More Money, Coming to a Paycheck Near You

Posted on | September 2, 2008 | No Comments

A new study by Hewitt Associates, a provider of human resources outsourcing and consulting services, revealed that employers intend to raise employee salaries very little for the remainder of this year.

In fact, the days of complaining about your 4% pay increase are dead, replaced by the days of complaining about you 3.3% raise (for hourly employees) or your 3.8% raise if you’re a salaried exempt employee (i.e. a management-level employee).  Execs can expect 3.9% increases.  Salaried non-exempt employees and non-union hourly employees can expect 3.7%.  Union employees can expect 3.3%.

Hewitt surveyed 1,007 employers and found that, faced with higher costs and increased competition for talent, many are considering new and different ways of attracting and rewarding employees.  The once-a-year pay increase is limping along but being eclipsed by one-time performance rewards or incentives such as signing bonuses and sales incentives.

The beauty of one-time awards is that employers don’t have to commit to the costs of increased salaries; they can reward good performance and take a one-time hit to the bottom line.  This way they share a bit of the current windfall with the employees who helped make it possible but don’t have to worry that they’re paying employees too much when times are tough and the windfall isn’t falling.

Hewitt predicts that one-time awards (variable pay plans) will reach a record high this year, with employers devoting as much as 12% of payroll to these awards.  More than 90 percent of companies currently offer at least one type of broad-based variable pay plan in the form of special recognition awards (63%), business incentives (59%), individual performance awards (44%), non-executive equity awards (44%) and retention bonuses (38%).

Cities Where You Can Expect Higher Than Average Pay Increases in 2008:

• Washington, D.C. (4.9 percent)
• Houston (4.6 percent)
• Dallas (4.1 percent)
• Denver (4.0 percent)
• Los Angeles (4.0 percent)
• New York City (3.9 percent)

Cities Where You Can Expect Lower Than Average Increases in 2009:

• Detroit (3.4 percent)
• Atlanta (3.6 percent)
• Philadelphia (3.7 percent)
• San Francisco (3.7 percent)

Industries With Higher Than Average Increases

• Accounting (4.9 percent)
• Consulting (4.9 percent)
• Legal (4.9 percent)
• Energy (oil/gas) (4.5 percent)
• Construction (4.4 percent)
• Engineering (4.4 percent)

Industries With Lower Than Average Increases

• Automotive (3.1 percent)
• Forest and paper products/packaging (3.4 percent)
• Medical devices (3.4 percent)

TRULY INTERESTING BIT

Approximately two-thirds (65 percent) of companies indicated that high potential/ top performers make up only 11 percent or less of their workforce.  That means only that 11 percent can expect to benefit from increases in performance pay.

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