Companies Continue to Trim Salary Budgets

February 9, 2009 ( - Base salary budgets for 2009 have been reduced even more by many companies in response to a worsening economy and reshaping of corporate forecasts, according to a new Mercer survey.

According to a press release on the survey findings, one in four organizations have instituted a salary freeze for 2009 and another 20% are considering a salary freeze. Just three months ago, approximately one-quarter (24%) of survey respondents planned to reduce their base pay budgets from their April projections by one-half percent, and 18% of participants planned to increase their budgets from their April projections to an average of 3.8%.

Companies making or considering a base salary increase in 2009 – 75% of respondents – are budgeting 3.2% overall, down almost one-half percent from mid-October projections of 3.6%, the press release said.

The biggest budget decrease in the survey findings is at the executive level, where more than three-quarters (77%) of respondents plan to decrease their salary budget from their 2008 projections.

To make up for reduced merit increases, pay for performance is becoming increasingly more important, Mercer said. “The trend to strengthen performance management programs to better differentiate strong from average or weak performers will only gain more traction in the months ahead,” said Steve Gross, global leader of Mercer’s broad-based performance and rewards consulting business, in the press release. “Greater differentiation of top performers allows employers to attract and retain those employees that will contribute to the company’s competitiveness and success.”

Mercer’s 2009 US Salary Budget Planning poll was conducted January 22-29, and includes responses from more than 400 mid-size and large employers across the US. To purchase the full report, visit or call 800-333-3070.