Salary Freezes Start to Thaw

October 11, 2010 ( – Seventy-six percent of employers that froze pay during the last 18 months have either lifted their pay freezes or plan to do so by year-end 2010, according to Buck Consultants.

A Buck news release about its survey also found workers can expect average 2011 salary increases of 2.8%, an increase from 2.5% in 2010 and 1.8% in 2009.

According to Buck, 87% of organizations participating in the survey subscribe to a pay-for-performance philosophy. The most prevalent type of short-term incentive program is a companywide incentive plan with an individual performance component.

Bonus payments and bonus participation are also on the rise, the Buck poll found. Payments for 2010 performance for executives, directors, managers, and other exempt employees are expected to exceed bonuses paid for 2009 performance.

Among survey respondents who have changed the way they manage base pay in 2010, between one-third and one-half (depending on employee level) have reallocated merit funds from low performers to high performers. In the prior year, less than 10% adopted this measure.

“There is mounting concern that employees will seek new opportunities as soon as the job market improves,” said Tom Burke, principal at Buck Consultants, in the news release. “Compensation-related retention strategies are becoming increasingly important.”

Strategies for retaining top performers include: new career development opportunities (34%), market pay adjustments (27%), increased noncash recognition (19%), larger bonus opportunities (13%), additional company stock (12%), and retention bonuses (12%), Buck said.

Buck said other findings included that:

  • Between 70% and 80% of employees can expect pay raises this year, but only 57% of executives should expect a pay increase.
  • “Specialized industry knowledge” is the top reason organizations offer a hiring or retention bonus.
  • Referral bonuses are offered by 59% of employers.

Buck Consultants completed its survey in August. The survey includes responses from more than 200 employers.