Hay Group Finds Employers Revising Down Projected Salary Increase

December 8, 2009 (PLANSPONSOR.com) - U.S. employees can expect median pay increases of 2.5% in 2010, according to a new Hay Group study.

A press release said the 2.5% projection is the lowest planned increase in the last decade and is also lower than the forecasted 3% increase cited in Hay Group’s July survey. Mel Stark, vice president in the Reward Practice at Hay Group, said about a quarter of companies decreased salary increase projections in the last four months.

Planned increases are generally consistent for executives, middle management, supervisory, and clerical positions, but Hay Group’s research found that base salary increases are healthier in industry sectors such as life sciences, energy, and financial services, and not as strong in the health care, health insurance, and industrial sectors.

In addition, according to the press release, at least 30% of the approximately 40% of organizations that reported in early 2009 that they had either reduced or eliminated their 401(k) employer contributions say they are planning to reinstate the matches as of 2010. More than 35% of organizations with defined benefits plans previously indicated they intend to freeze their plans in some form, and the latest data survey found no reverse in this trend.

Most organizations have also looked carefully at their health care costs for 2010 and are increasing employee costs either through direct increases in contributions or changes to deductibles and copayments. Other alternatives being considered include additional medical options and designs which encourage behavioral changes in utilizing medical services.

Hay Group’s forecast results are based on the latest data available from the Hay Group 2010 Salary Budget Spot Survey conducted in November 2009 and containing responses from compensation and benefits professionals from over 650 organizations across all major industry sectors.