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The Outlook for Pay Raises in 2017

Look for average hikes of about 3%, but highly rated workers will get more.

Kiplinger's spoke with Sandra McLellan (pictured left), the North American compensation practice leader for consulting firm Willis Towers Watson, about employer pay raise trends for 2017. Here's an excerpt from our interview:

What kind of a raise can people expect in 2017?

Companies are forecasting 3% increases, similar to years past. But how that budget is spent may vary by person. Employees with the highest possible rating could see increases in the range of 4.5% to 5%, while low performers get an increase between 0.7% and 1%. Bonuses for salaried employees are projected to be 11.6% of pay, on average, with rewards for special projects or onetime achievements set at 5.6%, on average.

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What can workers do to improve their standing?

A lot of companies are making the process more about feedback than about performance rankings. That means there's a real opportunity to sit down with a manager and make sure there's a mutual understanding: What’s really expected of me, how will I be measured, and how will that impact my pay? The pace of work changes quickly, so ask how your goals are changing. Employees can also ask about more-individual approaches to work: Can I work from home or work alternative hours? A lot of times these programs are not communicated as well as they could be. They might not put dollars into your pocket, but they make life easier.

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The job market is getting tighter. Do wages reflect that?

For many skills, and for workers who are high performers or who have high potential, it's getting harder to attract talent. Increasingly, certain employees may see more movement on pay. Also, employers say that they need to create more opportunities internally. If you want to change jobs, grow in your career or develop skills that help you remain current, a lot of times there's more op­portunity available within your own company than you might think.

Which industries will be the most generous with workers? What jobs are in demand?

It's more about job skills than industries. And the skills that employers are having a harder time finding are the ones you might expect: digital and technical capabilities. These skills are now required in jobs that never needed them before. A marketing person today needs the ability to understand the dynamics of online channels, for example.

What other trends do you see?

Companies say they might lengthen the time between pay increases. One reason is that employers want to be able to make the size of the increase more meaningful. Or they might look to increase the differentiation between workers, spending more for high performers.

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