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Have 2018 Salary Increases Hit a Ceiling?

Man figurine standing on pennies on top of blocks reading "2018"

Raises are generally on the rise in Texas this year. But if you’re looking for an across-the-board percentage increase to hang your hat on, keep waiting. Predictability is not something 2018 is serving up well.

Late in 2017, several established wage surveys came to an expected consensus: Employers nationwide were planning on handing out 3% wage increases in 2018, just as they had the year before. But then, as 2018 approached, something interesting happened. PwC was surprised by its own survey results, which showed employers were suddenly becoming more generous. PwC’s Q4 2017 Trendsetter Barometer report showed employers were now deciding to increase wages by 4.27% (they reported a 3.39% planned increase for 2017 and an only 2% planned increase for 2016). It seems this quickly changing landscape forced some of those earlier reports like WorldatWork’s annual salary budget survey to be pulled from the web altogether.


Can you guess what happened?

Employers reported a remarkable 20% increase in economic growth confidence at the end of 2017. Experts speculate it’s because of the announced tax changes, which include a significant corporate tax rate deduction. Almost immediately in 2018 90% of U.S. employees also received a paycheck boost due to a reduction in payroll tax withholdings, which made it feel to many as if they already got a raise. Additional tax cuts prompted three in five U.S. corporations to consider passing even more savings on to their employees with either increased compensation, bonuses or expanded benefits. Walmart, which is Texas’s largest private employer, is among those businesses. It vowed to raise starting wages and give bonuses up to $1,000.

But now that we’ve settled into 2018 and talks of tariffs and other economic uncertainties loom, are employers going to stick with their lofty compensation goals? The White House reports a net 33% of small firms raised compensation in March, the largest share since November 2000. By how much? So far, pay has increased for hourly U.S. workers by only 2.7%.

The bottom line is that whatever the percentage increase, it’s wise to consider raises this year. In January, Austin-based Indeed found that half of all employees would consider leaving their current job if they don’t get a raise.

“Before it’s time to make those decisions, run salary audits and compare your company’s compensation packages to your competitors’ salary ranges to learn whether you’re paying enough,” the Indeed study authors recommend. “If cash is truly limited, get creative with benefits by offering work-from-home options, opportunities for travel or relocation, development opportunities or additional PTO.”

Jobs in high demand require special consideration. Take Austin tech workers, for instance, who made 7% more on average last year than they did the year before—the biggest salary increase for any tech workers nationwide, reports Recode’s Shirin Ghaffary (the full report from Hired can be accessed here). If you employ tech workers Austin and surrounding Texas metros, you’re in a class all our own. Pay close attention to the competition when it comes to salary.

And then there are those affected by salary equality reform. If you have offices or employ workers in states outside of Texas (or in other countries), be aware some jurisdictions are implementing wage equality laws. For instance, Massachusetts recently passed measures to make it unlawful for employers to pay men and women different rates for “comparable work.”  In Texas, where the law doesn’t require it yet, many employers are proactively considering fixing pay gaps as a part of corporate responsibility. As it turns out, Austin is woefully behind on gender pay equality.


What questions do you have about employee compensation? Have your plans to increase salaries or benefits this year differed from years past? As the U.S. business outlook shifts, you may be faced with quite a bit of uncertainty, and we’d be happy to uncover more insights for you. Let us know!


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Copyright: Rattana Rueangha / 123RF Stock Photo