WorldatWork reports that just 11% of U.S. companies are awarding annual cost of living adjustment increases. The Compensation Programs and Practices study found that promotional increases, merit increases, and market adjustments are much more prevalent.
The reason, says Kerry Chou, CCP, compensation practice leader at WorldatWork, is a shift in thinking about pay increases. “From a rewards perspective, it doesn’t make sense to base pay raises solely on the Consumer Price Index,” Chou says, referring to COLAs, which are across-the-board wage and salary increases designed to bring pay in line with increases in the cost of living.
Many workers perceive their raises as COLAs, believing they are given to maintain purchasing power rather than as a reward for a job well done, according to WorldatWork. But, says Chou, “Pay raises are a tool to motivate and retain employees. How motivating can it be for a top performer to receive the same base pay increase as a low or average performer?”
The survey found that when asked “What type of salary increases and/or adjustments does your organization award to some or all employees?,” employers answered as follows:
- Promotional increases, resulting from higher/greater levels of responsibility—94%
- Merit increases—92%
- Market adjustments—76%
- Internal equity adjustments—64%
- Pay differentials—42%
- Temporary special assignment pay—36%
- General across-the-board increases not considered COLAs—12%
For more information about the survey, go to www.worldatwork.org.
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