The State of Salary Increase Budgets: A Special Update

As the economic crisis continues, WorldatWork releases today a special update to its annual salary budget survey.  Results from the updated study, reflecting data compiled in December 2008, show that (across all employee categories, industries and regions) employers plan to lower their original salary increase projections by 0.8%.  This means that salary budget increases this year are now expected to be 3.1% on average, compared to 3.9% when the survey was originally completed in April 2008.

Following is a breakout by major U.S. metropolitan area, comparing original and updated 2009 projections:

              

Other key findings from the updated study:

• 77% of employees can expect a 2009 pay raise.This is an expected drop from what WorldatWork reported for 2008 (that 91% of employees were expected to receive a salary increase), but it is higher than I would have anticipated.  What it shows, I think, is that after any layoffs and staff reductions are completed, employers are committed to rewarding the employees that remain.

• Half of participating organizations (51%) made changes to their original 2009 salary increase budget projections.  Those that lowered increase budgets did so by an average of 1.6%. (Remember that the 0.8% reduction reported overall includes all organizations - those who changed their budgets as well as those who did not.)  Among those reducing increase budgets, 19% to 33% are cutting their salary increase budgets to zero.

Comments

[Paul]

Very interesting data, but I'm wondering if you could comment on why the marked decrease in participation (n). Is it the result of staffing reductions? Fewer participating companies? I'm left wondering how this might skew the % results.

Thanks for posting this. Confirms I think what most of us already knew would happen. I was actually a little surprised that the reductions were not greater.

Thank you!

[Ann Bares]

Paul:

Good questions. I think the decrease in participation is mostly due to the fact that the December data is an "update", rather than the comprehensive study that is done in April. As such, and given that it probably had a compressed participation timeframe, I would expect it to have a lower number of participants.

If the second group is a representative subset of the first (and, generally speaking, I can't think of why it wouldn't be), then the results shouldn't be skewed too much from one sample to the next.

[E James (Jim) Brennan]

During that survey period, there was a running daily online poll at W@W showing that a substantial minority of enterprises were undecided about the nature and extent of budget changes. Those who hadn't come to a final decision on where they stood (ending ~25%)probably kept deferring any update response. As the survey ran from October through December, the number "reducing budgets" grew with a steady erosion of hold-outs from the "no-change" and "too-soon" crowd, while the "we're increasing" minority stayed below 2%.