Salary Increases at Historically Low Levels

September 8, 2004 ( - Salary increases remained at a record low level in the past year, but should improve slightly in 2005, according to a survey by Hewitt Associates.

The 2004 numbers remained consistent with the previous year’s salary increases, the consulting firm stated in a press release. More specifically, increases averaged 3.4% for salaried exempt employees, 3.3% for salaried nonexempt employees, 3.3% for nonunion hourly workers and 3.7% for executives. Three percent of businesses implemented a salary freeze in 2004. However, only 1% expects to do the same next year.

class=”NormalDS”> Projected increases for 2005 are slightly better, with estimates of 3.6% for salaried exempt employees, 3.5% for salaried nonexempt employees, 3.5% for nonunion hourly workers and 3.8% for executives. However, when compared to increases from 2001, the numbers look somewhat less impressive. In that year, workers saw, on average, increases of 4.3% for salaried exempt employees, 4.2% for salaried nonexempt employees, 4% for nonunion hourly workers and 4.5% for executives.

class=”NormalDS”> “We may never see base salary increases in the mid-to-upper 4% range again,” said Ken Abosch, a business leader for Hewitt Associates, in the news release “Cost containment is still a focus in 2004, which led to a status quo in base salary increases. And, while we expect salaries to rebound a bit in 2005, most organizations continue to place greater emphasis on performance-based programs, such as variable pay. These programs should continue to grow in popularity and potential payout for years to come.”

The Hewitt survey also looked at salary increases by city. In 2005, it projected that those workers living in cities will most often beat the national salary increase average. Washington, DC, salaried exempt employees should be the real winners, with a projected 4% salary increase. Los Angeles and Boston follow close behind, with 3.8% average salary increases expected in both cities.

Hewitt also found that 79% of companies believe that variable pay programs – pay according to performance as well as a base salary – improves their business results.

The firm surveyed 1,185 companies.