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2011 Compensation Budget Forecasts

Guest post by: Jennifer Loftus

Article Overview: The following is a general summary from a number of large consulting firms and national research organizations. (Note the following is a summary of overall budget projections.

2011 Compensation Budget Forecasts

2011 Compensation Budget Forecasts

It’s that time of the year again. Time to begin setting compensation budget’s for 2011. As we move towards the fourth quarter of 2010 we are left with mixed messages regarding the state of the economy. In one case stock market has returned to the 11000 levels and companies are reporting record profits. On the other hand unemployment is stuck at the 9.5% or above. It is evident that many organizations have “re-tooled” in terms of staffing and have discovered they can provide their goods and services with less staff. If you add the uncertainty of healthcare reform and its impact one can clearly understand while it is very difficult to make predictions with any confidence.

But predictions must be made. The following is a general summary from a number of large consulting firms and national research organizations. (Note the following is a summary of overall budget projections. Refer to each organization’s website for more detail information):

Organization	2011 Overall Compensation Budget Projection
Buck Consultant’s	2.5%
Business & Legal Reports	2.1%
Conference Board	3.0%
Culpepper Associates	3.06%
The Hay Group	3.0%
Mercer HR Consulting	2.9%
Towers Watson	3.0%
WorldAtWork	2.9%

While there appears to be a high degree of consistency in the projections among this group it is important to remember that these are high level national all industry projections. Each organization provides more detail break downs of the data by region, industry, non exempt, exempt and executive levels.

The important take away from this review is the very optimistic numbers we are seeing for 2011. During the economic turndown between October, 2008 and the end of 2009, astron Solutions has seen a move of its clients to emphasize variable compensation programs at all levels which are self-funded by actual key financial and other strategic results. By establishing self-funded incentive programs the organization only has to pay with what has been earned. Many have replaced base pay adjustments in 2009 – 2010 with this new variable compensation emphasis.

The risk of course is that the organization may soon find itself not as competitive on the base pay as the economy continues to recover. This has led to a decentralization of compensation decisions in which “mission critical” positions are being defined and segregated from the rest of the pay system and treated different then the other positions when it comes to compensation budgeting. This trend we do not believe is reflected in the 2011 projections listed above. There are organizations that are budgeting more then 3% for their mission critical positions and less then 3%, even 0% for other positons to better utilized the limited dollars they. They couple this with a broad-based, organizational wide short term incentive plan tied to results that all can participate in.

So our recommendation as we move into 2011 is:

1. Focus more on industry and regionally specific compensation budget projections.

2. Determine whether or not your organization needs to “protect” mission critical positions and set compensation budgets accordingly.

3. If step #2 is taken be prepared to also offer some form of short term variable compensation based on specific results that can be applied to all organizations.

4. Watch recruitment patterns in the next few months. A clear sign of a consistent recovery will be the attempts to prirate away key employees by competing organizations.

5. Take caution in setting your total rewards budgets allowing for dollars that may be necessary to fund mandated health insurance requirements.

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Article Tags: 2011 Budget Forecast, Compensation



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