Pay Band Manager, a first-of-its-kind HR solution, has launched!

Learn more
LaborIQ

Compensation | March 1, 2022

The Annual Increase Percentage: Why 2022 Is Different

A salary can seldom be judged by just the number you see on paper. What might have been an attractive salary two years ago will likely find you struggling to pay living expenses in today’s economy.

The cost of living is constantly rising as inflation affects the global market. Recent statistics indicate a 7.1% increase in the cost of living over the last 12 months, and at the time of this writing, the U.S. inflation rate is 7.5%.

Salaries need to rise in tandem to compensate workers accordingly.. This annual salary increase usually follows the annual increase percentage. However, this year’s annual increase percentage doesn’t follow the same rules as in the past. Let’s take a look at this in more detail…

Annual Pay Increases

What’s the Annual Increase Percentage?

The annual increase percentage measures the percentage rate salaries are raised across the board in any given year. Many employers increase wages by a percentage each year to reflect the rising cost of living and new trends in the labor market.

Unsurprisingly, businesses that fail to match salaries with rises in inflation risk losing employees to competitors offering more competitive compensation. In other words, when wages don’t align with the cost of living and inflation, employees are, in fact, earning less each year, as they have to stretch their paychecks that much further.

The Annual Increase Percentage in 2022 – Why is it Different?

The pandemic has thrown much of the world’s economy into disarray and it’s still too early to fully assess its total economic impact. However, the World Bank’s early statistics indicate that global economic growth is expected to slow down from 5.5% in 2021 to 4.1% in 2022.

The way corporations do business was significantly affected by the pandemic. It also caused supply shortages and prompted price increases. As a result, job losses rose and the U.S. government had to step in. They introduced temporary wage subsidy initiatives, including the Paycheck Protection Program (PPP) and the Employee Retention Tax Credit (ERTC) to help employers pay staff.

At the same time, the cost of living skyrocketed. In December 2021, the Consumer Price Index (CPI), which measures the overall cost increases in the economy, increased by 7% from December 2020. This primarily affected food and energy prices. However, according to CNBC, wage increases in 2021 didn’t match the rising cost of living.

But, this was to be remedied in 2022, when compensation costs like salaries, raises and benefits would jump by 3.9% – the highest percentage increase since 2008.

What Impacts the Annual Increase Percentage?

The annual increase percentage is affected by a range of circumstances. Of course, inflation is the most crucial factor. But other, less far-reaching elements also impact salary increases, including:

  • Location. As each state has different living costs, wage increases differ greatly depending on location. For instance, according to the BLS, California’s wage and salary rates rose by 4.6% between 2020 and 2021. But in Detroit, the raise was only 2.7% and just 2.5% in Seattle.
  • Job sector. While the average performance-based raise doesn’t fluctuate significantly across different sectors, some variations exist. For instance, in 2021, civilian workers had a more negligible raise than private industry workers (4.2% compared to 4.6%). Still, both enjoyed higher percentages than state and local government workers (2.4%).
  • Job performance. Higher-performing employees carrying lots of responsibility might receive more substantial raises than their coworkers at their employer’s discretion.

Stay Ahead of Annual Increase Percentages

Given fluctuating economies and changing inflation rates, it can be challenging to adjust salaries. For many companies, keeping costs as low as possible while doing the right thing for staff is a tricky balancing act. This is where a software solution like LaborIQ can make a difference. LaborIQ is compensation analysis software that draws data from the labor market to determine accurate salary rates and expected salary increases for specific job roles. These calculations factor in location, employee experience, labor market forecasts, and more.

With the right software at your fingertips, you can stay ahead of the annual increase percentage and have the necessary data to create the competitive compensation packages needed to retain and attract top talent.. Visit our website today to learn more.

Related Posts

Explore The Latest With Labor IQ

November 25, 2024

Compensation Data is The Key to Pay Transparency

Compensation

March 28, 2024

Keys to a Winning Compensation Strategy

Compensation Featured Human Resources

February 19, 2024

What makes a good job description?✍️

Compensation Featured Human Resources

January 26, 2024

Understanding pay for in-demand jobs

Compensation Featured Human Resources

December 22, 2023

2023 Year in Review

Compensation Featured Human Resources

November 17, 2023

Pay Bumps for New Hires

Compensation Featured Human Resources

November 1, 2023

Setting Salary Ranges in a Changing Labor Market

Compensation Featured Human Resources Salary Benchmarking

October 30, 2023

10 Questions to Set Your Compensation Philosophy

Compensation Employee Retention

August 29, 2023

2024 Compensation Benchmarking Guide (+ Template)

Compensation Employee Retention

August 18, 2023

Not All Compensation Data Is Equal

Compensation Featured

August 11, 2023

Know Your Company’s Compensation Health Score?

Compensation Featured Human Resources

July 7, 2023

Concealing Compensation: How It Impacts Your Business & Employees

Compensation Human Resources

June 20, 2023

How to Calculate a Market-Based Salary to Attract Top Talent

Compensation Featured Hiring

June 19, 2023

A Boomer’s Reflections on the Business Impact of Remote Work

Compensation Featured Hiring

May 4, 2023

The Costs of Keeping Compensation a Secret

Compensation

April 18, 2023

Circa Announces LaborIQ Compensation Solution

Compensation Featured

February 6, 2023

The Role of Backfilling Jobs and Compensation

Compensation

December 22, 2022

What SB 1162 Pay Transparency Legislation Means for Your Organization

Compensation Pay Equity

December 21, 2022

5 Keys to 2023 Compensation Planning

Compensation

December 13, 2022

Pay Transparency Laws Force Employers to Address Pay Parity

Compensation

December 7, 2022

Webinar Replay: 2023 Hiring Outlook

Compensation Hiring

November 29, 2022

7 of 10 Workers Likely to Demand the Top of the Salary Range

Compensation Hiring

October 24, 2022

Do You Trust Your Compensation Data?

Compensation Employee Retention Hiring

September 19, 2022

Inflation: How It Impacts Working Parents and Child Care Costs

Compensation Labor Market Reports

September 16, 2022

Job Swimming: Meeting Expectations

Compensation Hiring

September 16, 2022

Do you need a compensation solution?

Compensation Employee Retention Hiring

September 14, 2022

A Guide to Supporting Laid Off Employees

Compensation Human Resources

August 23, 2022

Which Compensation Data Should You Be Analyzing?

Compensation

August 16, 2022

A Step-by-Step Guide to the Compensation Planning Process

Compensation

August 11, 2022

A Handy Compensation Benchmarking Template

Compensation

August 9, 2022

What is Compensation Analysis?

Compensation

August 4, 2022

Compensation Benchmarking: Your Questions Answered

Compensation

July 1, 2022

Show Me the Money: Pay Transparency Pros and Cons

Compensation

July 1, 2022

Proactive Steps to Prepare for New Pay Transparency Laws

Compensation Pay Equity

June 16, 2022

Overcoming Compensation Management Challenges

Compensation

June 13, 2022

Removing Bias From Your Compensation Planning

Compensation

June 10, 2022

The Ins and Outs of Salary Benchmarking

Compensation

June 8, 2022

It’s More Than Money: Attracting Top Talent Beyond Compensation

Compensation

May 11, 2022

Everything You Need to Know About Compensation Analysis

Compensation

April 25, 2022

It’s That Time Again! Bring on the Mid-Year Compensation Reviews

Compensation Human Resources

April 5, 2022

Counter Offering the Counteroffer

Compensation Hiring

March 1, 2022

The Annual Increase Percentage: Why 2022 Is Different

Compensation

August 25, 2021

Key Factors in Determining the Right Salary Offer

Compensation