A pattern that found many U.S. employers making sharp cuts to their pay-increase
budgets at the end of the year appears to be changing, according to a survey
by Mercer Human Resource Consulting.
While four in 10 employers (41 percent) say they will make some type of adjustment
to their 2005 pay-increase budgets, those changes will be very small this year--with
reductions of just one- or two-tenths of a percentage point for some employee
groups. That means average pay increases for 2005 are still projected to be
around 3.5 percent, according to Mercer.
Among employers that anticipate a budget change, pay increases for executives
now will average 3.3 percent in 2005 instead of the 3.7 percent projected earlier
this year. That results in an overall drop in projected executive pay increases
from 3.8 percent to 3.6 percent when all employers in the survey are considered.
Mercer conducted the study, includes responses from nearly 500 employers, in
"Despite all the talk about the possibility of losing employees as the
economy improves and the baby boomers retire, it hasn't happened yet--but it
could happen soon, and employers are feeling this tension," says Steven
E. Gross, leader of Mercer's compensation consulting practice. "For now,
employers are able to maintain relatively low pay-increase budgets, despite
the pressure to increase it based on labor movement once the economy improves."