We’ve compiled a brief compensation and benefits budgeting guide to help your organization make important pay and health care decisions this fall. The guide summarizes the latest and most important trends we’re seeing related to administering compensation and health care benefits, which affect your organization as it plans for 2013.
Employers project 3% pay increases.
Salary budget planning surveys for 2012/2013 consistently report average actual pay increases of about 3% for 2012 and project pay increases of about 3% for 2013. Specifically, national, regional, and local survey findings predict increases of 2.9%-3.0% for 2013 for most levels of employees, up from 2.7%-2.8% over the past few years. A breakdown of the projections from these surveys is summarized below.
|Survey Source||Average Pay Increase Projected for 2013|
Source: ERC, Mercer, Hay Group, WorldatWork, Aon Hewitt, Towers Watson, Culpepper
Projected increases in the non-profit industry tend to be slightly lower. On a national level, increases of 2.6% are predicted for 2013, based on a survey by CompData. Locally, Northeast Ohio non-profits project increases of 2.8%, based on ERC's latest Wage & Salary Adjustment Survey.
Pay increases continue to be differentiated by performance.
Numerous surveys, namely those conducted by Mercer and WorldatWork, suggest that employers are differentiating pay increases by performance level. Higher performing employees tend to receive higher pay increases above the average increase, while lower performing employees tend receive lower pay increases below the average increase.
Specifically, Mercer’s survey shows that organizations are continuing to reward top performers with the highest increases of 4.4% (on average) in 2012. Meanwhile, average performers received an average increase of 2% in 2012. WorldatWork's 2012/2013 Salary Budget Survey also showed an increase in paying for performance, with more employers offering variable pay this year (82%).
Fewer employers implement pay freezes.
The percentage of employers not providing pay increases or freezing pay continues to decline across nearly all compensation planning surveys. For example, in the 2012-2013 ERC Wage & Salary Adjustment Survey, 91% of employers are projecting providing pay increases in 2013. This rose from 88% in 2012, 82% in 2011, 59% in 2010, and 55% in 2009. This trend, validated in other survey reports, suggests that more employers are providing pay increases compared to the past few years.
Most employers will not eliminate health care plans.
A new survey released by Towers Watson shows that 88% of 440 employers surveyed are committed to offering health care benefits to their employees in the future, despite the new health care reform provisions which will provide alternative avenues for employees to obtain health care. The results of the survey suggest that employers do not foresee eliminating their health plans, mainly because they are not confident in the state exchanges set up under the health care reform law.
Other studies have been conducted by the Society for Human Resource Management (SHRM) as well as by other associations and firms and reflect similar findings, in that employers continue to invest in health care benefits for employees and cite plans for doing so in the future.
Health care costs stabilize.
A survey conducted by Towers Watson shows that the average total cost of health care is projected to rise by 5.3% in 2013 to $11,507 per employee. This is lower than the 2012 increase of 5.9%. Similarly, a new survey conducted by the National Business Group on Health reports that U.S. employers can expect an average increase of 7% in health care costs. Both projections are lower than past years, suggesting that average health care costs may remain stable in 2013. Finally, a survey by PriceWaterhouseCoopers reports average health care costs of 7.5% for 2013, the same projection as 2012.
ERC’s latest 2012 ERC/Smart Business Workplace Practices Survey also reflects similar findings on a local level. Average premium increases reported by respondents in Northeast Ohio hovered around 10%, similar to last year. No hikes in premium increases were observed in this year’s survey.
HSAs continue to rise in popularity.
Research conducted on both national and local employers, including studies conducted by the Employee Benefits Research Institute, ERC, and American’s Health Insurance Plans, continue to find that the prevalence of health savings accounts (HSAs) is rising. More employees are being covered by these plans, and an increasing number of employers are offering them as a mechanism to control health insurance costs.
There’s no question that pay and health care could be volatile topics in the upcoming year in light of the election, health care reform law, and potential fiscal cliff. Be sure to stay tuned for more trends, research, and guidance with regard to managing pay and benefits in the upcoming year.
ERC Compensation Surveys
ERC has just published its 2012-2013 ERC Wage & Salary Adjustment Survey which provides information on pay increases given in 2012 and those planned for 2013. Additionally, our 2012 compensation surveys provide a great deal of salary and wage data to help your organization make important pay decisions.
ERC Policies & Benefits Survey
ERC’s 2013-2014 Policies & Benefits Survey is now open for participation! This survey is ERC’s largest survey dedicated to benchmarking policies and benefits and contains extremely detailed information about health care practices, among other benefits. Members can participate now through October 12 and receive the results for no cost when they are published next spring.