By BLR Founder and CEO Bob Brady
BLR CEO Bob Brady would like to know whether employers are backing off of pay raises planned for next year. Please take our very brief survey and see the results next week.
Economic uncertainty
Until quite recently, employers were saying that pay raises would be inching upwards. Now, people are changing their minds. Or are they?
Based on a very small sample drawn from my personal circle, employers—faced with uncertain economic prospects—are ratcheting back on planned pay increases for 2009. A few are considering no increases. Some are lowering their pay budget increases. Others are postponing effective dates. Other tactics include reducing planned increases in rate range changes.
What help do you need in compensation or benefits? Chances are you’ll find it in BLR’s renowned “all comp and benefits in one place” website, Compensation.BLR.com. Try it at no cost
When we surveyed employers as to pay increase plans in late June of 2008, the results indicated the average planned merit increase was 3.71%. This was up slightly from the actual 2007 increases, which were reported to be 3.67%.
Planned increases
2009 — 3.71%
2008 — 3.65% (the actual increase was reported as 3.67%)
2007 — 3.69% (the actual increase was reported as 3.54%)
Our data were in accord with surveys conducted by other organizations.
Now, it looks like that 2009 number may not hold in the face of the economic travail of the last few weeks and months. Most of the employers I speak with are grappling with the dilemma. In the past, they’ve regularly used this data to set pay budgets. Now, we’re not so sure, and we’re going to use this opportunity to conduct a short survey. (See the link at the end of the article. Results next week, so please participate.)
Pay philosophy
Smaller amounts available for raises make it even harder to execute on our compensation strategy, which is similar to most employers, but bears repeating as we face harder times. We try to reward those who contribute the most, but we look at a lot of factors, including where someone is in their range and the difficulty of replacement. It’s never “equal,” but we try to make it “fair.”
Central to the strategy are two tenets:
1. To make significantly more money, you have to get promoted. If someone stays in the same job year after year, it is very hard for any employer to justify significantly greater pay. After a certain point, productivity does not increase measurably. This is hard to sell to people, but the unfortunate fact is that to get more money you have to be adding more economic value.
2. The best people have the most options. If you are serious about keeping them, you have to weight your rewards in their favor. It doesn’t always have to be money, and when it comes to people who are above average, ambitious, capable, and have marketable skills, you can’t expect to keep them with less than average pay and benefits. The exceptions prove the rule.
Got a specific comp or benefits question? Our experts will answer it in 1 business day when you’re a subscriber to BLR’s Compensation.BLR.com. Try it at no cost. Find out how
So, as we face the question of budgeting for pay increases in the coming year, we’re keeping those tenets in mind. We’re trying to balance our long-term interests in developing and retaining a workforce that will help us compete successfully against short-term pressures that could be severe. We’re curious about how others are handling this dilemma. Please click the link below and let us know how your organization is dealing with the economic uncertainty.
If you can’t click the link above, copy and paste this URL into your Web browser’s address bar: http://www.surveymonkey.com/s.aspx?sm=m1CSxsihPcSBbYbQKcd_2fog_3d_3d