Compensation planning for 2022
August to October is generally when we start seeing data on pay budget increases for the following year. A number of consulting organizations conduct surveys and report what organizations plan to do the following year as far and what their pay increase budgets will be, and also what changes they may make to their pay grade midpoints based on changes in market rates. Planning for 2022 changes is going to look different than previous years because of the COVID pandemic and the tight labor market.
For the past several years, most organizations have been budgeting above 3.00% for their pay increases. Actual pay increases at the employee level will generally vary by performance and other factors.
According to the WorldatWork.org total rewards association, the projected increase rate for 2022 is expected to be 3.30%. Actual increase rates for 2021 were 3.00% and we think that was because these increases were already underway when the pandemic hit. Organizations that planned for increases later in the year tended to trend lower than this and many did not provide increases at all.
In addition to higher increases we are also seeing organizations decide to pay at premium levels are choosing to match the market at levels higher than the market median [50th percentile]. You may have also experienced your employees leaving your industry to take jobs in others because the pay rates being offered by larger organizations are so much higher than what you have been able to pay.
Base pay is important, but you need to think more broadly about your total rewards strategy, which can include not only cash compensation but generous time-off, a flexible workplace, personal development, and other opportunities. If this is something you haven’t thought about, it might be time to work with an HR consultant to help you draft your compensation philosophy and strategy.
Many of our HR consulting projects involve providing recommendations on effective compensation practices, providing data on compensation benchmarks and best practices to refine your compensation philosophy. You can find more information on our compensation consulting in our updates and on our website. If you want to talk to us directly, contact us…we’d love to hear from you!