by CIO Staff

Compensation Going Up for Majority in Business

Dec 21, 20063 mins

By Chuck Martin

As business conditions continue to improve, people at work might be happy to know that compensation for the majority of them will be going up within the next year.

In a worldwide survey of senior executives and managers by NFI Research, we found that 84 percent expect compensation of their subordinates to increase over the next 12 months.

It’s not that the coming raises are based on pure generosity, but rather the pragmatic business issues of the day.

The top reasons for the coming wage hikes are business conditions, performance, employee retention and economic conditions.

We know from our recent research that business growth is the top issue facing businesses next year and that many of the people at work are stretched to their limits already.

Many companies will be increasing compensation with an eye to keeping some of the talent they have.

“The market is more competitive, so we need to increase wages to keep ahead of our competition,” said one survey respondent. “It’s the best investment we make.”

“I believe that salaries will increase due to the shortage of staff that we are encountering in British Columbia,” said another. “Companies feel that the only way to attract staff and retain staff is through compensation.”

Some of the increase in compensation can be to make up for other items that have fallen by the wayside over a period of time.

“As corporate management continues to slash benefits, all that’s left for middle management is compensation as a reward for good performance,” said one manager.

While performance is a primary reason for almost half of business leaders to increase compensation for subordinates, outside factors also play a role, especially competitive situations as more businesses seek talented workers.

“Market conditions are making it extremely difficult to hire qualified staff,” said one respondent.

“One factor is competitive pressures and competitive demands for strong and effective staff,” said another.

At the least, increasing a person’s salary or bonus might just be what it takes to keep that person on board, at least for a longer period of time.

“It’s all about employee retention–specifically, the key members of your management team,” said one respondent. “Thankfully, compensation is just one of the keys to keeping employees in our company.”

In some cases, compensation increases are fixed in one way or another.

“Our union contract stipulates a slight increase,” said one manager. 

Said another: “We are a union shop. Increases are built into the contract.”

“In our business, equity with peers is also an important driver, and our employees have received very low compensation adjustments over the last couple of years due to economic conditions,” said one manager. “Since that has improved, I expect salaries will have some adjustment beyond the consumer price index.”

“We are in a regulated industry,” said another. “Our income is regulated, so we must manage our costs to the income allowed.”

No matter the situation, business leaders should ensure that a fair share of the increased compensation next year is given to those who are performing.

Chuck Martin is a best-selling business book author, his latest being , Tough Management (McGraw-Hill, 2005), the business fable “Coffee at Luna’s” and the soon-to-be published “Smarts.” He lectures around the world and can be reached at