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2011 Salary Increase Update

Guest post by: Jennifer Loftus

Article Overview: As we explored in Astronology last year, many organizations were projecting an optimistic 2011. The sense was that the economy would be on the mend, inflation low, and the stock market on the rise. But much has happened over the past few months which may run contrary to these hopes - from the unsettled Arab world, skyrocketing oil prices, and labor unrest in America’s heartland.

2011 Salary Increase Update



Given the changes in the world, what are we now hearing about 2011 salary increase projections? Below is a summary of several of the latest reports.

The Conference Board

The Conference Boardrecently published the results of its survey of 313 organizations, including four employee groups: non-exempt hourly (non-union), non-exempt salaried, exempt, and executive. With a median increase of 2.5% in 2010, salary increase budgets remain historically low. Projections for 2011 show a modest increase to 3.0%, an indication that the economic recovery has not yet picked up enough strength to significantly raise salary budgets. Pay for performance, rather than general increases, remains a dominant trend.

The Hay Group

2011 salary increase plans and projections appear to be holding steady to 2010 levels, according to a recent spot survey of 468 U.S. organizations conducted in November byHay Group.

Several of the key findings from the Hay survey include the following:

· The median base salary increase for US employees will be 2.8% in 2011. This is similar to projections for the year gathered in 2010.

· 80% of survey respondents say that they havenotchanged their original planned 2011 salary increase budgets. Of the remaining 20% of respondents, 7% have increased their budgets, and 13% have decreased them.

· 85% of respondents report that they arenotconsidering a change to their salary budgets at this time. An additional 9% are considering increasing their budgets, while 6% are considering decreasing them.

The survey also notes that participants anticipate delivering a median increase of 3.1% to top performers, slightly higher than the 2.8% for an “average” employee. Meaningful pay distinctions are yet another victim of the economic downturn and slow recovery.

Towers Watson

According toTowers Watson, U.S. employers are planning to give employees in 2011 the largest merit increases since the start of the financial crisis. The survey also found that more employers are starting to hire again, particularly professional and technical workers, and positions that require employees with critical skills.

Participating organizations are optimistic, budgeting merit increases of 3.0% for 2011, the highest levels we have seen in recent years. Of all the survey sources, Towers Watson remains highly optimistic for 2011, while the others are more cautious.

In addition to the trends in base pay, it is important to keep in mind the impact of total rewards. Along the Astron Solutions grapevine we have heard the following trends of which you need to be aware:

· Executive Compensation, both base pay and total cash compensation, remains active. The competition for top talent in all industry segments has created a “highest bidder” environment, which has led to base pay increases well above the projections of the experts cited above. There is also a greater emphasis in pay for performance via variable compensation programs, as well as additional opportunities to shelter income for retirement.

· The move to decentralized compensation continues to grow and gain in popularity. In this environment, organizations incorporate job families and make decisions on compensation budgets based on data as related to the job families. While this may result in an environment of “haves and have not’s,” the approach has gained popularity as a way to best utilize limited compensation resources.

· Flat dollar “bonus” adjustments in lieu of pay increases are still popular. However, organizations must be cautious when using this approach, as they raise legal concerns, especially in terms of FLSA violations when employers do not include these amounts in non-exempt employees’ overtime calculations.

Stay tuned for more updates as we watch the impact of rising oil prices, inflation, and health-care costs on Human Resources’ attempts to maintain, in a cost-effective manner, the positive employee environments they have worked so hard to establish.

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Article Tags: budgets, distinctions, dominant trend, economic downturn, economic recovery, employee groups, hay group, median base salary, participants, remaining 20, respondents report, salary increase, spot survey, survey respondents, top performers, watson



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