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Pay Raises More Frequent in 2013

 Small businesses may being giving out raises a little more frequently this year, and they may also be shelling out a somewhat bigger increases in wages and salary to keep their top performers on the payroll. That’s according to WorldatWork, a non-profit association of human resources and compensation professionals.

After the amount and frequency of employee raises hit recessionary lows in 2009, WorldatWork says that companies it surveyed are, on average, planning to schedule raises and reviews of their salary structures at shorter intervals. On average, they also plan to give employees raises that average some 25 percent higher than 2009 levels.

The WorldatWork study found that the average worker waited a little more than a year – about 12 ½ months – to get his or her latest pay bump. In 2010, that interval averaged a full month longer, or 13 ½ months. Also, most employers are now reviewing and adjusting their overall wage and salary structures every one to two years. During the recession, this interval was averaging 2 ½ years and was even ranging up to 3 years for about 10 percent of employers.

As far as the raise amounts themselves, WorldatWork’s research says that they will average about 3 percent. This is significantly higher than the 2009 average of just 2.2 percent, but also correspondingly lower than the pre-2009 average of 4.5 percent. Raise figures can vary greatly, of course, with some companies saying that poor performers will receive as little as 0.1 percent, while stars may get a well-above-average raise in the 5 to 6 percent range.

The highest pay increases will go, not surprisingly, to workers who are receiving promotions. Those moving up the ladder will see their base pay go up an average of 9 to 10 percent. WorldatWork notes that most companies’ bookkeeping systems budget for promotion-related raises separately from routine raises.

With inflation in the U.S. running less than 2 percent toward the end of 2012, a 3 percent raise would seem on the surface to be a clear bright spot for workers. However, the end of the 2 percent payroll tax holiday means that a large part of the average employee’s raise will go to fund Social Security rather than to their own discretionary spending. The expiration of the payroll tax reduction is one of the least popular facets of the fiscal cliff deal struck in Washington, both among employees and among business owners who rely on consumers having spending money in their pockets.

PADGETT BUSINESS SERVICES® works with small businesses all over the U.S. and Canada by providing expert bookkeeping, tax management, payroll and financial planning services. We can play a part in the success of your small business, too.