In a new study, the pay transparency and compensation data analysis site PayScale surveyed over 160,000 US employees to find out who is asking for raises, who is getting them, and what determines whether a request is granted. It will come as no surprise to leaders versed in the challenges of diversity and inclusion that the survey turned up gender and racial gaps, not in how likely employees were to ask for a raise, but rather in how successful they are in getting them, Aimee Picchi reports at CBS Moneywatch:
Compared with white men, people of color are significantly less likely to receive raises when they ask supervisors for more money. The reason may boil down to bias, although it’s unclear whether it’s due to overt or unconscious bias, said PayScale Vice President Lydia Frank. … Women of color are 19 percent less likely to have received a raise than white men, while men of color are 25 percent less likely, the analysis found. The research found that no ethic group was more or less likely to have asked for a raise than any other group. …
Workers are often told it’s up to them to ask for a raise, but the findings suggest that employers should scrutinize their own processes for distributing pay hikes, Frank added. “If people don’t receive the same consideration, employers have a responsibility to ask how do we ensure everyone is treated fairly,” she noted.
The study did find a meaningful difference between men and women in terms of rationale among those who don’t ask for raises, with 26 percent of women saying they didn’t ask for a raise because they felt uncomfortable negotiating their salaries, compared to 17 percent of men. Still, the study doesn’t support the notion that women experience pay gaps because they are less likely to negotiate their pay; PayScale notes that it found ” no statistically significant difference in the rates at which women of color, white women, men of color and white men ask for raises.”
In the UK, as in the US, persistent wage stagnation has been a painful long-term consequence of the financial crisis and the Great Recession. A new survey from XpertHR finds that employers there are increasingly optimistic about the raises they will be able to offer this year, predicting an average increase of 2.5 percent, Ashleigh Wight reports at Personnel Today:
A survey of more than 200 private sector employers found that they were more optimistic about the pay increases they plan to offer their staff in 2018 than six months ago, when they expected to offer a 2% pay rise. Of the organisations surveyed, the most common pay award prediction remained at 2%, with 28.9% of employers expecting to offer this level of increase. One in 10 (11.4%) employers forecast a pay increase of 4% or more, while just 5.3% of employers predicted a pay freeze.
In the three months to the end of February, XpertHR found there was a 2.5% median basic pay increase, based on data from 169 pay awards. … XpertHR pay and benefits editor Sheila Attwood said: “It is several years since employers have been so optimistic about prospects for pay rises. If private sector pay awards stick at 2.5% over the course of the year, this will mark the first time since 2012 that increases have been consistently above 2%.”
These findings mirror a survey of US employers conducted in the last quarter of 2017, which registered growing levels of business optimism and predicted that wages could rise 4.27 percent in the coming year, compared to the 3.39 percent figure PwC found in Q3 and just 2 percent a year ago.
Reports issued recently by two leading think tanks paint very different pictures of the economic outlook for UK workers, however. In early November, the Resolution Foundation asserted that the average pay package in Britain in 2022 would still be £20 lower than it was before the financial crisis, according to the Guardian:
A new union deal in Germany covering some 120,000 Volkswagen workers will give some of them the option of swapping some of their pay for additional time off, CNN Money reports:
Volkswagen said the workers will get a 4.3% pay rise starting in May, and from 2019 an extra 2.3% bonus and more pension benefits. Night shift workers, and those caring for children and elderly relatives, can swap the new bonus for six extra days off. If they do, they’ll be entitled to about 45 paid days off each year, including public holidays.
Volkswagen Group — which also owns the Audi and Porsche brands — employs about 286,000 workers in Germany and 350,000 in other countries. German workers are taking advantage of low unemployment and strong economic growth to flex their muscles at the negotiating table.
The deal between Volkswagen and the IG Metall labor union comes after the first strikes the company had seen since 2004, Reuters adds, and represents a compromise between the union’s demands for a 6 percent raise and the company’s initial offer of 3.5 percent initially and a further 2 percent over 30 months. It also includes a significant boost in the amount of money Volkswagen contributes to employees’ pensions, from 27 euros a month to 90, and then to 98 euros starting in 2020. In exchange for these concessions, Volkswagen secured the right to ask five to ten percent of the workers covered in the agreement to temporarily increase their working hours from 35 to 40 a week.
The tax reform bill passed by the US Congress in December, which drastically lowered the corporate tax rate from 35 to 21 percent, has prompted numerous large employers to announce raises, bonuses, or upgrades to their benefits packages as a means of passing on some of their tax savings to their employees. On Wednesday, the restaurant chain Chipotle announced a round of one-time cash bonuses and stock grants, as well as increased parental leave coverage for many employees. On Thursday, CVS said that it would boost hourly employees’ pay from $9 to $11 per hour, among other pay rate increases, and now provide up to four weeks of paid parental leave for full-time employees. Walmart, Starbucks, Disney, Wells Fargo, and other large companies have made similar moves.
What remains unclear, however, is whether these rewards (most of which consist of one-time bonuses rather than permanent wage increases) are sustainable and whether the benefits of the tax cut will redound to the majority of Americans who don’t work for large corporations. Small business owners are reluctant to make similar moves, much as they would like to, until they have a better sense of how much money they will actually save from the tax reform. As the Associated Press’ Joyce Rosenberg pointed out this week, smaller companies have less clarity on that issue than large corporations do, and questions remain as to how new deduction rules will pan out for small business owners. In addition, small and mid-sized businesses have nowhere near the same cash reserves or credit lines as big companies do, which makes the awarding of bonuses and raises a much riskier endeavor.
Since the US Congress passed a major tax reform bill last month, slashing the corporate tax rate from 35 percent to 21 percent, a number of companies have come out with announcements that they were passing some of their tax savings on to their employees in the form of raises, bonuses, or enhanced benefits. Many of these companies framed these decisions as responses to the tax cut, but some also acknowledged that they were planning to increase rewards this year anyway or were parlaying their tax savings into accelerating changes that were already in the works.
The businesses making these announcements are large, high-profile companies that employ substantial numbers of people, so a lot of American workers are seeing the corporate tax cut “trickle down” into their paychecks. In surveys, however, most companies have indicated that their tax savings will go mainly toward investor-focused spending like debt repayment, dividends, and stock buybacks. Also, most of the post-tax-reform rewards employees are getting are one-time bonuses, which don’t commit employers to higher payroll costs in the future as raises do. Companies that handed out bonuses before the new year (or before the start of their fiscal year) had an additional incentive to do so, as they would be able to deduct those bonuses from their taxable income for 2017, subject to the 35 percent rate.
Passing over the thorny politics of whether or not corporate tax cuts are the best way to deliver higher incomes for working families, tax reform is hardly the only motivation these companies have for raising wages or upgrading benefits like paid family and sick leave.
As part of a package of compensation and benefits increases, Starbucks announced on Wednesday that all of its US employees, both salaried and hourly, will be eligible for paid sick leave, while paid parental leave will now be available to all parents, the Associated Press reports:
Starbucks Corp. said Wednesday that the changes affect about 150,000 full-time, part-time, hourly and salaried employees, most of whom work as baristas or shop managers. The new benefits apply to workers at more than 8,200 company-owned stores but not at the 5,700 licensed shops like those found inside supermarkets.
The company also said workers would receive a pay raise in April, in addition to one-time stock awards ranging from $500 to $2,000. The new sick leave policy will come into effect in July, according to the AP. Previously, paid sick leave was only available to hourly employees in states that mandated it by law.
Starbucks’ parental leave policy for hourly employees has long exceeded what most US retail employers offer. Nonetheless, the coffee chain has recently faced pressure from activist investors to increase those benefits to match its substantially more generous policy for salaried corporate employees, following media reports scrutinizing the impact of this disparity on store employees. These latest changes do not equalize benefits for hourly and salaried employees, but will make parental leave available to some store employees who were not able to take it before, when it was only available to birth mothers and adoptive parents.
Previous surveys have predicted that most US employees will receive a small increase in their base pay this year, averaging about 3 percent, though high performers can expect a bit more as organizations shift their compensation strategies toward greater differentiation. That 3 percent raise appears to have become standard in recent years for the average employee, as a 4 or 5 percent annual raise once was.
A new survey of CEOs and CFOs from PwC, however, suggests that raises might be a bit higher than expected this year: The consultancy’s Q4 2017 Trendsetter Barometer report, based on interviews with 300 CEOs and CFOs during the last quarter of 2017, found that these leaders expect to raise wages by an average of 4.27 percent in the coming year, compared to the 3.39 percent figure PwC found in Q3 and just 2 percent a year ago. The last time panelists projected average wages would rise above 4 percent was during the second quarter of 2007, the report notes.
Plans for growth are also on the upswing, with 56 percent of the leaders surveyed saying they intended to hire new employees in the coming year, compared to 49 percent who said so in Q3. PwC attributes these bullish plans for 2018 to higher levels of business confidence and optimism about the future of the US economy, with 79 percent of leaders expressing optimism, a notable increase from 59 percent at the end of 2016.