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February 23, 2009
How Do U.S. Comp Budgets Compare Globally in Economic Slump?
Think U.S. employers and their workers are experiencing the worst of the current economic conditions? You may be surprised to learn that employers in other parts of the world are contemplating or instituting cuts to salary increases, pay freezes and hiring freezes with considerably greater frequency than those in the United States. But the comparison is less favorable for U.S. employees in one very significant way.

Hewitt Associates conducted surveys among 2,000 companies (representing 25 million workers) across 40 countries to find out how the economic turmoil and cost pressures were impacting their 2009 compensation budgets. It broke down the results by four major regions: Asia-Pacific, Europe, Latin America and the United States.

The survey found that U.S. companies were least likely among the four regions to consider implementing hiring freezes. Of course, that’s not to say the percentage who were considering or planning to freeze hiring in 2009-- 39 %--is not significant, but it fell well below that of companies in Latin America (66%) and Europe (63%) that had such plans. Meanwhile, 42% of Asia-Pacific companies were considering a hiring freeze.

Companies in Europe and Latin America were also much more likely (at 20% and 23%, respectively) to institute pay freezes than their counterparts in the United States (10%) and Asia-Pacific (6%).

Hewitt found that about two-thirds (67%) of surveyed companies in Europe were making cuts to their 2009 salary increase budgets. By comparison, half (50%) of employers in the United States were planning cuts to salary increases. In addition, companies in Latin America (63%) and Asia-Pacific (58%) companies were also more likely to be making such cuts than U.S. companies.

However, lest we believe the above means that U.S. employees are feeling the softest blow of current economic conditions compared to other parts of the world, consider the following: Employees in the other three regions of the world will fare much better than those from U.S. companies in terms of actual pay increases in 2009. While U.S. companies that are making cuts are only reducing planned raises by an average 0.7%, they are providing “dismal” average raises of 3.0%.

While the other three regions were planning more drastic cuts to their salary increase budgets, the resulting average raises are considerably more favorable: Asia-Pacific companies making cuts will reduce planned pay raises by an average of 1.7% from earlier projections in 2008, but for average raises of 5.2%; while companies in Europe are reducing planned raises by 0.9% for average raises of 4.2%. Finally, Latin American companies are cutting salary increase budgets by 1%, but the average pay increase for their employees dwarfs that of the other three regions (and quadruples that of the United Sates) at 12.3%.

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