Reported Salary Increases to Remain Stable in 2008

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<p><strong>New York &mdash; Sept. 24</strong><br />Buck Consultants, a human resource and benefits consulting firms, has announced the results of its national survey of U.S. employers on compensation planning.<br /><br />For most employee levels, average planned salary increases for fiscal year 2008 equal the average target salary increases for fiscal year 2007. </p><p>Salary increases for 2008 range from 3.8 percent for nonexempt employees to 4.3 percent for executives. </p><p>In fact, executives were the only employee group whose average salary increase changed from 2007 to 2008 &mdash; with a slight decrease from 4.4 percent in 2007.<br /><br />Buck&rsquo;s survey, &ldquo;Compensation Planning for 2008,&rdquo; was conducted in the first half of 2007. It analyzed responses from 415 organizations on their compensation budgets, reward program components and pay-for-performance plan designs.<br /><br />The largest proportion of salary increase spending is on merit pay, with merit budgets representing about three-quarters of total salary increase spending. </p><p>Average planned merit increases for 2008 range from 3.1 percent for nonexempt employees to 3.6 percent for CEOs.<br /><br />&ldquo;Our study found that about three out of four organizations target non-executive base salaries at the 50th percentile of the market,&rdquo; said Larry Reissman, a Buck principal who directed the survey. &ldquo;This indicates most employers are managing their total compensation costs very carefully, which creates challenges when rewarding their top performers.&rdquo;<br />       <br />Eighty-six percent of respondents report that they consider individual performance when determining the size of merit increases. </p><p>Buck&rsquo;s survey results show, however, that the actual effect of performance on pay increases is modest, at best. For example, employers using a five-point performance rating scale (55 percent of respondents) report that the average pay increase for the highest performance rating was 3.5 percent &mdash; given to the top 10 percent of performers. </p><p>This compares with an average pay increase of 2.8 percent for the next two performance categories &mdash; given to three-fourths of the population.<br /><br />&ldquo;In our experience, organizations need to re-engineer, not just tweak, their reward programs to achieve meaningful pay for performance, as well as the return on salary expenditures management expects,&rdquo; Reissman said.<br /><br />Other key findings include:</p><ul><li>Sixty-two percent of respondents have a separate promotion budget. Median promotion increases range from 6.5 percent for nonexempt employees to 10 percent for executives.</li><li>Sixty-seven percent of employers offer one or more short-term incentive plans.</li><li>Fifty-seven percent of respondents offer hiring and/or retention bonuses. Median hiring bonuses range from 5 percent of base pay for nonexempt employees to 20 percent for CEOs.<br /></li></ul>

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