Large corporations are biting the bullet this summer and giving raises to retain their employees — and help them cope with inflation.
The average pay raise is around 3% a year, typically given between January and April. But soaring inflation,and a tight labor market are creating conditions that warrant off-cycle and larger-than-usual bumps in pay for workers.
A recent survey of workforce trends found that roughly two-thirds of employers increased their compensation budgets from January to June, according to Gallagher, a consulting firm.
“Inflation and the impact it has on the cost of going to work, feeding a family, keeping the lights on, is driving the conversation about pay raises,” said Scott Hamilton, a human resources expert at Gallagher. “Companies are having conversations about pay increases, gasoline gift cards, reimbursement for travel expenses to make sure the workers necessary to keep the services operating show up.”
Raises for all stripes of workers
Gas company ExxonMobil, technology company Microsoft, investment firm T. Rowe Price and retailer Walmart are among the large corporations that recently increased worker compensation and benefits.
In April, ExxonMobil expanded a program that gives stock to high-performing employees, doubling the number of workers who receive shares. And in June, Exxon gave its U.S. workers a one-time cash payment equal to 3% of their salaries, a spokesperson said in a statement to CBS MoneyWatch.
Microsoft in May doubled its global budget for merit-based salary raises. “This increased investment in our worldwide compensation reflects the ongoing commitment we have to providing a highly competitive experience for our employees,” a Microsoft spokesperson told CBS MoneyWatch.
T. Rowe Price also sweetened deals for workers, offering most of its global staff 4% salary increases by July 1 “to reward their commitment and ensure that we remain an employer of choice,” a company spokesperson told CBS MoneyWatch.
More than 85% of the company’s workforce received these pay raises on top of their normal salary increases, which took effect in the beginning of the year. T Rowe Price cited labor market conditions and inflation trends as factors that influenced the abnormal pay raises.
In mid-June, Walmart announced higher wages for more than 36,000 pharmacy technicians by raising their average hourly wages to more than $20 an hour.
“Perfect storm” of conditions
A June survey from Pearl Meyer, which advises employers on compensation, found that in 2022, companies increased worker pay by an average of 4.8%. The higher-than-usual increase was driven by a “perfect storm of record inflation, high turnover rates, and a shortage of labor,” the survey concluded.
About one-third of organizations surveyed by Pearl Meyer said they are considering or planning rarely-used mid-year raises for top performers.
“It’s surprising because historically it has been pretty rare to see mid-year salary increases,” said Rebecca Toman, vice president of surveys for Pearl Meyer.
Toman predicted that mid-year raises will be awarded to top performers and mission-critical employees only. “We are going to see mid-year raises, but not everybody is going to be eligible.”
Most organizations surveyed said the higher increases in 2022 were brought on by retention concerns and the higher cost of living amid rising inflation.
“Inflation is definitely an issue right now but there are also labor shortages and insufficient talent in many areas,” Toman said.
Inflation has accelerated to, the highest rate in 40 years, and continues to outstrip most raises in pay. One exception: low-wage workers , retail and health care, whose wages have been rising at even faster rates.