Planned Salary Increases Tick up for 2010

This is higher than the average salary increases the survey found for 2009 of 1.2% to 2%. “It is likely that any upward adjustment in salaries will occur at a much slower rate than the drop that took place, and there is a good chance that future pay increases will remain lower than past levels for a while,” said Tom Burke, principal at Buck Consultants, in a press release. “Companies will tend to be very conservative about increasing fixed payroll costs until the economy is quite healthy.  Until we begin to see clear and consistent increases in employment and capital expenditures we don’t expect any significant upward movement in pay increases.” 

The survey, “Compensation Planning for 2010,” also found bonus participation is holding steady compared to 2008 and is consistent with the pay-for-performance philosophy most companies have adopted, although there is more variability in the size of bonuses.

Short-term incentives, typically annual and based on companywide performance, are the most prevalent program design (61%), surpassing programs based on business unit, team, or individual performance. For employers with short-term incentive programs, employee participation averages more than 90% at all employee levels.

Eighty-three percent of organizations participating in the 2009 survey subscribe to pay-for-performance compensation philosophies. A similar percentage of organizations have short-term or annual incentive programs with the most prevalent type of program being a companywide incentive plan or profit sharing plan.

Other key findings of the survey, according to the press release, include:

• Seventy-two percent of employers have a pay communication philosophy. The types of pay information shared with managers and employees vary, but 70% of organizations communicate their compensation strategy and bonus opportunities with both managers and employees.
• Organizations that use a four-level or five-level performance rating scale tend to display more distinct differences in average salary increases based on performance than organizations that use fewer or more levels to measure performance.
• Fifty-four percent of employers overlook a hidden funding source for rewarding top performers – money that was budgeted but not spent on salary increases due to terminations or poor performance.

Buck’s survey report is available for $200 from Buck’s Global Survey Resources, 500 Plaza Drive, Secaucus, NJ, 07096-1533, or by calling 800-887-0509. It can also be ordered online at www.bucksurveys.com.