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Sunday, 14 June 2015 21:25

Report: Michigan employers keep giving small performance-based raises

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At a time when employers are focusing on retaining skilled a workforce — especially as the pool of available workers shrinks — new research shows they have foregone doling out more money to employees via performance-based raises.

According to a June compensation report from the Livonia-based American Society of Employers, merit raises in Michigan have remained steady at 3 percent since 2014, suggesting that companies are foregoing a critical employee retention tool.

“What we are seeing is that employers are not able to differentiate true performance when it’s 3 percent,” said Mary Corrado, president and CEO of ASE. “If somebody is doing extremely well, they may get 4 percent but someone on the other end gets zero to make up for that.”

She noted in the report that a 3 percent merit raise seems on the low end of the scale, particularly with employers saying it’s difficult and expensive to on-board, train and retain workers.

But not all industries are experiencing flat merit raises, as the ASE survey notes the situation varies quite a bit across industries.

Engineering, for instance, had enjoyed several years of wage growth and has now leveled off at 2.9 percent, in line with the overall average. Wages in design and drafting positions are seeing some of the highest growth at 5 percent. The same positions had no growth in 2014, according to the report. Legal support positions saw 2 percent growth and human resource professionals were right with the average at 3.1 percent.

At the other end of the spectrum is base wage growth. According to an analysis of 33 metropolitan areas conducted by The Wall Street Journal earlier this month, the greater Grand Rapids area was one of 11 regions where wages have returned to pre-recession levels.

However, the overall steady nature of merit raises in the region presents a conundrum for employers, Corrado said. It is hard to distinguish whether the increases are truly performance-driven or really just a mandatory raise.

“Some companies used to call them ‘cost of living’ increases," Corrado said. “Now we are wondering whether the merit increase has just become a general increase rather than a true measure of performance.”

Employment experts point out that merit increases will become increasingly important in coming years since a considerable amount of hiring lately has been for jobs on the lower end of the pay scale, said David Smith, president and CEO of Grand Rapids human resources firm The Employers’ Association.

“The growth in jobs we have experienced — a lot of them are coming from entry-level positions and entry-level positions are paid entry-level rates,” Smith said.

As training and retaining a qualified workforce gets increasingly competitive, Corrado from ASE believes that will force employers to ramp up the raises they give their workers.

“I would suspect we will see merit increases increase a bit in 2016 because employers are going to have to continue to retain workers as the boomers retire,” Corrado said. “Finding workers is so much more difficult than it has been in previous years — even before the great recession.”

Read 2143 times Last modified on Sunday, 28 June 2015 18:03