Exempt employees at large employers can expect about the same base-pay increases
in 2006 as they received in 2005, but rising healthcare and energy costs have
the potential to offset salary gains, according to Hewitt Associates, a human
resources services firm.
Hewitt's survey of 1,056 large organizations found that exempt employees can
expect base salary increases of 3.6 percent next year--the same as Hewitt found
for 2005 increases. Executive employees are projected to receive 2006 increases
of 3.8 percent, compared with 3.6 percent for non-exempt employees, 3.5 percent
for non-union hourly and 3.1 percent for union employees, according to Hewitt.
"Companies are struggling to attract and retain key talent with relatively
flat pay increases, while at the same time employees' pay checks are continuing
to shrink due to increasing health care and energy costs," says Ken Abosch,
a business leader for Hewitt Associates. "The real challenge for companies
is finding real and meaningful ways to reward their top performers without additional
money in traditional base pay budgets. For many, that's going to take creativity
and a heavier reliance on variable pay."
In 2005, actual company spending on variable pay as a percentage of payroll
increased to 11.4 percent, up from 9.5 percent in 2004 and exceeding 2005 projections
by 1.5 percentage points, according to Hewitt. Hewitt says spending on variable
pay in 2006 is projected to remain strong at 11.1 percent.
Read BLR's 2006
Pay Budget Survey Summary.