Your Business

Higher Salaries Ahead in 2012

Raises will be higher, but you’ll have to work hard to earn one.

Good news—well, let’s call it not-bad news—is coming from an otherwise dreary job market. Although unemployment remains stuck at about 9%, salary freezes have thawed for the second year in a row, with only about 4% of companies anticipating freezes in 2012, much improved from a bone-chilling 48% in 2009. People lucky enough to have jobs can expect a moderate raise this year of 3%, on average, by most estimates.

The uptick modestly outpaces increases seen over the past few years (they hit bottom in 2009) but falls short of prerecession raises. “It’s the fourth-lowest level of corporate spending in 35 years of tracking it in our study,” says Ken Abosch, of human resources consulting firm Aon Hewitt, whose survey predicts a 2.9% increase in base salaries.

If you’re an above-average performer or have a special skill set, you can expect your employer to cut you a more generous paycheck. Companies want to make the most of every dollar in the raise pool by investing it in top producers, or those with unique talents. Mercer’s 2011–12 compensation survey found that top-performing employees—those ranked in the highest 8% of their companies’ workforce—saw salaries climb 4.4% in 2011.

The practice of paying raises that vary from employee to employee, and concentrating on top performers, is here to stay. “We can’t really blame this shift on the recession,” says Abosch. Increasingly, employers also think outside the paycheck when it comes to compensating valued employees. Many offer job training, tuition reimbursement and stock options.

The 2012 salary outlook is rosiest for employees in the real estate, oil-and-gas and engineering in­dustries. Those workers will see base-pay raises of about 3.5%, according to Aon Hewitt. The stingiest raises will go to government employees, who are on track for a meager 1.7%.

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