Salary Freezes and Reductions... Is the End in Sight?

In the latest update to their ongoing research on the impact of the economic crisis (this round conducted in June and reflecting 179 U.S. based employers), Watson Wyatt finds that many - but not all - companies are planning the reversal of recent cost cutting actions.  While there will be reinstatements in some areas, survey responses also suggest that some changes (staff size being chief among them) that are expected to be longer-term in nature.

Some findings from the salary side of things:

Salary Freezes

Of those companies that have implemented salary freezes ...

• 17% plan to eliminate the freeze in the next 6 months

• 52% plan to eliminate the freeze in the next 12 months

• 7% plan to eliminate the freeze in the next 18 months

• 2% believe that it will be more than 18 months until the freeze is eliminated

• 4% do not expect to eliminate the salary freeze

• 18% don't know

Of those stating plans to eliminate a salary freeze, 78% will eliminate all salary freezes.

Salary Reductions

Of those companies that have implemented salary reductions ...

• 30% plan to reverse the salary reductions in the next 6 months

• 25% plan to reverse the salary reductions in the next 12 months

• 5% plan to reverse the salary reductions in the next 18 months

• 20% do not expect to reverse the salary reductions

• 20% do not know

Of those planning to reverse salary reductions, 78% will restore salaries to their original levels.

Merit Increase Budgets

Responding companies report their actual 2009 and planned 2010 merit increase budgets to be as follows, on average...

• 2009 Actual:  2.0%

• 2010 Planned:  3.0%

Note that of those companies that reduced salaries, about half do not yet know if their next merit increases will build upon current reduced salary levels or the former salary levels.

While it is heartening to hear that we may have the worst behind us in terms of salary freezes and reductions, this data also suggests that salary plans and levels will likely be in flux for at least the next 12 months.

Image: Creative Commons Photo "The End" by Ewen Roberts

Comments

[Chris Young]

Thanks for pointing to this piece of research, Ann. And thanks for distilling it down to the high points!

I've shared you synopsis with my readers in my weekly Rainmaker 'Fab Five' blog picks of the week (found here: http://www.maximizepossibility.com/employee_retention/2009/06/the-rainmaker-fab-five-blog-picks-of-the-week-4.html) to help them keep up with the ever changing world of employee comp.

Have a great week!

- Chris Young

[Ann Bares]

Thanks so much, Chris - appreciate the chance to connect with your readers via the 'Fab Five' picks!