U.S. Multinationals Reconsider Salary Increase Budgets

November 12, 2008 (PLANSPONSOR.com) - A new survey by Hewitt indicates the majority (51%) of U.S. multinational organizations do not plan to change their positions on salary increases or variable pay.

However, those organizations that have decided to revise their spending levels have significantly reduced their budgets, resulting in an average decrease of 17% in overall increase budgets. Eighty-one percent of organizations that are implementing changes said they are doing so due to concerns about the broader economy, while 60% said their organization is undergoing cost reductions.

Forty-four percent of organizations changing their increase or variable pay budgets indicated they will do so globally, rather than by country (42%) or by region (15%).

Of organizations who responded when asked about economic impact on variable pay programs, 52% said their variable pay programs will not be impacted. Thirty-eight percent reported an impact on their broad-based variable payouts globally, and 10% reported an impact on specific countries only.

Among those who said variable payouts would be affected, 100% said 2008 payouts would be reduced by more than 10%, and 71% predicted 2009 payouts would be.

The Hewitt study found the economic impact on global operations has been varied and organizations are using a variety of methods to reduce costs. The most common approaches have been to enforce a hiring freeze (20% globally, 40% by country), reduce promotions (21% globally, 12% by country), and lengthen the time between overall increases (18% globally, 23% by country).

The survey “Impact of Global Economic Conditions on 2008/2009 Non-U.S. Compensation Spending” received responses from 97 U.S. multinational organizations, 67 manufacturing companies and 30 service companies.