Salary Picture Looking Brighter for 2010

July 22, 2009 ( -U.S. workers' pay hikes are expected to rebound in 2010 to a 3% median merit increase, following a year in which many companies slashed raises in the wake of the recession, according to a Watson Wyatt survey.

A news release said companies report 2009 merit pay advances will be 2%.

Additionally, fewer companies plan to eliminate pay raises in 2010. According to a separate survey of nearly 900 companies conducted by Watson Wyatt Data Services, only 10% of companies are planning no pay raises for workers in 2010 compared to 25% this year.

“This has been a very difficult year for both employers and their workers,” said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt, in the news release. “But there is some good news on the horizon. Employers plan to give larger raises next year and many plan to reinstate previously cut pay raises as planning for an eventual economic recovery continues.”

In 2009, workers who “partially met expectations” will receive median merit increases of 0.2%, down from 1.5% in 2008. Workers who “exceed expectations” this year will receive a median 3.1% increase, while workers who “far exceed expectations” will receive a 4% increase, Watson Wyatt said.

The recession has significantly reduced annual bonus pools as well. Funding for annual incentive awards dropped notably from 99% in 2007 to 82% in 2008. In 2009, annual incentive awards are expected to be funded at 75%.

The 2009/2010 U.S. Strategic Rewards report is available here .

The 2009/2010 Salary Budget Survey results summary is available here .