Dive Brief:

• Salary increases for employees at many companies in the U.S. are on the horizon for 2021, according to the 2020 General Industry Salary Budget Survey conducted by Willis Towers Watson Data Services released Aug. 17. Amid compensation planning, most employers surveyed are expecting "a turn toward normalcy in 2021," the global advisory, broking and solutions company found. 
• About 7% of companies are not planning pay increases in 2021, "down significantly from 14% this year," according to Willis Towers Watson's survey of 1,010 companies conducted mid-May through late-July. Companies surveyed projected the average salary increase next year will be 2.8% for non management, management and exempt employees. However, hourly and nonexempt salaried employees and executives are expected to receive a 2.7% increase. Performance continues to play a major role in salary increases. "Stars" or employees receiving the highest possible rating were granted an average increase of 4.7%, compared to an average of a 2.8% increase for employees who received an average rating. Across all groups, performance/bonus short-term incentive awards are expected to remain steady in 2021, the firm said.
• Industries impacted during the pandemic such as health care and retail, "are projecting a slight bump but still fall shy of pre-pandemic levels with salary increases projected to average 2.6% and 2.8%, respectively," according to Willis Towers Watson. Meanwhile, above-average increases are projected in the insurance industry (2.9%) and nondurable goods industry (3%). Before the pandemic hit, companies budgeted, on average, 3% increases in salary, but have granted employees increases between 2.5% and 2.7% this year, according to the firm.​

Dive Insight:

During the pandemic, many companies have implemented pay cuts; however, most are determined to pivot back to salary increases, according to Catherine Hartmann, North America Rewards practice leader at Willis Towers Watson. 

"This has been the most challenging compensation planning year for many companies since the Great Recession," Hartmann said in a statement. "However, unlike then, companies have been hit differently depending on their industry, the nature of how work gets done and the type of talent they need." For example, research has shown that sales compensation plans have been adjusted in terms of final compensation. Most companies have reduced the size of 2020 salary budgets and "are holding the line on increases for next year," Hartmann said. 

Managing the short-term effects of financial downturn amid the COVID-19 pandemic effectively can give organizations greater options when it comes to controlling long-term outcomes, Mercer, a human resources consulting firm, told HR Dive in April. Conserving cash and delaying increases and grants this year preserves flexibility, according to Mercer. But at the same time, companies should consider evaluating potential compensation and benefit actions to take later to improve cash flow. If employers achieve a balance between economics and empathy during the pandemic, they will be rewarded with loyalty from workers, candidates and customers, the firm said. 

"Most companies will continue to be in a cash preservation and cost optimization mode regarding their budgets, Hartmann said. "And although many companies are looking toward stabilizing their business next year, the full extent of the economic impact of the pandemic is yet to play out. Companies will remain cautious and continue to adopt strategies that attempt to balance employee engagement with protecting their core business." 

But amid the financial crisis caused by the pandemic, fewer workers are expecting a pay increase, according to an Aug. 4 Randstad US survey. About 62% of the 1,200 employees surveyed said they expect a pay raise every year to remain at their current company, which is down from 82% in 2018. More than half (58%) of the respondents said they would prefer to negotiate for a better benefits package than a higher salary.