Salary Budget Advances Expected to Plateau in 2008

August 2, 2007 (PLANSPONSOR.com) - Workplace salary budgets - the total amount allocated for all employee salaries - are expected to reflect a 3.9% increase this year and the same hike in 2008, a new survey showed.

A news release from the Scottsdale, Arizona-based WorldatWork said salary budget increases have risen one-tenth of a percent each year since 2004. The HR professionals industry group on Thursday released its latest Salary Budget Survey.

“Modest 2007 salary budget increases of 3.9%, which are expected to plateau in 2008, present a challenge for managers,” said Anne C. Ruddy, president of WorldatWork, in the news release. “They will have to think more holistically and learn the art and science of ‘total rewards’ to attract, motivate and retain talent.”

Washington , D.C. employers reported the highest total salary budget increase (4.1%) of all the surveyed metro areas. The biggest increase from 2006 to 2007 (3.7% to 4%) occurred in Houston, according to the study.

According to the news release, other findings include:

  • As in 2005 and 2006, the largest salary budget increases this year are targeted for officers/executives, outpacing workers in the three other employee categories, i.e. nonexempt hourly nonunion, nonexempt salaried, exempt salaried. In 2007, officers and executives experienced salary budget growth above 4% for the first time in six years.
  • Companies with fewer than 500 employees reported the highest salary budget increase in 2007 at 4.1%. The biggest companies (more than 20,000 employees) reported a 3.7% advance.
  • Among major industries surveyed, public administration had the largest actual salary budget hike (4.3%) this year. The smallest hikes (3.7%) were found in the transportation/utility and retail sectors.
  • The percentage of organizations using variable pay increased slightly from 79% in 2006 to 80% in 2007, continuing a steady upward trend in the use of compensation that is contingent on performance or results achieved.

According to the news release, salary budgets do not include other employment hard costs, i.e. medical/dental insurance, payroll taxes, 401(k) match, etc. Base pay increases may come from merit increases, cost of living increases and general increases (promotional increases are excluded).

The data includes results for the United States and Canada, major metropolitan areas in the two countries, major industries as well as data by organization size, WorldatWork said.

The full study can be ordered by calling 877-951-9191 or online here .

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