The Washington Post

Are you getting a bigger raise next year? Not likely.

Things have been looking up for the U.S. job market recently: The unemployment rate has dipped to 6.1 percent, its lowest level since 2008. We’re on our best streak of job gains since 1999. But, at the same time, wage growth has remained weak, a factor that economists say has prevented the recovery from accelerating.

So now that companies are getting less cautious about hiring, are they also loosening the purse strings on pay raises for the workers they already have? Not so much, according to new data from WorldAtWork, a nonprofit association for human resources professionals.

WorldAtWork surveyed thousands of employers about what their budgets for pay increases are in 2014 and what they expected those budgets to look like next year. On average, companies in the U.S. reported a 3 percent uptick in their salary increase budgets. Companies projected a similar picture for next year: On average, they reported they expected these budgets to increase by 3 percent in 2015, the exact same increase as was seen this year.

This latest data is fresh evidence of a trend that many compensation experts have observed: 3 percent appears to be “the new normal” for yearly salary budget increases. (It had been a bit higher than that prior to the recession.)

This survey and many other compensation studies look at pay increase budgets, which is human resources-speak for the amount of money available for raises. So a 3 percent increase to that pool of money doesn’t necessarily mean that every worker is likely to get a 3 percent raise. At a time when many companies say retaining top talent is a major challenge and a top priority, some employers will likely use the money to reward their highest performers with 5 to 6 percent raises and leave average or low performers with meager 1 or 2 percent raises.

The picture for salary increase budgets looked similar in other developed economies: WorldAtWork found that companies in Canada, Germany and the United Kingdom also reported 3 percent increases for 2014 and expected an increase of the same size next year.

One bit of brighter news for your bottom line: WorldAtWork reported earlier this summer that companies are upping their use of bonuses to reward top performers.

Why are employers getting more relaxed about bonuses but keeping a lid on pay increases? Because bonuses are a more flexible form of compensation. While a salary increase becomes a fixed cost, companies can easily cut back on bonuses if the unsteady economic recovery loses its footing.

Sarah Halzack is The Washington Post's national retail reporter. She has previously covered the local job market and the business of talent and hiring. She has also served as a Web producer for business and economic news.
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