To combat inflation and retain workers in what many executives say is still a difficult labor market, some large employers are raising wages or awarding special bonuses. Exxon Mobil Corp. gave US employees a one-time payment equal to 3% of their salaries in June. According to PricewaterhouseCoopers LLP, raises will be given out in July to reflect the firm's performance in the fiscal year that just ended. Microsoft Corp. announced this spring that it would nearly double its global budget for merit-based raises.
The moves, which are frequently planned months in advance, come at an unusual time for American companies. In recent weeks, some executives have expressed concern about a possible economic slowdown, and companies such as cryptocurrency exchange Coinbase Global Inc. and Netflix Inc. have laid off workers. Despite this, many corporate leaders believe that business is good and that higher pay is necessary to reward employee performance, keep up with rivals' pay, and reflect that employees are paying more for gasoline, groceries, and other daily living expenses.
"The market has moved," said Michelle Swanenburg, head of human resources at asset manager T. Rowe Price Group Inc., citing one of the reasons for the current pay changes.
T. Rowe sent an email to thousands of employees last month in which it announced that it would give approximately 85 percent of its workforce a 4 percent raise beginning July 1. T. Rowe employs over 7,500 full-time employees.
Though the company's fiscal year ends in December, executives decided to give raises now after noticing an increase in attrition, particularly among technology workers and some entry-level employees, and to account for inflation, according to Ms. Swanenburg. The company extended the raises to some new hires, which meant that some employees received a raise after only a few weeks on the job.
"We had a lot of discussions this summer about what to do because we knew associates were struggling and turnover was increasing." "We wanted to ensure that we remained a preferred employer," Ms. Swanenburg explained. The 4% raise is in addition to the annual, year-end salary adjustments that the company will continue to provide.
Overall, companies have on average increased base pay in the U.S. by 4.8% so far in 2022, and about a third of employers are considering or planning midyear raises, according to a survey of more than 300 large employers conducted in May by Pearl Meyer, a compensation advisory firm.
For years, many companies kept pay increases around 3% annually, but bosses have felt pressure to change pay largely in an attempt to retain workers, said Rebecca Toman, vice president of Pearl Meyer’s survey business unit.
"A labor shortage combined with inflation creates a perfect storm in which we're seeing larger-than-normal annual base salary increases and companies considering doing something more," Ms. Toman explained.
Exxon's 3% bonus in June occurred outside of the company's normal annual review cycle. On a conference call with investors in late April, CEO Darren Woods stated that it was intended to help Exxon maintain its competitiveness. In addition, the company announced that it would triple the number of employees eligible for stock grants.
Some smaller businesses that have recently increased pay significantly are now assessing whether further changes are required. Warehousing and logistics company Lansdale Warehouse Co. in Pennsylvania increased wages between 8% and 12% in the summer of 2020, and then again by a similar amount in 2021, to account for inflation and a tight market for truck drivers, warehouse workers and others, said President W. Paul Delp.
This summer, the roughly 65-person company is awarding spot bonuses in the form of $25 or $50 gift cards to the Wawa gas and convenience store chain. At a recent meeting, supervisors talked about one employee’s strong performance, Mr. Delp said, and decided “he needs a Wawa card.”
Landsdale executives also now monitor a local cost-of-living index on a quarterly basis, wanting to ensure wages allow a family of four to live comfortably. "We keep a close eye on things," Mr. Delp said.
U.S. inflation accelerated to an 8.6% annual rate in May, its fastest pace in 41 years. The unemployment rate held steady at 3.6% in May—near its prepandemic lows—though the pace of hiring cooled from recent months.
Larger employers say they are monitoring pay data almost continuously now, too. At PwC, the firm no longer reviews salary data once a year, said Tim Ryan, the firm’s U.S. chairman. Instead, PwC regularly looks at a number of data points, including salary expectations of new hires, using that information to react quickly and make compensation changes if needed.
The firm raised pay 5% in January, and offered additional raises this month. “Our people will get another round of good raises and we will stay competitive,” Mr. Ryan said.
Those who study compensation trends say if the economy does worsen, companies could begin to focus pay raises more selectively. A number of employers considering midyear pay raises this summer are choosing to offer extra compensation to high performers or those performing in-demand roles, Ms. Toman of Pearl Meyer said.
“Companies are being really thoughtful and targeted,” she said. “The high-performers are going to be the ones who see the increases first.”