2012 Compensation Budgets Focus On Top Performers.

Almost all organizations (97 percent) are planning to award base pay increases in 2012, according to Mercer’s 2011/2012 U.S. Compensation Planning Survey report. The survey predicts that the average increase in base pay for U.S. workers to be 3 percent in 2012, up slightly from 2011 (2.9 percent.)

Half of the organizations that project higher 2012 pay increases than those granted in 2011 cited expected labor shortages and greater competition for workers as the main reasons.

The survey shows that the distribution of base salary increases vary by employee performance. Mercer’s survey shows the highest-performing employees received average base pay increases of 4.4 percent in 2011 compared with 2.8 percent for average performers and 0.4 percent for the weakest performers.

“The risk of losing key employees weighs heavily on employers as their compensation budgets remain flat,” said Catherine Hartmann, a principal with Mercer’s rewards consulting business. “Employers realize that in order to hang on to their best employees, they’re going to have to reward them. And while noncash rewards, such as training and new opportunities, enhance retention, base pay is still the most important element of the employment deal.”

The survey includes responses from more than 1,200 mid-size and large employers across the U.S. and reflects pay practices for more than 12 million workers.  View the full report by Mercer here.