More Employers Planning 2010 Pay Increases

December 21, 2009 ( - More organizations are planning to grant pay increases in 2010 as the economy begins to show signs of improvement, according to Mercer.

Mercer’s 2009/2010 US Compensation Planning Survey Update, which was conducted in November and includes responses from more than 350 mid-size and large employers across the U.S., found the number of organizations freezing salaries has declined compared to last year, according to a news release. While challenging economic conditions drove 30% of employers to freeze salaries across the board in 2009, just 14% are planning across-the-board freezes in 2010.

Of those employers granting base pay increases, the average increase is expected to be 2.7% in 2010, down from an actual 3.2% in 2009 and slightly less optimistic than the increases planned earlier this year for 2010. Including salary freezes, average base pay increases for 2010 are projected to be 2.3%.

Consistent with base pay increases, Mercer’s survey shows that short-term incentive payouts are projected to decrease slightly in 2010. On the whole, average payouts as a percentage of base pay for all employee groups are reasonably stable, the news release said.

In addition, differentiation of short-term incentive awards continues to vary by performance levels, with the highest-performing employees projected to receive average payouts (as a percentage of base pay) of two to four times more than the lowest-performers.

Mercer found industry variations in pay trends. While 20% of durable goods manufacturers and 18% of services firms are expected to maintain pay freezes in 2010, less than 5% of consumer goods and insurance firms are expected to have freezes.

Compared to the expected average pay increase of 2.7% in 2010, employers within the consumer goods and high-tech industries have the highest projected pay increase at 3%. In contrast, other industries expect to award less than average pay increases in 2010, including education (2.2%) and health and medical insurance (2.4%).

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