While the United States economy and job market are both on the incline, salary increase budgets continue to remain stagnant with few (if any) signs of growth.  This lack of growth is causing companies to tie base pay increases to performance as well as providing alternative forms of rewards.

Mercer’s 2015/2016 U.S. Compensation Planning Survey reveals that next year’s average salary increase budget is expected to increase by a mere 0.1% from 2015 to 2.9.  Human resource experts explain that the Planning Survey includes respondents from approximately 1,504 midsize and large United States employers, reflecting pay practices for over 17 million employees.

The lack of growth is forcing human resource management within companies to look for other ways to retain talent.  Differentiating salary increases by employee performances still seems to reign supreme with companies rewarding top-performing employees with more significant pay increases than lower performers.  Mercer’s survey shows that top-performing employees received average base pay increases this year that were nearly quadruple what low performers received.

Although this may seem like a short-term fix to the lack of budgets, some human resource departments feel as though this is a fairer way of providing increases to employees.  Why should a low performing employee be rewarded the same as a top performer who may value their position more?  This methodology also allows companies to vary increases by category, segment or department.  Companies are able to weight the importance of an employee based on where they are in the company hierarchy.  So while it appears to be a supplement, these short-term incentives might not go away any time soon, regardless of budgets.