At first glance, the latest figures seem to defy the laws of supply and demand. The job market is booming, with more job growth than the U.S. has seen in years. Hiring is up and employers are trying harder to find and retain talent. So paychecks should be getting bigger too, right?
If only. Average base pay across all industries in the U.S. went up a measly 1.8% in 2014, according to the latest analysis from PayScale. Even during the fourth quarter of last year, when the economy was growing like gangbusters, wages and salaries increased by a scant 0.6%.
The first quarter of this year isn’t looking much better, with average wages expected to increase 1.7% over the same three months of 2014. For the entire year, according to compensation consultant Mercer’s annual employer survey, you can expect a 3% bump in salary — a tiny uptick over the average raise of 2.9% in 2014.
Clearly, the long-term trend toward stagnating wages has yet to turn around. The average U.S. worker has seen his or her pay go up 7.5% since 2006. But, adjusted for inflation, real wages fell by 7.5% during those years, PayScale reports. If you feel as if you’re working harder for the same pay, or even less, it’s not just your imagination.
So, if you want to make noticeably more money this year than last, what can you do? You could change jobs, especially if you’re in a field where demand for hard-to-find skills is pushing salary offers up. Or you could stay where you are and try capitalizing on a trend that is quietly gaining ground: incentive pay.
Yes, employers are determined to keep long-term overhead costs low. But most companies seem to have no qualms about pay for performance, partly because variable pay plans are usually self-funding. If you find a new way to cut costs, for instance, your bonus comes out of the resulting savings. Not only that but, unlike a salary hike, a performance bonus is paid only once.
No wonder variable pay hit a new record high in 2014, according to a report from nonprofit human resources association WorldAtWork, and will keep going strong this year. Bonuses (including retention bonuses designed to keep key talent from quitting) are by far the most widespread form of incentive pay, favored by 82% of companies.
Two-thirds (66%) of employers say they offer spot bonuses for doing a great job on a single task, and 42% pay extra if employees meet performance goals worked out in advance with their bosses.
If 82% of employers offer some form of incentive pay, letting people earn more for accomplishing specific goals, yours probably does too. But don’t be surprised if you haven’t heard about it. About 40% of companies surveyed admit to communicating “minimal information” about how individuals’ pay is determined, the WorldAtWork survey says.
Maybe it’s not surprising, then, that almost half (45%) say their employees don’t understand how their compensation systems work. If you’re looking at another 3% annual raise with nothing extra for performance, it could pay to ask.