Catherine Hartmann, North America Rewards practice leader at Willis Towers Watson, joins Yahoo Finance’s Sibile Marcellus on this week’s career control to break down the rebound in pay raises and which sectors are seeing the highest raise in wages for 2022.
KRISTIN MYERS: Welcome back. Well, during the pandemic many companies put pay raises on ice amid so much uncertainty in the labor market. But pay raises are now finally making a comeback. We have Sibile Marcellus here with the latest installment of "Career Control." Hi, Sibile.
SIBILE MARCELLUS: Pay raises are back in a big way. The pandemic shattered our concept of what a workplace is supposed to look like, and many workers have been quitting their jobs, looking for something better. There is a new survey by Willis Towers Watson that shows that employers are planning to reward high performers with significantly larger raises. I want to bring in Catherine Hartman, Managing Director and North America Rewards Practice Leader at Willis Towers Watson. Now Catherine, how big are these pay raises that companies are going to be giving employees? And are we just talking about executives or also people working under them?
CATHERINE HARTMANN: We're actually talking about people across the board. And the reason I think that we're talking about that, is while the pandemic caused most businesses to cut back on compensation, we're now seeing companies providing raises at levels not seen in past years. So the survey in fact indicates that employers project average annual increases of 3%. Now that's for executives, management, professional, and support staff in 2022, and that's up from 2.7% in 2021. We're also seeing production and manual labor employees that are also receiving higher than expected average increases. So that's going to be a 2.8% next year, which is higher than the average 2.5% that we saw the past year.
SIBILE MARCELLUS: We've been hearing a lot about the labor shortage in the hospitality industry, but looking at the survey, what are some of the industries that are going to be getting even bigger pay increases?
CATHERINE HARTMANN: Among the major industry groups, we're continuing to see that high tech and pharmaceutical companies project the largest increases. That's around 3.1%. Now that's followed by health care, media, and also some of our financial services or think fintech companies at 3%. And while other companies, hospitality and industries may be lower, I think there's real pressure on organizations to compete for qualified workers these days. And so if we see this trend continue through the fall, it is possible that these industries with lower projected average increases, like retail, like leisure and hospitality, may see that their actual 2022 salary increases are at higher level.
SIBILE MARCELLUS: Catherine, tell us how performance reviews can be very lucrative for some employees.
CATHERINE HARTMANN: They absolutely can. The survey found that companies are continuing to reward top performers with significantly larger pay increases than average performing employees. What we're seeing is that management and professional employees are receiving the highest possible performance rating, and therefore, they're being granted on average about 4.5% this year. But for some companies who are leaning in to pay for performance and have that strategy, I actually believe that the increases could be higher.
SIBILE MARCELLUS: And aside from pay raises, what other tools do employers have in their arsenal to try to retain employees?
CATHERINE HARTMANN: I'm so glad you asked that question, because one of the difficulties for companies right now is balancing I would say competing priorities. So on one hand, employers need to continually effectively managing their fixed cost as they rebound from the pandemic. But on the other hand, companies are starting to recognize that they do need to boost compensation. So what they're doing is, they're using all of the tools in their toolbox to make these sorts of increases in compensation.
That includes heavier use of sign on bonuses and equity grants. That includes increases in referral bonuses. And in some cases, providing referral bonuses at hourly worker levels that they hadn't in the past. They're also using more retention bonuses provided with payments that are six or 12 months out, and then the use of skill premium as well as I would say mid-year market adjustments or adjustment in their salary structure.
SIBILE MARCELLUS: Catherine, I've never met an employee who didn't want a raise. Any tips for employees who won to position themselves so that they can possibly get one?
CATHERINE HARTMANN: Absolutely. I think now is not necessarily the time for employees to be bashful about asking for an increase, but I think it's also a time not necessarily to be boastful. So my advice when going into these discussions is to keep three things in mind. Number one, know your worth. What is the market value for the role you hold and what is the competitive rate?
The second is, understand your performance accomplishments. What were your primary accomplishments? What was your level of performance? And what was your contribution level as both an individual team and to the company as a whole? And the third, be very fact-based. Leave your ego and leave your emotions at the door. Now really is a good time to self advocate.
SIBILE MARCELLUS: Catherine Hartman, I hear you, not a time to be shy. Great to have you on, thanks so much.
CATHERINE HARTMANN: [AUDIO OUT]
KRISTIN MYERS: All right, thanks so much Sibile Marcellus for bringing us that latest installment of "Career Control."