Salaries Will Rise, But Not Enough for Top Performers

Goodbye HeartSalaries are expected to increase by 2.3 to 3 percent in 2012, according to SHRM and several prominent HR consulting firms, just slightly higher than the 2.6 percent median increases seen in both 2010 and 2011. But despite the lackluster forecast, which has annual raises falling below the rate of inflation once again, failing to take care of top performers and highly skilled professionals could spark turnover if you’re not careful.

Many tech professionals are receiving multiple job offers after just 30 days on the market, and IT salaries are expected to rise 4.5 percent with some positions increasing by 6 percent or more, says Robert Half International’s annual outlook.

If you want to retain top performers, the key is not to take a one-size-fits-all approach when it comes to raises, bonuses and total compensation. Over 90 percent of U.S. organizations say they’re tying salary increases and annual bonuses to performance measures, up from 78 percent in 2009. Companies embracing a pay-for-performance philosophy will give top performers raises between 4.5 percent to 6 percent, while lower performers and less-skilled employees will probably see raises of 1 percent to 1.5 percent.

The most prevalent type of short-term incentive pay was a company wide plan with an individual performance component according to a survey by Buck Consultants. Other retention incentives for top performers include:

  • New career development opportunities (64 percent).
  • Market pay adjustments (43 percent).
  • Larger-than-average base pay increases (30 percent).
  • Increased noncash recognition (28 percent).
  • Larger bonus opportunities than before (21 percent).

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