If you’re like most employees, you probably think raises don’t come frequently or sizably enough. You put in a lot of hard work at your job and all you want is for your employer to recognize that in the way of extra pay, especially considering you bring back a lot more money to your company that it gives to you. But if we could tell you we had a crystal ball and saw raises next year for employees at big firms, that’d be pretty exciting, right? Well, we don’t have to rely on any fortune-telling gimmicks, because a study done by global management consulting firm Hay Group has shown that raises are due across the board.
While a 3% pay raise is average across the board for all workers at large firms – a number that has been the average for the last four years – that unfortunately doesn’t mean each industry will be compensated the same or as fairly. Let’s take a look at how the different industries stack up.
Hospital Workers: They’re only going to see an average of 2% in their raises next year.
Chemical: Roughly 3%
Consumer Products: 3%
Health Insurance: 3%
Financial Services: 3%
There is one surprise winner in who’ll be getting pay raises next year. While almost all industries are facing an average of a 3% raise in 2015, there is one sector that will get an extra little bump: oil and gas. The oil and gas industry has been strong in recent years, even in the face of Middle Eastern and European crises. Most recently, the Russian-Ukrainian crisis over Crimea has caused a big fuss to worldwide oil supplies and economic balances, but the United States has managed to escape relatively unscathed from it.
Not Everything about the Raises Is Good News
We’d love to say that anytime a raise is mentioned, it’s completely good news and there’s no wisp of a storm cloud attached to it. However, this is not one of those times and the news of 3% pay raises in 2015 across the board does come with a few strings attached.
Inflation plays a part in affecting the net figure of the 3% raises, as the cost of living will always rise each year and this cuts into how much the raise is actually worth.
After factoring in inflation, the average raise of 3% actually works out to about 0.9%.
This 0.9% net raise is lower by almost half as much than what economists forecasted for this year, with a predicted 1.6% rise for this year not going to be seen in 2015.
Why are Raises so Seemingly Paltry?
The economy is slowly but surely recovering, we’ve got an abundance of natural resources that has the rest of the world envious, and we’ve solidly built up our industries to be tops in the world in many areas. We’ve also got CEOs of major companies getting ridiculously-sized bonus packages, often amounting to many, many times more than what a person would make over the course of their life.
With that context, shouldn’t large firms be able to give more than a small 3% raise to its employees?
The companies that Hay Group used in their study — roughly 400 firms with revenues of at least $500 million — consistently said this was one of the top reasons they were hesitant to hand out bigger raises:
They’re afraid employees will leave them as the economy continues to get better.
Instead of bumping up the size of their raises for next year, large companies prefer to compensate their employees in other ways, using non-financial rewards like training, development and perks, as a way of procuring employee loyalty.
Is it the right way to go? Or should companies start paying their employees what the market thinks they’re worth?