Have you recently received a pay raise or are you hoping to get one? If so, you might be wondering how your raise stacks up to the average. Most employees want to know whether their pay is fair—and what they can do to earn more.
There are many factors that impact an employee’s salary increase. Your occupation, the industry you work in, the type of raise you’re entitled to receive, and whether you are getting a promotion or changing jobs all can make a difference.
Once you’re aware of what you could expect from a raise, you can successfully position yourself to get an above-average one.
Determining How a Raise Measures Up to the Average
What’s the best way to tell if your pay raise is above––or below––average? Consider general factors that are related to the economy, your occupation, and the industry you work in:
- Overall growth in earnings and in the economy will impact the resources that organizations have available for raises.
- Industries that experience faster growth and are adding a high volume of workers will often offer higher raises to attract and retain the employees needed to support that growth.
- Occupations with a shortage of workers with the right skills and training are also more likely to offer higher than average salaries and salary increases.
- The industries with slow growth or job losses and wage stagnation are less likely to offer higher earnings, both in salary and pay increases.
Pay Raises by the Numbers
According to PayScale's 2020 Compensation Best Practices Report, 82% of companies gave increases to base pay in 2019—but two-thirds of those companies gave raises of 3% or less.
What’s more, fewer employers gave raises as high as they budgeted for: 34% of responding companies budgeted to give 3% raises, but only 29% followed through. Only 9% gave out 4-5% raises, although 11% budgeted for them.
The Bureau of Labor Statistics (BLS) issues an Employment Cost Index that measures the year-over-year increase in wages and salaries. The BLS January 2020 report indicated that wages and salaries increased by 2.9% for year ending December 2019. Wages for private industry workers increased by 3% and wages for government workers increased by 2.5%.
These figures include all types of raises and don’t imply that every worker had their pay increase by 3% in the private sector. Organizations with compensation systems tilted toward merit-based pay increases will show a greater variation in pay increases by the employee.
Occupations with the Highest and Lowest Increases
Wages and salaries grew 3% during the 12 months ending December 2019, according to the Bureau of Labor Statistics. But compensation does not increase equally across all occupations and industries. Some sectors have higher wage growth than others.
According to The PayScale Index, which measures the change in wages for employed U.S. workers, the following industries had the highest year-over-year wage growth in Q1 2020:
- Arts, Entertainment & Recreation: 2.9%
- Technology: 2.7%
- Transportation & Warehousing: 2.7%
- Real Estate: 2.6%
And these industries showed the lowest year-over-year wage growth for the same quarter:
- Energy & Utilities: 1.5%
- Manufacturing: 1.9%
- Accommodation & Food Services: 2.2%
- Finance & Insurance: 2.2%
Types of Pay Raises
Consider the type of raise you expect to receive. Raises take several different forms:
- Across-the-board or cost-of-living raises are awarded at the same level to all employees.
- Merit increases are distributed differentially based on performance.
- Promotion-based increases are allocated to employees who have advanced to new, more responsible jobs.
- Equity raises are instituted by organizations to ensure equal pay for equal work.
Employer-Budgeted Increases: The Mercer Compensation Planning Survey indicates that employers are projecting their average total increase to salary budgets (which includes merit and promotional budgets) to be 3.6%, up slightly from 3.5% in 2019.
Per the survey’s key findings, the “uptick is primarily driven by an increase of organizations having 'additional increase budgets', which often times are to account for market or pay equity adjustments.” In addition, despite the fact that promotional budgets have decreased overall, average salary increases grew 1.5%.
Performance-Based Pay Increases: The WorldatWork Salary Budget Survey as reported by the Society for Human Resource Management (SHRM) illustrates the impact that performance has on raises. In 2019, organizations reported average raises of:
- 8% for middle performers
- 2% for high performers
Per SHRM, WorkatWork also found that 84% of employers used variable pay, e.g., bonuses, to reward employees in 2019. Typically, these companies awarded variable pay based on a combination of individual performance and team success.
Changing Jobs Boosts Your Pay
Many job switchers earned wage growth well above the average for their industry, according to the Workforce Vitality Report by ADP. The report indicates the following major differences between overall year-over-year wage growth and job switchers’ wage growth in key industries (as of December 2019):
- Construction: overall wage growth 4.3%, job switchers’ wage growth 7.9%
- Manufacturing: overall wage growth 4.0%, job switchers’ wage growth 5.2%
- Finance and real estate: overall wage growth 4.3%, job switchers’ wage growth 6.0%
- Education and health services: overall wage growth 1.8%, job switchers’ wage growth 3.1%
- Professional and business services: overall wage growth 3.3%, job switchers’ wage growth 7.7%
However, not every industry offers pay premiums for job hoppers. Job switchers in trade, transportation, and utilities had wage growth of 3.4% year-over-year for 2019, compared to 3.5% wage growth overall. And people who switched jobs in leisure and hospitality saw negative wage growth––their pay changed -2.6% year-over-year, compared to 5.5% year-over-year wage growth overall.
The Best Ways to Position Yourself for an Above-Average Raise
What’s the best way to line up the best possible pay raise you can get?
It’s important to show your employer that you’re a valuable employee and should be paid as such.
It’s also important to be prepared to move on, because that can be your best opportunity to increase your earnings:
Identify How You Can Add Value
Identify the bottom line for your department and the area or areas where the most value can be added and appreciated by your supervisor and management.
Connect Your Goals to the Bottom Line
Work with your supervisor to develop a performance plan and tie your goals to the bottom line whenever possible. If your organization doesn’t have a structure for performance plans, volunteer to draft one for review by your supervisor.
Provide Updates on Your Progress
Communicate your weekly and monthly progress toward goals to your supervisor whether requested or not. When it comes time to determine merit raises, your boss will have plenty of detailed information about your contributions.
Develop a Professional Development Plan
Develop and follow through on a professional development plan that incorporates cutting-edge knowledge and skills in your area. You will be prepared to make a stronger contribution to your current employer and change jobs if necessary. Pay special attention to upgrading your technology skills.
Works Towards a Promotion
Identify next-level positions at your organization and volunteer to take on any related tasks. Promotions are one of the best ways to get a large salary increase from your current employer.
Build Your Network
Keep your professional network current and take on roles in your field such as leadership in professional organizations and conference presentations that will enhance your visibility and attract recruiters.
Enhance Your Marketability
Take the time to enhance your marketability to prospective employers while you’re still at your current job.
Be Prepared to Move On
Keep a constant eye out for openings in your field since job switching is the most common way to generate a big increase in income:
- An easy way to do that is to set up job search alerts. In addition to getting new listings as soon as they are posted, if the employer lists a salary, you can see what you could be earning if you made a change.
- Check salary surveys and calculators to estimate what someone with your credentials can expect to be paid.