Hewitt Survey Shows Employer Spending on 2010 Salary Increases and Variable Pay Awards Lower Than Originally Anticipated
30 Agosto 2010 - 8:00AM
Business Wire
While the economy is showing signs of improvement, U.S.
employers remain concerned about the stability of the economy. This
uncertainty is evident in the amount of money they are allocating
toward pay raises and performance awards this year, according to a
new survey by Hewitt Associates, a global human resources
consulting and outsourcing company. Hewitt’s survey shows that
companies are spending less on pay raises and variable pay awards
in 2010 than they originally anticipated. But they are more
optimistic about the future, with most expecting to bump up salary
increases and variable pay awards in 2011.
Hewitt’s survey of more than 1,450 large companies shows that
base salary increases for salaried exempt workers were 2.4 percent
in 2010. These numbers are down from what employers originally
projected in August 2009 (2.7 percent), but still higher than the
record-low pay raises workers saw in 2009 (1.8 percent).
Salary increases are expected to bounce back slightly in 2011.
For salaried exempt workers, salaried nonexempt workers and
executives, Hewitt’s survey shows base pay increases of 2.9
percent. Nonunion hourly and union employees can anticipate salary
increases of 2.8 percent.
“Going into 2010, employers were optimistic that they would be
able to allocate more money towards compensation, but the lagging
economy and lower-than-expected company performance forced many
employers to revise their spending,” said Ken Abosch, leader of
Hewitt’s North American Broad-Based Compensation Consulting
practice. “We predict a similar situation in 2011. Right now,
employers believe they'll be able to raise salaries next year, but
if the economy remains unstable, they'll be forced to readjust base
pay increases to offset other spending or revenue shortfalls."
Historical U.S. Salary
Increases
2007 2008 2009
2010 2011 (proj.) Executives 4.0% 3.9% 1.4%
2.4% 2.9% Salaried exempt 3.7% 3.7% 1.8% 2.4% 2.9% Salaried
nonexempt 3.6% 3.7% 1.9% 2.4% 2.9% Nonunion hourly 3.6% 3.6% 2.0%
2.4% 2.8% Union 3.3% 3.4% 3.4% 2.5% 2.8%
While 2010 salary increases are lower than expected, the news
isn’t all bad. The number of companies freezing salaries this year
was down significantly, and this trend is expected to continue into
2011. In 2010, 21 percent of organizations froze salaries, compared
to nearly half (48 percent) in 2009. Just 10 percent of employers
anticipate salary freezes in 2011.
Variable Pay Expected to Rebound in 2011
Like salary increases, spending on variable pay—or
performance-based awards that must be re-earned each year—was also
lower than expected in 2010 due in large part to lackluster company
performance. In 2010, spending on variable pay as a percentage of
payroll for salaried exempt workers was 11.3 percent, down from a
record high of 12.0 percent in 2009. Spending in 2011 is expected
to creep upward to 11.8 percent—which would be the second highest
increase since Hewitt began tracking the data in 1976.
Hewitt’s survey also shows employers are—by and large—depending
on company performance to budget for variable pay, though some are
looking at additional funding sources. About three quarters (76
percent) are budgeting for spending on variable pay through
improved company performance, while 12 percent are doing so through
reduced merit increases and 10 percent by reductions in head count.
Just 5 percent of companies are budgeting for variable pay through
reduced spending on benefits, while 4 percent are doing so through
pay freezes.
“Rising spending on variable pay indicates a shift in overall
pay philosophies,” explained Abosch. ”Rather than rewarding
employees for years of service, employers are tying a greater
percentage of workers’ pay to their individual performance and the
overall performance of the company. Structuring compensation
programs this way gives organizations greater freedom to adjust
budgets based on the economy and their performance, rather than
being locked into the fixed costs associated with increasing base
pay.”
2011 Salary Increases by Industry and City
According to Hewitt’s survey, workers in some U.S. cities can
expect to see salary increases higher than the national average in
2011. These cities include Washington, DC (3.4 percent), Houston
(3.3 percent) and Pittsburgh (3.2 percent). Cities that can expect
lower-than-average increases in 2011 include Philadelphia (2.5
percent), and Atlanta and Los Angeles (2.6 percent each).
The industries that can expect to see the highest salary
increases in 2011 include accounting/consulting/legal (3.3
percent); and energy, aerospace, pharmaceuticals,
construction/engineering and real estate (3.2 percent each). The
lowest increases are projected to be in education (2.3 percent),
metals fabrication (2.6 percent), and automotive and forest/paper
products (2.7 percent each).
About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations
around the world with expert human resources consulting and
outsourcing solutions to help them anticipate and solve their most
complex benefits, talent, and related financial challenges. Hewitt
works with companies to design, implement, communicate, and
administer a wide range of human resources, retirement, investment
management, health care, compensation, and talent management
strategies. With a history of exceptional client service since
1940, Hewitt has offices in more than 30 countries and employs
approximately 23,000 associates who are helping make the world a
better place to work. For more information, please visit
www.hewitt.com.
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