Merits Projected to Rise in 2010

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Merits Projected to Rise in 2010

by Marisa Rambaran, The Rosen Group

Positive news in the midst of the recession-Watson Wyatt’s 2009/2010 U.S. Strategic Rewards May 2009 survey reports an optimistic outlook for salary boosts in the coming year.

So far this year, bonus budgets have suffered under the hard hit economy, leaving hard-working employees to endure less than their deserved pay. But in 2010, the 235 companies surveyed by Wyatt plan on turning things around.

In 2008, workers experienced an average pay increase of 3.5%. That percentage was projected to stay constant in 2009, but since bonus programs took a back seat to the declining economy, it drastically decreased to its lowest in February at 1.5%. As of June, 2009, it has slightly gone up to 2.0%. But the projection of a 3.0% merit increase for 2010 has much promise, as the 235 major companies, with 1000+ employees, emphasize hope for an economic upturn.

Wyatt subsidiary, Watson Wyatt Data Services, also surveyed around 900 organizations, concluding that the companies projecting no plans for pay raises has decreased from 25% in 2009 to 10% in 2010.

Watson Wyatt’s global director of strategic rewards, Laura Sejen, says, “This has been a very difficult year for both employers and their workers. But there is some good news on the horizon. Employers plan to give larger raises next year, and many plan to reinstate previously cut pay raises as planning for an eventual economic recovery continues.”

Worthy workers can expect at least a 1% increase in salary adjustment payout from their employers, which is expected to move from 1.8% in 2009 to 2.7% in 2010. Potential beneficiaries of the augmented 2010 salaries will be evaluated by high standards. Companies, aware that the recession is not yet over, must make sure that the workers receiving bonuses have earned it. Weak performers, therefore, will not be rewarded. Employees should expect high-level analysis in the workplace, from companies eager to show optimism and hope for a recovering economy.

Other major reports echo Wyatt’s findings, giving hope for a steady economic upturn. The 2009/2010 Culpepper Salary Increase Budgets Survey reports that salary freezes, initially meant to prevent and/or reduce layoffs, are expected to decrease from 37% in 2009 to 13% in 2010. Also, Culpepper reports that of the 13% of companies that reported decreasing salaries in 2009, one-third intend to overturn that statistic next year.

Hewitt Associates reports that although the current year’s salary increases are the lowest in 33 years, variable pay spending has doubled since 1994 from 5-6% to almost 12%. With a positive economic outlook, high-performance workers can look forward to change in 2010. Hewitt representative Ken Abosch states that, “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. Over the past decade, we’ve seen companies steadily shift from a fixed pay model to one that emphasizes true performance-based awards, and we expect this trend will continue.” Hewitt’s report goes on to show higher merit projections in the industries of energy and food/beverage/tobacco. Those industries with the lowest expected increase include Industrial machinery, education, and vehicle manufacturing.

Good news is finally here, after a year of cutbacks on compensation and benefits due to the struggling economy. Employers are optimistic for an economic turnaround, and their high quality employees can expect to see the results of these projections in the upcoming year.

© 2009, The Rosen Group Newsletter. Reprinted with permission by The Rosen Group, specializing in Human Resources Solutions and HR Staffing.