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Even with a tight labor market, employers aren’t expected to dole out hefty salary increases in 2018. Seventy-three percent of employers polled in a recent PayScale survey were estimating an average of three percent or less—same as last year—with many employers counting on “variable pay,” such as bonuses and commissions, to attract and retain top talent.
The Tax Cuts and Jobs Act has even spurred some businesses to offer one-time bonuses, which experts say could boost morale, but also potentially set expectations for future bonuses.
“The question is: will employees who benefited from a one-time bonus now, expect that there will be a similar kind of action 12 months from now?” said Jim Hudner, a managing director in the Boston office of Pearl Meyer, which specializes in executive compensation consulting.
That’s yet to be seen, but it doesn’t seem to be stopping companies from handing out bonuses.
In an online survey conducted in late January by Pearl Meyer, out of the 301 respondents nationwide, 20 percent had already provided some enhanced benefit to employees as a result of the tax overhaul and another 35 percent were considering it, Hudner says.
While a one-time bonus not tied to performance or goals isn’t traditionally the norm, over time there’s been “a slow, but very steady increase in the utilization of variable pay programs like discretionary bonuses or annual incentive plans,” Hudner says.
With moderate salary increases, the use of bonuses starts to become more important to recognize higher performers, Hudner notes.