Location, location, location. It’s not just a motto for real estate. It also can apply to where you have the best chances of getting a higher-than-average raise.
Nationally, the projected average base pay raise for 2016 is just 3%. But the average projected for Washington, D.C., is 3.8%, according to the latest survey of 691 companies from Aon Hewitt.
Dallas isn’t far behind at 3.5%. And the expectation for Minneapolis is 3.3%. Houston, Seattle and Columbus, Ohio, meanwhile, are projected to come in just above average at 3.2%.
Granted, a 3.2% or even a 3.8% raise won’t put you on Easy Street. That’s why employees have come to count on so-called “variable pay” options, such as bonuses and other incentive programs, to boost their annual income. More than 90% of the companies surveyed offer them.
The projected variable pay average for next year is 12.7% for salaried employees who are exempt from overtime.
But again, working in some cities will be more profitable than others. Projections for bonuses and other forms of variable pay are highest in Houston (16.5%), Boston (16.1%) and Minneapolis (13%), according to Aon Hewitt.
Even in cities where bonuses and incentive pay expected to be below average, the increases aren’t bad — 11.1% in Detroit, for example.
Indeed, the trend among employers now is to spend much more heavily on bonuses and other incentives to recognize and reward good performance instead of the plain-vanilla base pay raise.
And Aon Hewitt expects that trend to hold.
Two decades ago the base pay bumps averaged 3.9%. Today it’s a percentage point lower. By contrast, money allocated for variable pay went up more than 5 percentage points to 12.7%.
Why the shift?
“[Variable pay lets employers] recognize and reward performance without growing their fixed cost,” said Ken Abosch, a compensation practice leader at Aon Hewitt.
So, given pressures on companies to keep those costs down to remain competitive, Abosch said, “We don’t expect to go back to the days of high salary increases — 3% is the new 4%.”
Of course, the raise and bonus you get will depend in large part, too, on your industry.
For example, Abosch noted, “organizations in the energy sector have been seriously impacted by the falling cost of oil and are therefore forced to keep fixed costs at a minimum.” That may help explain why employers in Houston, a major oil city, are projecting higher-than-average incentive and bonus awards, but are hewing close to the national average on base pay increases.