2010 Salary Hikes Forecast to be Skimpy

February 9, 2010 (PLANSPONSOR.com) – New 2010 projections show that salary increase budgets in the U.S. will be below 3% for the first time in more than two decades.

A Conference Board news release about its employer survey on the issue said projected 2010 salary structure adjustments for all categories of employees are not expected to top 2% – well below the research organization’s forecast inflation rate (2.6%).

“U.S. workers will continue to face downward pressure on their salaries and wages,” says Linda Barrington, managing director, human capital, The Conference Board, in the announcement.  “Without the purse strings loosening on financial rewards, employers are going to have to rely on other ways of engaging employees, especially top performers, in order to keep their companies competitive.”

The revised median forecast of salary increase budgets for 2010 now stands at 2.8% for all employee groups except executives (2.75%) – the lowest level in the 25-year history of survey, according to the announcement.It also represents a sharp drop from the 3% median forecast for salary increase budgets in April 2009.

More than a quarter of respondents (27.7%) said they had already changed their originally projected total increase budget for 2010.  The median projected total salary increase budget for this group, 2.5%, is lower than that of respondents overall.  

According to the announcement, the highest forecast median salary increase budgets for 2010 are in consulting services – 3% for all employee groups except non-exempt hourly, which stands at 2.85%.  The second highest projections are reported in the trade sector, with all employee groups at 3% except non-exempt hourly (2.5%).  The lowest 2010 increase budgets are in the banking industry (2%).  

For merit increase budgets forecast for this year, the median is 2.5% in each employee category for all industries.  This compares to lower 2009 medians of 2.1% for non-exempt hourly, 2.38% for non-exempt salaried, and 2% for exempt employees.

The survey was conducted in November among 285 U.S. organizations. The survey report can be ordered from here