Companies Stay the Course on Compensation

October 30, 2001( - Large US companies are making few major changes to their existing compensation programs, reducing their merit increase budget only slightly, and taking a wait-and-see approach to the economy, an Andersen survey finds.

Results of the survey show that the median planned 2002 merit increase is 3.8% to 4.0% for all employee groups, slightly shy of 2001 actual merit increases.

Key findings of the survey include:

  • one-fifth of the respondents are planning to reduce their merit budget in direct response to the recent economic slowdown and/or the events of September 11,
  • almost two-thirds cited the overall labor market conditions as a major factor in determining the 2002 merit increase budget,
  • a little under 60% are not planning any new changes to the base salary component of their compensation programs,
  • half expect 2001 bonuses to be less than 50% of target, with nearly half of those anticipating no bonuses this year at all, and
  • almost 30% are implementing new programs to retain valued employees

Anderson found that companies are proceeding with ‘normal’ merit increases for two reasons:

  • the prospect of low or no bonuses, and
  • the fear of salaries falling below the market

The sample comprised 57 companies with median revenues of $1.5 billion.