent.

Another measure of compensation is the size of the pool of money a company makes available for raises. This year, that number was up 2.8 percent.

Janice Abraham, the chief executive of Chevy Chase-based insurance firm United Educators, said her firm has boosted its salary pool by 2.5 percent this year.

The increase, Abraham said, is because of the company’s dependence on highly-skilled workers.

“We can’t afford to lose our talent,” she said.

Payroll budgets have been climbing at a slow-if-steady rate for the past three years, suggesting many companies continue to be wary about the strength of the recovery. Talented employees, though, feel like they have weathered the storm, and deserve a salary adjustment.

“What I think people don’t realize is, this may not be a storm anymore,” Kostopoulos said. “This may be the weather.”

James C. Dinegar, president of the Greater Washington Board of Trade, cautioned that pay raises could grow smaller next year if Congress does not take action to prevent automatic spending cuts known as sequestration from going into effect.