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October 19, 2004
Pay Raises Remain Low, But Bonuses Rise

Pay raises for most employees remain flat and below historical averages in 2004, but annual bonuses are higher than those paid out in 2003, according to a study by Hay Group.

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Average 2004 pay raises for blue collar (3.0 percent), nonexempt (3.5 percent), and professional/managerial employees (3.5 percent) remain at 2003 levels, which were lower than previous years'. While median increases for executives (3.5 percent) are up from 2003, they are still below 2001 levels.

Prior to 2001, the historical average merit increase for all levels was closer to 4.0 percent, according to Hay Group.

"We're still in a valley," says Doug Jensen of Hay Group. "The outlook for some industry sectors is better than others. Most companies are allocating their scarce HR dollars across the employment base and attempting to pay-for-performance and make sure their reward programs are aligned with the business."

Employees eligible for bonuses are seeing larger bonus payouts in 2004, according to the study. The researchers note that its research indicates that while companies are still being conservative with salary increases, financial performance has improved, allowing for larger bonuses to be paid.

Most of the companies surveyed plan to keep their salary increase budgets the same as those for 2004.

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