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February 08, 2010
Pay Freezes Continue at Many Firms

Most employers froze employees' salaries in 2009, and many of them will continue with the freeze in 2010, according to a survey by WorldatWork.

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Conducted in October 2009, the survey found that among employers that froze salaries in 2009, 54 percent planned returning to normal pay practices in 2010. However, more than one third said they were in no position to unfreeze salaries in 2010.

Among employers that cut pay in 2009, 29 percent said they planned to restore salaries in 2010. Thirty-seven percent of respondents who cut pay in 2009 said they will wait longer before restoring salaries. Fifteen percent said the pay cuts in 2009 were permanent.

“Employers are taking a ‘wait and see' stance when it comes to returning to normal pay practice,” said Jim Stoeckmann, compensation practice leader at WorldatWork. “There are risks both ways. Moving too fast in restoring salaries and merit budgets leaves employers vulnerable if the recovery fails to materialize. Moving too slowly creates the risk of turnover as employees look for a better opportunity with another company. Even with jobs scarce, there are always opportunities for employees with the right skill set.”

A survey conducted by BLR in June and July of 2009 found that more than 40 percent of employers said they planned on giving no merit increase at all in 2010. The survey found that average planned merit increase for 2010 is 1.85 percent.

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