More than seven million Americans will see their lowest pay increases in 32 years in 2009, according to a new survey by Hewitt Associates. Among 640 large companies (representing nearly 13.5 million workers) surveyed, 50 percent reported that the recent economic situation and/or cost pressures are causing them to make significant changes to their base salary spending this year. Meanwhile, an additional 25 percent were still considering making such changes.
For those employers planning significant changes, base salary increases are expected to drop below 3 percent for all employee groups for the first time since Hewitt started tracking such data in 1976. According to Hewitt, salaried exempt employees will see an average salary increase of 2.5 percent in 2009—down from an anticipated 3.8 percent reported by employers in a July 2008 Hewitt survey. Likewise, salaried nonexempt pay raises will decrease from 3.7 to 2.6 percent and executive pay increases will drop from 3.8 to 2.2 percent.
Hewitt provided industry-specific examples of pay increases next year. The automotive industry “is expected to dole out the lowest pay increases next year,” according to Hewitt. Salaried exempt and salaried nonexempt employees will see raises of 1.4 percent, down from 3.5 percent reported in July.
The survey found that 2.3 percent raises are in store for salaried exempt employees in education in 2009, also down from 3.5 percent in July; while salaried exempt employees in the banking and finance industries should anticipate raises of 2.9 percent, down from 3.9 percent in July.
Hewitt also reports that workers in the construction/engineering (4.5 percent), research and development (4.0 percent) and pharmaceutical (3.9 percent) industries will enjoy higher than average pay raises.
The survey further found that most companies that offer variable pay programs are “staying the course and not making drastic cuts to their 2009 budgets.” Hewitt reports that in July, for salaried exempt employees, spending on variable pay as a percentage of payroll was expected to be 12.1 percent. This figure dropped only slightly in Hewitt’s December survey to 11.1 percent. These same figures for salaried nonexempt employees were 6.1 percent and 5.7 percent respectively. Sixty-nine percent of companies surveyed currently offer variable pay programs to employees, according to Hewitt, and another 24 percent plan to introduce one in 2009.