Bosses Offer Midyear Raises to Retain Employees as Inflation Takes Toll

It’s a summer of pay increases at many big US companies. To address inflation and to retain workers in what many executives say remains a tough labor market, some large employers are raising salaries or doling out special bonuses.

Overall, companies have on average increased base pay in the US 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 plus inflation makes up that perfect storm where we’re seeing larger than historical annual base salary increases and companies thinking about doing something more,” Ms. Toman 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 said.

“Companies are being really thoughtful and targeted,” she said. “The high-performers are going to be the ones who see the increases first.”