Employers Leaving Salary Increases Budgets Intact

December 14, 2010 (PLANSPONSOR.com) - A new survey from Aon Hewitt reveals that compensation budgets are likely to remain intact for 2011 and few companies anticipate having to take drastic actions such as pay freezes to reduce costs.

The survey of more than 500 employers conducted in August found that three-quarters of companies expect to reach or exceed business performance goals this year, leading to the stabilization of pay and variable pay budgets in 2011. According to a press release, most companies (56%) made no revisions to their original base salary increase budgets, which are anticipated to be at their highest levels in two years.   

In 2011, salary increases for salaried exempt workers are expected to be 2.8%, up from 2.4% in 2010 and significantly higher than the record-low pay raises workers saw in 2009 (1.8%).  

The survey found spending on variable pay—performance-based awards that must be re-earned each year—is also holding steady. Updated findings show 2011 spending on variable pay as a percentage of payroll will be 11.6% for salaried exempt workers, down just slightly from original projections of 11.8%.  

In addition, Aon Hewitt’s survey shows that none of the responding organizations anticipate cutting pay in 2011, and just 11% plan to freeze salaries for salaried exempt and non-exempt workers next year, which is similar to 2010, when 12% of organizations froze salaries.