When It Comes to Salary Budgets, What’s the Right Number for You?

by Christopher Fusco, CCP, GRP, SPHR - November 23, 2016
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It’s November, and along with setting aside time to be spent with family and friends over the holidays, it’s also time to look toward the New Year. For many of us, that means establishing resolutions and setting goals that we hope to accomplish in 2017. For companies eager to maintain a competitive position within their respective industries, planning for 2017 likely includes establishing a solid salary budget for the upcoming compensation cycle. After all, ensuring that compensation is allocated strategically can have a tremendous effect on your ability to attract top talent and retain high performers.

Whether your company ties its salary increases to an anniversary date or a focal date, such as in April or January after the conclusion of a fiscal year, it is important that your salary budget takes into account more than just a small increase based on last year’s plan. But, how do you determine the right budget for your organization? As with a lot of things in life, the answer is: It depends.

When setting a budget for the upcoming year, you want to be sure to take into account not just what you spent last year, but also the state of your industry, your geographic region and the evolution of certain jobs and roles that are important to your business. You can begin your budget analysis by reviewing the results of our 10th annual National Salary Budget Survey, which explores salary trends over the past several years that can help inform your salary budget planning.

The results from the survey of more than 400 companies across 20 industries indicate that there will be a total budget increase of 3% in the United States. The majority (75%) of organizations in the United States and Canada, however, do not plan to change their budgets at all for 2017. While some companies would stop their budget analysis right there and simply make a cost-of-living adjustment, it would be prudent to take a closer look at how individual types of businesses and different regions of the country are approaching budget planning for next year. Below is a brief overview of our findings, and the full analysis can be found here.

Regional Differences

The Northeast region of the United States is planning for the biggest positive change in salary budgets for 2017, according to our survey respondents. For a company with operations in the Northeast, taking into account that nearly 20% of companies there are reportedly planning for an increase in their budget will go a long way toward maintaining a competitive position among top employers in the region. Businesses in the Mountain region also will want to make note of the 17.4% of companies planning for a higher budget in 2017.

Industry Differences

According to our findings, the big winners will be employees in the Chemicals, Healthcare and Financial Services industries, as approximately one-quarter of companies in those industries indicated that they are planning for higher salary budgets for 2017 (compared to their budgets for 2016). In fact, none of the surveyed Chemicals organizations reported plans to decrease salary budgets next year.

Planning for 2017

The results of our annual survey demonstrate that salary budgeting is not as cut-and-dried as it may first appear. Rather than relying on the previous year’s budget as a baseline, it is important that organizations conduct a deeper analysis to determine an appropriate course of action since salary budgets can depend on a variety of factors, including your business type and geographic region. Working with a trusted advisor also can help ensure that your compensation strategy, including your salary budget, are in line with organizational goals. Preparing now for the coming year will set up your company for the successful attraction and retention of top talent in the short and long term.

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