Employers Scrimping on Pay Raises Next Year

New report shows average pay raises for millions will below 3 percent next year.

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An annual survey of hundreds of large employers indicates average pay raises for millions of workers in 2009 will fall below 3 percent for the first time since the data began to be tracked in 1976.

The Hewitt Associates survey of 640 companies finds half of companies planning to alter base salary spending next year--and another 25 percent of companies still considering it. Among those employers (representing about 7 million workers), salaried employees will average salary increases of 2.5 to 2.6 percent--down from 3.7 to 3.8 percent in July--and executive pay increases will fall to 2.2 percent from 3.8 percent.

So how will performance be rewarded--and talent be retained--in this kind of environment?

According to Hewitt, "while base pay increases continue to decline, companies remain focused on attracting and retaining key employees by reserving a significant portion of their compensation budgets for variable-pay bonuses, or performance-based rewards that must be re-earned each year."

The industry that will likely see the lowest increases next year: automotive.

Above-average salary increases are expected in construction/engineering; research and development; and pharmaceutical.


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