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February 06, 2001
US Employers Adjust Projections for 2001 Salary Increases
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Employers now plan to grant slightly higher pay raises in 2001 than they originally had projected in mid-year 2000, a new survey shows. Few employers anticipate reducing headcount or lowering short-term incentive payouts this year.


New York--Despite talk of a possible economic slowdown, US employers are planning to give slightly higher pay raises to employees this year than they originally had projected in July 2000, according to a new survey from human resource consultant William M. Mercer, Incorporated.

The 2000/2001 US Compensation Planning Survey, conducted by Mercer in July 2000 among 2,439 firms nationwide, showed that US employers planned base salary increases of 3.9% to 4.4% in 2001 for their various employee groups. In an update of this annual survey, conducted in December 2000 among 645 firms nationwide, employers indicated that they now expect to grant pay increases of 4.2% to 4.6% to employees in 2001. The biggest projection increase was for technical/professional employees. In July, these employees were projected to receive pay raises of 4.2% in 2001, while in the recent update, that projection had increased to 4.6%.

2001 Projected Pay Increases

Reported in July 2000
December 2000 Update
# of Firms

2,439
645
Executives
4.4%
4.5%
Management
4.2%
4.5%
Technical/ Professional
4.2%
4.6%
Nonexempt
4.1%
4.4%
Nonunion Hourly
3.9%
4.2%

"Employers are adopting a 'wait and see' attitude regarding the economy," says Steven E. Gross, who leads Mercer's US compensation consulting practice. "The labor market is still so tight that they are reluctant to take any steps that would make it more difficult to attract and retain good talent. In fact, the survey shows just the opposite that they are doing more to position themselves positively with current and prospective employees."

As another indication of their economic outlook for 2001, only 15% of the surveyed employers anticipate a reduction in staffing levels this year; 44% predict no change, and 41% expect to increase organizational headcount in the next 12 months.

Short-term incentive payouts
In addition, few employers expect short-term incentive payout levels for 2001 to be lower than 2000 payouts, according to Mercer's survey. Across all employee groups, the vast majority of employers report that they will increase or hold short-term incentive payout levels constant for 2001.

Lower
Equal
Higher
Executives

10%
56%
34%
Management
9%
58%
33%
Technical/ Professional
9%
60%
32%
Nonexempt
8%
63%
30%
Nonunion Hourly
7%
64%
29%

"Keep in mind that 2001 incentive payout levels reflect 2000 corporate performance, which generally was good," Mr. Gross says. "Looking ahead to incentive payouts in 2002 now that could be another story."
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