A new report from compensation data and software PayScale shows that a vast majority of companies raised pay across their organizations just 3% or less in 2019.
The “2020 Compensation Best Practices Report” analyzed responses from nearly 5,000 employers representing every industry across the U.S. The data show that raises were less than budgeted; organizations are challenged with retention, and STEM positions remain hard to fill.
Although PayScale is categorizing the overall landscape for pay raises as “bleak,” 82% of organizations gave their employees base-pay increases, yet the majority of those raises came in at 3% or less.
The report found that retention is a top concern for employers, who gave higher raises to retain top talent in the most competitive positions and industries, including engineering and tech. Employees in those fields got between 3.5% and 5%. There are currently more job openings than available talent to fill those jobs in those areas, according to PayScale.
“As unemployment shrinks and customer expectations rise, it’s becoming increasingly difficult for organizations to find qualified candidates to fill gaps in the workforce, especially highly skilled technical talent capable of helping organizations modernize their technology, make better use of company data, and digitally transform their services,” said Wendy Brown, senior director of corporate marketing at PayScale.
Seven out of ten companies in the report prioritized hot skills (those that are in high demand and/or in short supply) over a formal education when they determined which employees or jobs would receive higher compensation, according to PayScale.
“Employees know about hot skills, and everyone knows that if you learn this programming language or you learn to get this certification, it makes a huge difference to your pay.”
Brown said that employers need to make wage investment a priority if they are concerned about retaining workers.
“Companies are rewarding employees in jobs that are hard to fill with increased pay. However, employers who are concerned about retention across their organizations should look at raising pay in a meaningful way more broadly to ensure their entire workforce feels valued and employees are more likely to remain in their positions.”
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.