December 16, 2008 09:00 AM Eastern Time 

Hewitt Survey: More Than 7 Million Americans to See Lowest Pay Raises
in Three Decades

http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20081216005139&newsLang=en

 

LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--Next year, more than seven million Americans will see the lowest pay
raises in 32 years, and that number is expected to rise as companies
attempt to manage overhead costs in response to the economic crisis,
according to a new survey by Hewitt Associates, a global human resources
consulting and outsourcing company. But while base pay increases
continue to decline, companies remain focused on attracting and
retaining key employees by reserving a significant portion of their
compensation budgets for variable-pay bonuses, or performance-based
rewards that must be re-earned each year.

Since July 2008, Hewitt has conducted a series of surveys to determine
employers’ likely actions around their 2009 compensation budgets. In
December, Hewitt’s latest survey of 640 large companies, representing
almost 13.5 million American employees, found that the recent economic
situation and/or cost pressures have prompted half (50 percent) to make
significant changes to their base salary spending in 2009, and another
quarter (25 percent) of companies are still considering doing so. For
those companies, base salary increases for all employee groups are
expected to drop below 3 percent for the first time since Hewitt started
tracking the data in 1976. Salaried exempt employees will see an average
salary increase of 2.5 percent in 2009, down from 3.8 percent in July.
Executive pay increases will drop from 3.8 percent to 2.2 percent, and
salaried nonexempt will decrease from 3.7 percent to 2.6 percent.

Despite significant decreases in merit-based pay, Hewitt’s research
shows most companies that offer variable pay programs are staying the
course and not making drastic cuts to their 2009 budgets. For salaried
exempt employees, spending on variable pay as a percentage of payroll is
expected to be 11.1 percent in 2009, slightly lower than the projected
increase of 12.1 percent in July. Variable pay spending for salaried
nonexempt employees is expected to decrease from 6.1 percent to 5.7
percent. According to Hewitt, more than two-thirds (69 percent) of
companies offer variable pay programs to employees, and another quarter
(24 percent) plan to introduce one in 2009.

“Clearly, many organizations and some industries are being negatively
impacted by the economy, and short-term adjustments to reduce fixed
costs are required to avoid pay freezes, layoffs, or in some cases, just
to survive,” said Ken Abosch, North American practice leader for
Hewitt’s Compensation Consulting business. “But employers aren’t making
these decisions lightly. They realize that while employees may have more
limited alternative employment options in today’s labor market, they
cannot afford to be less competitive than other organizations in their
industry, especially because the market for high-performing employees is
still very active even in difficult economic times. Variable pay
programs help organizations strike a balance between these two needs by
allowing employers to more effectively manage fixed costs and focus on
key business objectives, while at the same time motivating and rewarding
employees for attaining performance goals and contributing to business
results.”

Salary Increases by Industry

Not surprisingly, the automotive industry is expected to dole out the
lowest pay increases next year, with salaried exempt and salaried
nonexempt employees averaging 1.4 percent, down from 3.5 percent as
originally projected in July. Pay raises for automotive industry
executives are projected to be 1.3 percent, down from 4.0 percent.

Employees in the education and the banking/finance industries will also
see lower-than-average increases next year. Salaried exempt employees in
education can expect to see pay raises of 2.3 percent in 2009, down from
3.5 percent in July. Pay increases for employees in the banking and
finance industries will be 2.9 percent for salaried exempts next year,
compared to 3.9 percent.

Industries that will continue to see above-average salary increases in
2009 include construction/engineering (4.5 percent), research and
development (4.0 percent) and pharmaceutical (3.9 percent).

Copies of the complete report, “U.S. Impact of Economic Conditions on
2008/2009 Compensation Spending – Pulse II,” are available for $250 by
contacting Hewitt at (847) 295-5000 or humancapitalconsulting@hewitt.com.

About Hewitt Associates

For more than 65 years, Hewitt Associates (NYSE: HEW) has provided
clients with best-in-class human resources consulting and outsourcing
services. Hewitt consults with more than 3,000 large and mid-size
companies around the globe to develop and implement HR business
strategies covering retirement, financial and health management;
compensation and total rewards; and performance, talent and change
management. As a market leader in benefits administration, Hewitt
delivers health care and retirement programs to millions of participants
and retirees, on behalf of more than 300 organizations worldwide. In
addition, more than 30 clients rely on Hewitt to provide a broader range
of human resources business process outsourcing services to nearly a
million client employees. Located in 33 countries, Hewitt employs
approximately 23,000 associates. For more information, please visit www.hewitt.com.