Ken Abosch and Iwan Barankay, Wharton@Knowledge: “Expecting a salary raise this year? You could end up with a bonus check instead. More and more companies are moving toward giving performance-based bonuses instead of handing out pay raises unrelated to results achieved on the job. The trend is a key finding of the “2014 Salary Increase Survey” by Aon Hewitt, a human resources and consulting services firm based in Lincolnshire, Ill. Spending on variable pay among U.S. employers reached a record-high level of 12.7% of payroll in 2014—the highest in the 38 years that Aon Hewitt has conducted these studies. At the same time, salary increases for U.S. workers accounted for just 2.9%, reflecting a continued focus among companies on controlling fixed costs. 

“Salaries tend to have a cascading effect,” explained Ken Abosch, compensation, strategy and market development leader at Aon Hewitt. He said the increasing emphasis on variable pay, including bonuses, has been occurring over the past 10-15 years and is not merely a response to the 2008 recession. “It is a quiet revolution,” he added. Wharton management professor Iwan Barankay noted that the balance between the salary component and variable pay reveals who has more bargaining power —and that employers are increasingly coming out on top.”