With Salaries and Bonuses Projected to Increase, U.S. Employees Can Expect a Pay Hike in 2020

September 5, 2019 Ken Abosch

Amidst the backdrop of a strong economy and robust job creation, employers in the United States are focusing on the ongoing talent shortage by doubling down on investment in their people.

New data from Aon’s 2019-2020 U.S. Salary Increase Survey shows that salaries are projected to increase to 3.2% in 2020, a slight increase from the 2019 actual increase of 3.1%. Variable pay, on the other hand — which includes incentives or sign-on bonuses — is expected to rise to record levels at 13.1% of payroll. That’s the largest projected variable pay in the history of the 43-year study.

Talent retention is clearly front and center on the minds of business leaders. The cost of replacing key talent is harder and more expensive in this competitive labor market, particularly when companies across industries are looking for individuals with specialized skill sets (e.g., data science, engineering, machine learning, etc.). If companies don’t take proactive steps now to retain high-impact employees, they are at risk of both losing them to competitors and not being able to afford to replace their positions.

This confluence of factors has set the stage for base pay and, more prominently, variable pay to rise in 2020 as shown in Figure 1.

Meanwhile, salary increase budgets were 3.1% in 2019, which for the second time in a row lived up to the previous year’s projection, as seen in Figure 2.

Figure 3 shows a historical view of year-over-year trends in overall salary increase budgets compared to variable pay spend for salaried exempt workers. Variable pay continues its upward climb, projected to be at a record-setting 13.1% in 2020 as businesses are seeking to de-risk their fixed costs by allocating more to performance-based pay. This is evidence that organizations want to share the benefits of strong business performance, but do so in a way that does not add to their fixed costs as increasing base pay does.

Signing bonuses are the most prevalent type of short-term compensation — topping the list at 63%, while individual performance awards (53%), special recognition awards (52%) and business incentives awards (50%) are not far behind.

Next Steps

Our new 2020 Salary Increase and Turnover Study is open for participation through February 21. You can learn more and participate here.

As you make decisions about your salary increase budget needs and set your pay strategy for 2020, do so confidently with the latest data at your fingertips. Featuring input from more than 1,200 participating companies on pay trends for executive, salaried exempt, salaried nonexempt, nonunion hourly and union employees across the U.S., Aon’s 2019-2020 U.S. Salary Increase Survey Report covers a wide range of topics. These include current and projected base salary increase budgets, employee turnover rates, and variable pay trends across major industry segments.

To purchase a copy of the full report, please click here. If you have questions about the survey or the topics it covers, please contact us now.

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