AE industry tapping the brakes on raises and bonuses

Back in January, Word on the Street readers shared their 2023 projections for raises and bonuses. Between record-high profits and the sizzling demand for talent, employees were reaping the rewards. But as Mick Morrissey’s article points out, the compensation race has cooled down a bit. Two weeks ago, we once again canvassed our readers to find out what their intentions are for raises and bonuses—and the side-by-side comparison below shows how the landscape is changing:

Annual raise expectations in January: Over half (55%) of respondents were planning on increasing salaries between 6% and 9% in 2023. Just over 40%  of firms were budgeting raises of between 1% and 5%. And 3% of firms were planning on raises of 10% or greater. Firms in this last category had backlogs that far exceeded their current and projected production capacities. Their strategy was to (a) make an employee’s decision to leave for another firm as difficult as possible and (b) outspend their competitors to get the talent needed to meet their obligations and generate significant profit.

In general, more architecture and AE firms were planning for lighter raises in the 1% to 5% range than their engineering and EA peers, who were budgeting 6% to 9%. Similarly, a greater percentage of firms with 1,000 employees or more were budgeting in the 1% to 5% range, compared with their smaller peers. In large part this is because, all things being equal, larger firms were already paying higher salaries than their smaller counterparts, not to mention they typically have heftier non-salary benefits and perks. The pressure on surveying/mapping firms appeared to be intense with all of these respondents anticipating a 6% to 9% raise in labor costs at the time.

Annual raise expectations in September: Now, about 70% of respondents anticipate 1% to 5% raises, while less than a third (28%) are budgeting for 6% to 9% boosts. Demand for talent is still extreme, but softness in pockets of private-sector markets and the intermittent flashing of engine lights on the economy’s dashboard have got some owners tightening their fists.

In January, the majority of firms in both the 101-999 employees and 100 or fewer employees categories were budgeting for 6% to 9% raises while the majority of 1,000 and above employee firms were budgeting for 1% to 5% raises. But now, the majority of firms in all of the firm size categories surveyed are budgeting for 1% to 5% raises.

Annual bonus expectations in January: Nearly half (48%) of respondents anticipated that bonuses would be about the same as last year, while 10% expected them to be lower. That said, 42% anticipated paying out more in bonuses this year than they did in 2022.

Across all size categories, environmental firms most frequently (56%) anticipated paying greater bonuses in 2023. Just over a quarter (27%) of architecture firms anticipated paying less in bonuses this year. Between this and their lower anticipated raises, architecture firms—particularly those with heavy exposure to the tech sector—were likely anticipating a more challenging business environment this year. That said, 55% of architecture firms were anticipating a similar level of bonus payouts in 2023. Just over half (53%) of engineering firms were anticipating that bonuses would match those of 2022, with 42% reporting they expected to pay out more.

Annual bonus expectations in September: Bonuses, like raises, are expected to decline. The percentage of firms that expect bonuses to be about the same as they were last year rose 6% while the percentage of firms that expect bonuses to be more than last year dropped 11%. In all size categories surveyed, the majority of respondents expect bonuses to be about the same as last year.

– Morrissey Goodale is a CFE Media and Technology content partner.

Original content can be found at Morrissey Goodale.

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