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Advice for Employers and Recruiters

83% of Employers Offer Merit Pay Increases to Improve Retention

Steven Rothberg AvatarSteven Rothberg
October 15, 2012


Amy Kaminski of Compdata SurveysAs the job market slowly continues to open up, more employers are seeking ways to attract and retain the most valuable talent, and many are looking to rewards systems to facilitate this process.  The Compdata Surveys BenchmarkPro 2012 survey results found 82.8 percent of employers offer merit increases as one of the many systems used to reward employees. The average merit increase budget reported for 2012 was 2.7 percent, with 2.8 percent projected for 2013.

Bonuses are a popular reward option, as they are offered by 67.6 percent of employers surveyed. Nearly 40 percent of organizations use incentive pay, compared to spot incentives at 23.6 percent. Skill-based pay is utilized by 12.6 percent of survey respondents and key contributor rewards are used the least, 4.9 percent.

Reward systems often vary by industry as 81.9 percent of services employers report using bonuses. Hospitality and manufacturing and distribution organizations use bonuses at a rate of 77 percent and 74.5 percent, respectively. Fifty-three percent of employers in healthcare use bonuses, while only 39.5 percent of companies in utilities use them to reward employees.

“Recognition and rewards systems are crucial to employers looking to retain top talent, especially as the job market improves,” said Amy Kaminski, vice president for Compdata Surveys. “Some studies suggest as the job market rebounds, more employees will be looking to leave their current jobs in pursuit of new opportunities. Simply recognizing employees for a job well done can have a huge impact on employee morale, and in turn retention rates.”

Although the unemployment rate dropped to a 44-month low last month, the economy continues to be in a somewhat volatile position, with many companies still recovering from the recession. Some employers may be wary of granting sweeping pay increases to their staff. These reward systems provide employers with a viable alternative to traditional pay increases, while still recognizing their key employees.

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