Variable Pay Rewards Reach All Time High in 2009

Hewitt data shows that spending on variable pay as a percentage of payroll for salaried exempt workers was 12% in 2009, up from 10.8% in 2008. According to a press release, in 2010, companies are budgeting variable pay bonuses at 11.8%.

“Even in the toughest economies, companies are willing to reserve money for top-performing employees as a way to reward their performance and ensure they retain these employees after the job market rebounds,” said Ken Abosch, leader of Hewitt’s North American Broad-Based Compensation Consulting business, in the press release.

Hewitt’s survey of 1,156 large organizations reveals that base salary increases dropped below 3% for the first time since Hewitt started tracking the data in 1976. Base salary increases for salaried exempt employees in 2009 were just 1.8% and are expected to inch up to 2.7% in 2010.Executive employees are projected to receive increases of 2.6% in 2010 compared to 1.4% in 2009.

Salaried non-exempt employees can also expect an increase of 2.6% in 2010, up from 1.9% in 2009. Salary increases for nonunion hourly and union workers are projected to be 2.7% in 2010, compared to 2% and 2.2%, respectively, in 2009.

Hewitt also found that nearly half (48%) of companies froze salaries in 2009, up considerably from 2% in 2008. In 2010, 13% of companies anticipate salary freezes – more than two-thirds of which had a freeze in place in 2009.