Salary Budgets Up, But Barely

July 8, 2009 ( - Corporate salary budget increases have dropped to historic lows, according to the WorldatWork 36th Annual Salary Budget Survey.

In fact, at 2.2%, the 2009 increase is the smallest in the survey’s history and 1.7 percentage points below the 3.9 percent that had been projected in the previous year’s report, according to an announcement.

Among the 2,600 respondents to the survey, nonexempt hourly nonunion salary budgets had been projected to increase 3.8%, but the actual result was 2.3%. Exempt salaried budgets had been projected with a 3.9% increase, but saw just a 2.2% bump, while officers/executive budgets saw their projected 4.0% increase cut in half. On the other hand, projected 2010 salary budgets in all categories were projected with a 2.8% increase.

“A projected salary budget increase of 2.8 percent for 2010 indicates we may have touched the bottom this year and a turnaround may be on the horizon,” said Anne C. Ruddy, CCP, president of WorldatWork. “While it’s heartening to think the worst may be behind us, compensation plans will likely be in flux for at least the next 12 months. We plan to re-survey our members this summer to monitor thawing of any kind.”

Variable Pay

Human resource practitioners continue to use variable pay, which consists of cash bonuses and other incentives, to reward results. For 2009, employers are budgeting an average of 5% to 11.5% for variable pay, depending on employee category.

The report also asked respondents to speak to the percentage of employees in each of three performance categories. Roughly a quarter (23%) were rated high performers in 2008, and those employees received an average merit increase of 4.5%. In contrast, the 67% who were evaluated as middle performers, got a 3.1% bump in pay. Approximately 8% in the low performer category got an average increase of 2.0%, and the rest received no increase.

Looking ahead to 2009, survey respondents thought that 22% would be evaluated as high performers, with an estimated average merit increase of 3.4%. That was better than the 2.3% average merit increase projected for the middle performers, and twice as good as the 1.7% projected for low performers.

WorldatWork is offering a free Webinar to discuss the findings on August 25. The Webinar is free for both members and non-members. More information is available at

style="FONT-FAMILY: Verdana, Arial, Helvetica, sans-serif; COLOR: #666666; FONT-SIZE: 12px; FONT-WEIGHT: bold"> Total Salary Budget Increases, by Employee Category

Nonexempt Hourly Nonunion3.8%3.8%2.3%2.8%
Nonexempt Salaried3.8%3.8%2.1%2.8%
Exempt Salaried3.9%3.9%2.2%2.8%


style="FONT-FAMILY: Verdana, Arial, Helvetica, sans-serif; COLOR: #666666; FONT-SIZE: 12px; FONT-WEIGHT: bold">Merit Increases Awarded, by Performance Category

*Because respondents were asked to share data for low performers receiving a merit increase separate from those not receiving an increase, this figure does not include zero-percent responses. It is likely that the average for low performers would be slightly lower if all data for low performers was calculated together, including zero-percent responses.
Middle PerformersLow Performers Receiving a Merit IncreaseLow Performers Receiving No Merit Increase
Percentage of employees rated in this category for 200823%67%8%3%
Average merit increase awarded to this 2008 performance category4.5%3.1%2.0%*-
Percentage of employees estimated to be rated in this category for 200922%67%7%4%
Average merit increase estimated for this 2009 performance category3.4%2.3%1.7%*-

style="FONT-FAMILY: Verdana, Arial, Helvetica, sans-serif; COLOR: #666666; FONT-SIZE: 12px; FONT-WEIGHT: bold"> Variable Pay Programs, by Employee Category

Nonexempt Hourly NonunionNonexempt SalariedExempt SalariedOfficers/
2008 average % budgeted5.4%5.8%12.4%34.6%
2008 average % paid5.0%5.4%11.7%32.8%
% of employees eligible in 2008
for variable pay
% of eligible employees actually paid variable pay for 200880%79%76%84%
2009 average % budgeted5.0%5.1%11.5%31.8%
2009 projected % paid4.3%4.6%10.5%29.0%

2010 projected % budgeted5.1%5.4%12.0%33.5%