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December 28, 2005
Employers to Offer Bigger Bonuses, Adjust Pay Budgets Slightly

About three-quarters of employers expect bonus payouts for 2006--based on 2005 performance--to be equal to or more than those paid in the previous year, according to a survey by Mercer Human Resource Consulting. Moreover, payouts based on 2006 performance are projected to be even higher.

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The survey includes responses from 370 mid-sized and large employers across the United States . The firm conducted the survey in October.

According to survey findings, while approximately one-quarter of employers claim they will make some type of adjustment to their 2006 pay increase budgets set last spring, those changes will be fairly small this year--with increases of just one- or two-tenths of a percentage point higher for some employee groups. Therefore, average pay increases for 2006 are still projected to be around 3.6 percent for most workers, according to the survey.

Executives will see the largest adjustment, the survey found. Among employers that anticipate a budget change, pay increases for executives will average 3.9 percent in 2006 instead of the 3.6 percent projected earlier this year.

Despite tight base-pay budgets, employers are continuing to differentiate their workforce based on performance. According to Mercer's survey, the highest-performing employees (22 percent of the workforce) are expected to receive average base pay increases of 5.2 percent in 2005 compared to 3.4 percent for average performers (which make up 70 percent of the workforce).

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