Business News
Pay Freezes Thaw, According to Buck Consultants, A Xerox Company
Monday 11. October 2010 - More than three-quarters (76%) of organizations that froze pay during the last 18 months have lifted their pay freezes or intend to do so by the end of 2010, according to a Buck Consultants, A Xerox Company (NYSE: XRX), survey of U.S. companies released today.
Bucks survey, “Compensation Planning for 2011,” also found that workers can expect modest pay raises next year, up from recent low levels. Salary increases for 2011 will average 2.8 percent, an increase from 2.5 percent in 2010 and 1.8 percent in 2009.
“Employees shouldnt expect big gains in pay until there is a sustained economic recovery and significant improvement in the unemployment rate,” said Tom Burke, principal at Buck Consultants. “In fact, employers may revert back to pay freezes if economic stability and sustained growth do not occur.”
Pay-for-performance remains as crucial as ever, given the importance of allocating scarce funds effectively to retain top performers.
Eighty-seven percent of organizations participating in the survey subscribe to a pay-for-performance compensation philosophy. The most prevalent type of short-term incentive program is a company-wide incentive plan with an individual performance component.
Bonus payments and bonus participation are also on the rise. Payments for 2010 performance for executives, directors, managers, and other exempt employees are expected to exceed bonuses paid for 2009 performance.
Strategies to Retain Top Performers
Among survey respondents who have changed the way they manage base pay in 2010, between one-third and one-half (depending on employee level) have reallocated merit funds from low performers to high performers. In the prior year, less than 10 percent adopted this measure.
“There is mounting concern that employees will seek new opportunities as soon as the job market improves,” said Burke. “Compensation-related retention strategies are becoming increasingly important.”
Strategies for retaining top performers include: new career development opportunities (34%), market pay adjustments (27%), increased non-cash recognition (19%), larger bonus opportunities (13%), additional company stock (12%), and retention bonuses (12%).
Other Key Findings
Between 70 percent and 80 percent of employees can expect pay raises this year, but only 57 percent executives should expect a pay increase.
“Specialized industry knowledge” is the top reason organizations offer a hiring or retention bonus.
Referral bonuses are offered by 59 percent of employers.
Buck Consultants completed its survey in August. The survey includes responses from more than 200 employers, representing virtually every sector of the U.S. economy. It examines competitive compensation strategies, metrics for monitoring labor costs, and the use of technology to support compensation program administration.