Pay increase budgets at U.S. employers have picked up slightly from all-time lows in 2009, going from an average of 2.2 percent to 2.8 percent in 2012, and the increases appear to be stemming from fewer organizations reporting frozen salary budgets, according to WorldatWork.

The number of responses reporting a 0 percent salary increase budgeted for employees has declined from 33 percent of employers in 2009 to this year’s figure of just 5 percent, says the organization.

With average salary increase budgets below 3 percent for the fourth consecutive year, managers may be tempted to skip differentiating employee performance altogether. But with such modest salary budgets, pay for performance should actually be more heavily underscored, according to Kerry Chou, a Certified Compensation Professional and practice leader at WorldatWork. “In order to accomplish this, you need to effectively allocate available salary dollars, which could mean low or no raises for marginal performers. And while this isn't a pleasant conversation for managers to have, in the long run it's easier than losing your stars to the competition and then spending far greater sums to find replacements. A small pie can still be a great dessert; you just need to serve bigger pieces to fewer guests.”