Employers Taking Another Look at Salary Budgets

November 1, 2001(PLANSPONSOR.com) - Only 28% of companies plan to make changes to their base salary budgets for next year, despite the economic downturn and drop in demand, a recent survey by WorldatWork finds.

The follow-up survey to the group’s annual Total Salary Increase Budget Survey , asked 1,000 respondents if their projections for 2002 salary budgets have been altered by recent events.

Companies that provided a 2002 budget originally estimated a 4.6% total increase for exempt employees will, the new survey shows, has be reduced to 3.2% among the 269 respondents to this question.

Some 87% of those who will make changes to their budget will revise them downward, while 13% of the companies reporting a change are seeing a higher salary budget increase than originally projected.


Results of the survey also show that

  • almost half the sample experienced layoffs in the past 12 months, 6% of those occurring after September 11,
  • one in five companies expect layoffs within the next six months,
  • while 34% say it’s too soon to tell if there will be further layoffs in that time period

The survey found a marked decline in variable pay, more as a result of the economic downturn than of the events of September 11. These budgets are expected to continue to decline in 2002.

In between 2000 and 2001, variable pay budgets decreased

  • from 10.1% to 5.9% for exempt employees,
  • from 5.5% to 3.8% for nonexempt salaried employees, and
  • from 5% to 3.5% for nonexempt hourly employees

On the brighter side, 97% of respondents have not yet made cuts to base salary budgets.