Salaries Will Step Up in 2011

In a welcome change for recession-weary workers, employers are hiring again. What's more, instead of the noncash rewards that companies have been doling out to prized employees (or at least the ones still standing), the little something extra next year might actually be money. "Salary increases are back," says Mercer compensation consultant Loree Griffith.

Hiring is starting to perk up. A recent survey by Mercer found that 27% of companies are expanding their overall workforce, and only 3% are in the midst of broad-based staff reductions. A year earlier, just 12% of firms surveyed were expanding and 15% were cutting back. Caution prevails, however, as 45% of companies are hiring just enough newcomers to replace workers who have left, and 25% are hiring only in critical areas.

Most workers will receive raises in 2011: 98% of organizations surveyed by Mercer are planning increases. But few employees will consider their pay bump generous. Surveys show that employers are projecting median salary increases of about 3% or a little less for 2011, up from about 2.5% this year. Employees with the highest performance ratings will do better. Mercer projects that average pay increases for the highest-rated employees will be 4.5% in 2011, compared with 2.7% for workers receiving an average rating and just 1.5% for those deemed to be less competent.

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In 2010 bosses have been most generous in the oil-and-gas and pharmaceutical industries, where raises have averaged 3.2% and 2.7%, respectively. At the bottom of the scale, health-care and education employees are seeing 2.1% pay hikes. Companies are once again focusing on money as the best way to retain workers and keep them happy. Over the past 18 months, limited budgets for raises have meant more perks, such as flexible work schedules, more time off, training and career development, and opportunities to participate in special projects. Career training is still big, but so is cold, hard cash.

How can you get your fair share? Don't be afraid to ask, ask at the right time, and frame your request in the right way. Most raises are awarded in the spring, after an annual review. But you should plant the idea with your supervisor when you see the health of the company starting to rebound. A good time to make the request is just after you've won accolades for a significant accomplishment.

Remember that performance is measured in terms of quantity, quality, cost and timeliness, says executive coach Robert Lorber, of Lorber Kamai Consulting Group, in El Macero, Cal. Have you pitched in to cover for laid-off colleagues or helped to increase your company's market share? Reduced errors or improved production? Gotten customers to pay more quickly or shaved your division's budget through cost savings? Have you continued to meet or beat deadlines despite staff reductions?

Document each success. Now more than ever, companies emphasize variable pay models based on contributions to the bottom line. Show that you're moving the needle in the right direction, and your boss just might show you the money.

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.