Corporate salary budget increases have dropped to historic lows, according to the WorldatWork 36th Annual Salary Budget Survey. At 2.2 percent, the 2009 increase is the smallest in the survey’s history and 1.7 percentage points below the 3.9 percent that had been projected in the previous year’s report. The WorldatWork survey, the largest of its kind, clearly shows that the economic crisis continues to put pressure on employee salaries, though projections for 2010 suggest improvement.
The 2,600 respondents to the survey are WorldatWork members who are employed in the compensation and benefits departments of various employers, representing a total of 16 million U.S. employees.
“A projected salary budget increase of 2.8 percent for 2010 indicates we may have touched the bottom this year and a turnaround may be on the horizon,” said Anne C. Ruddy, CCP, president of WorldatWork. “While it’s heartening to think the worst may be behind us, compensation plans will likely be in flux for at least the next 12 months. We plan to resurvey our members this summer to monitor thawing of any kind.”
“This recession is having a greater impact on compensation than the previous recession brought on by 9/11, when employers still managed to increase salary budgets by 3.6 percent,” observed Alison Avalos, research manager for WorldatWork. In spite of the falling budgets, the survey shows employers are committed to awarding raises to about 8 in every 10 of those employed. “This may come as a surprise to many given that 1 in 3 survey respondents indicated they are planning 0 percent salary budget increases this year,” added Avalos. “Layoffs, hiring freezes, shifting pay increase dollars from executives to staff and other cost-saving actions may be allowing employers to continue planning for at least some pay increases for remaining employees, especially top performers,” Avalos explained.
Human resource practitioners continue to use variable pay, which consists of cash bonuses and other incentives, to reward results. For 2009, employers are budgeting an average of 5 percent to 11.5 percent for variable pay, depending on employee category.