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November 20, 2003
Many Employers Trim Budgets for Raises

More than 40 percent of employers are scaling back their 2004 pay-increase budgets for at least some portion of their employee population, according to a new survey from Mercer Human Resource Consulting. At these organizations, pay increases originally budgeted for an average of 3.6 percent now will average about 3.2 percent.

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Thirteen percent said they had reduced their pay-increase budgets as a result of healthcare cost increases, pension funding requirements, or a combination of the two factors. Another 13 percent were considering this course of action as a result of one factor or both factors.

"We are still seeing a great deal of caution as employers approach the end of the year and finalize their pay-increase budgets," says Steven E. Gross of Mercer. "In fact, a small number of employers still have budgeted no pay increases for at least some of their employees in 2004, indicating that they can’t afford pay increases– especially in concert with rapidly rising health care costs and pension funding requirements."

Mercer's survey found that the strongest performers will receive average pay increases of 4.8 percent in 2004, compared to 3.1 percent for average performers, and 1.0 percent to the weakest performers.

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