Some Professionals Think the Annual Raise is Broken. Here's Why

We may soon say goodbye to another mainstay of corporate life: the small annual raise.

U.S. workers on the professional social network Blind are searching for companies who will provide annual raises of 6% or more, many using the 5.9% increase in Social Security benefits set to start in 2022 as their benchmark.

The demand comes in stark contrast to the average 2% or 3% pay increases that many workers receive this time of year, like clockwork.

“Inflation jumped to 6.2%,” a verified Whirlpool professional said on Blind, referring to the U.S. consumer price index, which increased 6.2% in October 2021 compared to the previous year. “We all deserve minimum 7% salary hikes, agree?” (The consumer price index has since increased to 6.8% from a year ago in November 2021.)

Do companies adjust pay for inflation?

Companies typically set salary ranges for each position or job function. A salary range includes the minimum and maximum pay and room in between to account for different experiences, skills and raises over time.

Some employers also adjust the salaries they pay to help combat the impact of inflation. The pay increases, sometimes called cost-of-living adjustments, may help workers maintain their living standards over time.

Few companies seem eager to make these adjustments now.

“Companies have no incentive,” a verified Workday professional said about cost-of-living or inflation-motivated raises. The employee at the back-office enterprise software company added: “That’s one of the reasons for [the] Great Resignation.”

More than four out of five professionals (83%) said their companies have maintained radio silence or have explicitly told workers they will not adjust raises due to inflation, according to a user-created poll on Blind from Nov. 27 to 30, 2021.

A verified Cisco employee advised other professionals not to expect anything from their companies. “Ain’t gonna happen,” the tech-worker said on Blind. “Cost of living is not [the] cost of labor.”

“The company doesn’t care about your cost of living,” the Cisco professional continued, “they care about the cost of labor – meaning what someone will work for in a given geography.”

Indeed, only one in 10 professionals said their company’s human resources team acknowledged they were aware of inflation concerns. Just 7% reported receiving a larger than usual raise from their employer.

Even Google, well-known for its generous pay, recently told team members that it would not raise pay due to inflation.

How to get a raise now

The fastest way for workers to increase their salary may be to find a new job. It is common for in-demand candidates to increase their total compensation by 10%, 20% or more at another company.

Some professionals have decided to take that tack.

“If I don’t get a boost that’s at least equal to inflation, I’m leaving the next day,” said a verified eBay professional on Blind.

Employers have already boosted job offers in the current tight labor market. Tech workers have reported on Blind that new hires, including recent graduates, are receiving more pay at companies, including Amazon, Google and Microsoft, to meet the new prevailing market rates.

The bottom line

Workers have long been dissatisfied with the typical 2% or 3% annual raises, noting that these pay increases only maintain parity after inflation instead of a meaningful increase in total compensation they desire. As the U.S. inflation rate reaches more than 6% and the labor market continues to be challenging for employers, many savvy professionals seek new roles with heftier pay packages. It is another sign the Great Resignation may continue.