Salary Increase Plans not Deterred by Economic Uncertainty

October 27, 2008 ( - Average salary increases for fiscal year 2008 and increases planned for 2009 are consistent with plans developed last year, despite current economic uncertainty, according to a Buck Consultants survey.

In a press release, Buck said its annual survey of U.S. employers, “Compensation Planning for 2009,” indicates average salary increases for 2009 range from 3.8% for non-exempt and non-management professionals, to 4% for executives, to 4.1% for CEOs. Buck sent follow-up questions to participants to determine if recent economic news prompted any changes to salary budgets and year-end incentives for next year, and only 16% of those who responded to the followup reported that their plans have either been changed since mid-2008 or are now under review.

The 2009 average salary increases for employers revising their plans are 3% for non-exempt employees, 2.9% for non-management professionals, and 2.5% for executives. According to the press release, for companies changing their salary budgets for next year, salary increases have dropped by as much as 30% for executives and 19% for all other employee groups.

However, recent economic news has affected anticipated incentive payouts. Although half of the survey respondents report that payouts are likely to be “similar to last year,” 26% believe payouts will be smaller and 5% report that fewer managers and employees are likely to see incentive awards.

Among all respondents, 78% offer one or more short-term (typically annual) incentive plans. Short-term incentive participation is highest among CEOs (95%), executives (92%), directors (90%), and managers (85%).

Buck’s survey reports a slight shift away from individual and discretionary bonus plans to plans that link payouts to business unit, group, and team performance. The most prevalent types of incentives are those that combine business unit and group/individual performance (almost 50%) and those based just on business unit results (approximately 20%).

Buck said its survey revealed an increased importance of pay for performance practices.

The survey found:

  • Only 2.3% of respondents do not have a pay for performance philosophy - down from 4.1% last year;
  • The percentage reporting a merit salary increase policy that considers individual performance to determine the size of the increase is now 90% - up from 86% last year;
  • Promotions are based on an individual's past performance in 75% of the responding organizations - up from 69% last year;
  • 64% of respondents now consider individual performance to determine bonus or short-term incentive awards - up from 58% last year.

Buck Consultants conducted its survey in mid-2008. The survey includes responses from 314 employers, and 102 of the original 314 survey participants responded to the follow-up questions.

The survey report, "Compensation Planning for 2009," is available for $200 from Buck's Global Survey Resources, 500 Plaza Drive, Secaucus, NJ, 07096-1533, by calling 1-800-887-0509, or by visiting .