Pay Raises Modest For Third Straight Year

December 9, 2002 ( - Forty-eight percent of employers are concerned that modest pay increases may be contributing to lowered employee morale, according to a survey by Deloitte & Touche.

The Deloitte survey finds pay increases will be 3.5% in 2003, the third straight year with such modest increases.   Lower pay increases are being coupled with other cost saving measures, including 20% of respondents eliminating bonuses for 2002 and 25% giving bonuses less than half what employees had previously received.

Additionally, 76% report that health care costs have been increasing as fast or faster than raises.

Higher costs and lower pay increases contribute to the 75% of those surveyed reporting the biggest problem they face is the inability to reward talented employees for their hard work.  

“The biggest danger from continued low compensation is the negative impact it has on a company’s best performers,” says David Glueck, a director in Deloitte & Touche’s Performance Management and Compensation Practice. “Inadequately rewarding top employees undermines their incentive to perform at their peak, so productivity is almost certainly falling. And, when the economy picks up, they are much more likely to leave.”

Deloitte suggest increasing the use of alternative reward strategies to recognize top performers, including:

  • More rapid promotion opportunities
  • Training that directly enhances the top performers’ skills and development
  • Redefining work/life flexibility opportunities that still acknowledge the reality of bigger workloads for all employees due to downsizings

Respondents to the survey are senior financial and human resources executives from 130 companies, with median revenue of $1 billion and an average of 4,000 employees.