Survey Scenario - Historical Merit Budget Trends
For a great source of salary increase insights, look no further than the quarterly-published Radford Trends Report. Access to trends data is complimentary when you participate in one or more Radford Rewards Surveys and complete required supplemental survey submissions.
For illustrative purposes and to demonstrate volatility, the chart below shows merit budgets during the recession in the U.S. from 2008 to 2011. The blue line here shows that during that time frame, average merit increases have been around 3% or 3.5% in the U.S. The gold line shows the impact of pay freezes. While the undiluted average, or average of budget numbers from companies actually giving increases, is the figure most analysts quote when asking about market trends, the reality during the recession was that total money spent on pay increases dipped significantly. The diluted average, computed by taking zero increase figures into consideration, show that overall salary increase budgets fell to below 1.5% during the recession .
U.S. Merit Budget Average (2008 - 2011)
Source: Radford U.S. Trends Report
Over the last seven years, merit budgets have been relatively stable, hovering around 3.1% for undiluted and 3.0% for diluted, as mentioned in the Q4 2018 Radford Trends Report . The return from an unprecedented number of companies freezing salaries between 2008 and 2011 reveals that the undiluted and diluted figures are once again nearly the same. Moderate inflation, productivity improvements and consistent company growth permit companies to give increases to most or nearly all employees every year. While the typical salary increase budget in the U.S. has been hovering around 3% to 4% for a number of years, the budgets in China and India have been double or even triple those figures, given that their economies are growing and average salaries are increasing at much faster rates than in the U.S..