Don’t expect bigger bonus next year

MIDDLE- class incomes are on the rise, corporate profit growth has been particularly strong and unemployment is low. But don’t expect all that good economic news to translate into a big bonus next year: Companies are actually projecting a decline in their budgets for bonuses in 2018, according to a survey released on Monday.

Human resources consultancy Aon Hewitt released its annual salary increase survey of more than 1,000 companies and found that spending on “variable pay” – merit pay and annual bonuses – is projected to decline to 12.5 per cent of companies’ payroll budget in 2018, the lowest level since 2013. Raises to base salaries are also expected to be meager, with companies budgeting three per cent for base pay increases, roughly the same as the past six years.

While the flat pay increase is likely to be discouraging for many workers, said Ken Abosch, who heads the North American compensation practice for Aon Hewitt, “the real story is what’s happening in variable pay.” The first surprise, he said, was seeing a slight pullback in spending on bonuses for 2016 – companies spent 12.7 per cent of their budgets on bonuses, compared to 12.8 the year before. That was the first time since 2010 that number has declined.

But perhaps even more “alarming,” said Abosch, is next year’s projection. “That’s a correction. That’s a change in pattern,” he said, pointing to CEOs’ concerns about political uncertainty, global competition and concerns about rising inflation.

Abosch said the companies’ projections for 2018 run counter to what the White House has suggested could happen to wages as a result of low unemployment. “The rhetoric from the administration suggests that there’s going to be more aggressive wage growth, and this report is not supporting that,” he said. — WP-Bloomberg