A Peek At 2012 Compensation Planning.

Update:  As of today both Compensation Force & World At Work are confirming what we projected in May of this year for you 2012 compensation planning.  Read the original article below.


This early data is confirmed by study results released recently by Hay Group (310 organizations, surveyed in March through June 2011), which also project that U.S. employees can, for the second year in a row, expect median pay increases of 3.0% in 2012.

Creeping inflation has not translated into higher U.S. salary increases so far this year as cautious employers maintain prudence despite their own gross sales and future orders improving.  It’s hard to blame them.  While some employers are optimistic about prospects in the next year or so, they must remain cautious about hiring and with increases to payroll costs.

Various compensation consultants have said the modest growth in wage increases heading into 2011 are holding. Raises were expected to be 3% in 2011, up from about 2.5% in 2010. Unfortunately gas and grocery inflation have erased increases and employers have not yet adjusted upwardly citing continued global economic concerns. Some comp gurus believe that if commodity prices continue upward they could affect compensation in the second half of the 2011.  So what about comp in 2012?

  • Even though capital investment and hiring will work their way back into the budgeting process, salary increases above the 2011 levels will not.
  • Increases in consumer prices may put more pressure on wage growth but increases in 2012 will remain the 2.8% to 3.0% for most management and employees alike.
  • Health benefit costs will continue upward for both employees and employers, but the percentage of increase absorbed by employees will max out at 70% of premium for family coverage.
  • Employers will eliminate “benefits package re-designs” by switching carriers to control costs. Employees view these redesigns as a “take-away.” No matter how you spin them.  More companies will shift next year’s benefits cost increases directly to employees making for potentially higher base compensation expectations that may not be realized.
  • More employers will institute variable compensation; bonuses, profit sharing and team-based rewards, and move eliminate fixed merit budgets excepting collective bargaining.
  • Discretionary performance-based compensation bonuses will be driven deeper and broader across employee populations.
  • High performer retention through maximized differentiation in salary-increase and discretionary-bonus levels will continue to expand.
  • Across many sectors, employers are eager to retain their best talent and are extending base raises to 6% or 7%, offsetting that with low or no increases for weaker performers.
  • Industries, like pharma, energy, tech, and healthcare, average salary bumps are coming in just above the norm, at 3.0% or 3.1% in 2011.  That will continue in 2012.
  • The AFL-CIO said inflation isn’t playing out in contract talks so far this year, but that may change in 2012 post negotiations with Verizon and for Big 3.  The big issue in 2012 for represented employee benefits costs which are currently at 20% to 25%.
  • Wage freezes, while for the most part are gone, could revisit in 2012 should inflation, restrictive monetary policy, and the rising foreclosure rates continue.
  • Healthcare costs will rise 16% to 17% so even with employee’s share of benefit cost steadied at 70%, real wages will go backwards in 2012.

Most employees should see base increases at or slightly above 2011 levels in 2012 with increase in differentiation between high and low performers.  Profit/gain sharing programs will also rise.  Real wage for most employees will be reduced by increases in healthcare costs and inflation in 2012.


I’m Jim Tait, and HR 2012 is where I write about, well… HR Stuff and Things For 2012. One of the coolest things about my job is the unique opportunity to speak with and visit HR professionals and leaders across numerous businesses and industries.  I listen, synthesize, and then project to 2012.  I’m not trying to be Ms. Cleo; just trying to think ahead.

When I’m not agitating here, I’m agitating my wife De Ann, our five kids, or the dog.  

I’m also the lucky founder of OPI National Outplacement.  OPI National Outplacement and Career Transition Services is based in Knoxville, Tennessee, and has served companies and individuals in multiple industries since 1999. Specializing in large, complex, project work OPI has supported groups from 2 to 2,000 throughout the United States, Canada, and Mexico.

Prior to OPI, I did time with Union Carbide, ABB, and AlliedSignal in various Executive Operations and HR roles.  I can be reached at 865-531-9154.


Posted on May 31, 2011, in Uncategorized and tagged , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: