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It's just another cycle repeating, Dan. Back in The Day before double-digit inflation (now just another myth to relative youngsters), annual increases were indeed the exception and never the rule except in labor contracts. Merit increase grids then featured 18-month and 2-year cells. Yeah, really.

Incomplete data will always mislead but at best merely supply context for decisions. Projections only reflect their assumptions, and only the mediocre and unambitious want to be "average" or "normal."

The author of that article either didn't understand the data, or (and I think more likely) chose to present it in a somewhat misleading way to grab attention.

Regarding salary increases it states:
"Don't plan to buy that new car just yet, however. Both companies agree on one thing: There will be no raises this year, or next, or . . . maybe not for a long time. "Base salary increases are flat. We don't see the prospect of that changing much at all in the next several years," said Ken Abosch, who studies compensation issues for Aon Hewitt."

They did not say "no raises", they said that increases are "flat" - as in hanging around the 3% mark they have been at recently.

From Aon Hewitt press release:
"Aon Hewitt's survey projects that pay increases will continue to modestly increase in 2016. Pay increases for salaried exempt employees are expected to be 3.0 percent up from 2.9 percent in 2015, but nearly a full percentage point lower than what was observed two decades ago. "The modest increases we've seen over the past 20 years are an indication that employers have changed their compensation strategies for good, and we shouldn't expect to see salary increases revert back to 4 percent or higher levels that were commonplace in the past," said Abosch."


In regard to bonus funding the article starts with:

"Already have plans to spend that big end-of-year bonus on something special? You might want to stop dreaming. While you're at it, you might want to stop planning, too"

The author bases that on the fact that a Towers Watson survey says bonus pools will be underfunded. But if you look at the actual TW press release it states:

"The Towers Watson Talent Management and Rewards Pulse Survey found that U.S. companies’ average projected bonus funding for current-year performance is 89% of target. Last year, these same organizations funded their plans at 93% of target level. Since 2005, U.S. companies have fully funded their bonus pools only twice."


Not nearly as alarming as the article tries to make it sound.

Thanks Jim. We can always depend on you to fill us in on the history of comp. Everything new is old again....


Thanks for your great and very complete comment. It's nearly an article by itself! While I agree it is a misleading way to grab attention, sadly many people only read headlines. And, virtually no one makes the effort to read the supporting articles as you have.

The proposition that annual raises are dead is somewhat ridiculous. But, this article has really resonated in the comp and HR world. I think that's mainly because it starts by amplifying a message than many have already decided is true.

As for funding of bonus pools, perhaps most companies are doing it wrong. Perhaps how these pools are conceived and actualized needs to be better communicated. "Target" is the line item most used to discuss "budget". But Target is also supposed to be a stretch, not a guarantee.
It makes sense that bonus pools are general "underfunded" if completely funded means slight over performance.

Target is a term that is often misunderstood, even outside of comp. The bullseye on any shooting target is the intent, but even the best occasionally miss it.

Oh well. Back to work.

Agree Dan,

I think those are good points (along with the good points in the original post)

I only took the time to dig in as on the surface the article seemed to contradict some of the other information I have been seeing lately (i.e. consistent 3% increase budgets) so I was curious what the original data sources said. I wouldn't expect every comp person reading it to dig in that much, let alone the average reader...

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