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.
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.
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.
In that case, “there’s real concern that through 2014, that uncertainty puts a definite hold on hiring, on raises, on almost everything,” Dinegar said.
More than 280 companies from a variety of sectors took part in the survey, which examined salaries from February 2011 to February 2012. Participants included General Dynamics, Geico, Georgetown University, and Freddie Mac, among others. The data collected covers more than 84,000 employees across more than 500 different job descriptions.
The survey does not include most federal government workers. The Office of Personnel Management said that the median pay for federal employees in our region was nearly flat, rising by only 0.2 percent in 2012.
Among job categories that had more than 100 survey respondents, one of the most dramatic median pay increases was for “applications analyst/developer II,” a technology job, which leapt 21 percent from $68,470 to $82,500.
Another category that saw large gains was “editor III,” which rose 18 percent from $72,970 to $86,240.
The biggest decline in median pay among categories with more than 100 responses was for “respiratory therapist II.” The median compensation in that position fell from $61,090 to $55,640, a 9 percent drop.
This variation makes one thing clear: “These are not across-the-board increases, at all,” said Jane Weizmann, a director in the Washington office of professional services firm Towers Watson. “Organizations are segmenting their salary spend and targeting it to critical skill groups.”
When all the positions in the survey were grouped into “job families,” the biggest gains came from banking jobs, which saw a 19.1 percent increase in pay. Accounting and finance jobs were next, with average pay up 6.7 percent.
In the accounting field, Bailey said qualified professionals have been difficult to find due to a change in the structure of the CPA exam. Because of that change, fewer accountants were entering the marketplace. As employers faced a shortage of qualified applicants, they may have been more inclined to use salary increases to retain their workers.
The job family that saw the largest decrease in average pay, 29.3 percent, was customer service.
The decline is likely because “those types of positions would have a fairly large available labor pool,” said Kerry Chou, senior practice leader on compensation for WorldAtWork. “A few weeks of training, and they could be productive on the job.”
The overall growth in compensation this year exceeds increases in pay at the national level. The Labor Department reported in June that wages and salaries were up 1.8 percent over the previous year.
While the Washington area’s 2.1 percent uptick may not seem like a major one, it can mean the difference between tens of millions of dollars flowing into the local economy.
“Overall, even though the top performers are probably going to benefit the most … I think everybody’s going to get caught in the draft and benefit to some extent from this positive change,” Kostopoulos said.