U.S. Salaries Projected to Increase Slightly in 2003, While Companies Rely on Performance Pay as Key Compensation Vehicle, According to Hewitt
Study Shows Cities Where Workers Should See Greatest Base Pay Increases
(EMAILWIRE.COM, September 03, 2002 ) One sign that the economy is beginning to rebound may be found in the Hewitt Associates 26th Annual "U.S. Salary Increase Survey."
Hewitt, a human resources outsourcing and consulting firm, surveyed 1,045 companies nationwide, and found that average salary increases for 2003 are projected to be 3.9 percent for salaried exempt employees, 3.8 percent for salaried nonexempt employees, 3.8 percent for nonunion hourly workers and 4.1 percent for executives. This is a slight increase from 2002, which saw an average salary increase of 3.6 percent for salaried exempt employees, 3.5 percent for salaried nonexempt employees, 3.5 percent for nonunion hourly workers and 3.8 percent for executives.
While increases are projected to be slightly higher next year, they are down from 2001, when base salary increases were 4.3 percent for salaried exempt employees, 4.2 percent for salaried nonexempt employees, 4.0 percent for nonunion hourly workers and 4.5 percent for executives.
Meanwhile, 10 percent of organizations in this Hewitt study reported a salary freeze in 2002, while only 1 percent expect to take this type of action in 2003.
Additionally, the Hewitt study shows that workers in many major cities nationwide should experience salary increases slightly higher than the national average projections for 2003. For instance, pay increases for salaried exempt employees in Atlanta (4.0 percent), Boston (4.0 percent), Houston (4.6 percent), Milwaukee (4.4 percent), San Francisco (4.0 percent) and Washington D.C., (4.2 percent) are expected to beat the estimated national average for next year.
Conversely, in cities such as Chicago (3.9 percent), Dallas (3.8 percent), New York (3.8 percent) and Philadelphia (3.5 percent), salaried exempt employees should see salary increases at or just below the 2003 projected national average of 3.9 percent. (See chart for a list of 2002 and projected 2003 salary increases by city.)
"In 2002, we saw many companies take action to reduce salary spending, but organizations nationwide seem to be cautiously optimistic moving forward," said Ken Abosch, a business leader for Hewitt Associates. "In fact, one of the most encouraging signs of increasing business confidence can be found in the amount companies are planning to budget in 2003 for variable pay."
Variable Pay Programs Continue to be Popular
Moderate salary increase projections are offset by companies' intended use of variable compensation plans. (Variable compensation is a performance-related award that must be re-earned each year and does not permanently increase base salary.) According to Hewitt, 80 percent of surveyed organizations currently have at least one type of variable pay plan in place, which is consistent with 2001 when 81 percent of organizations offered variable pay, and up from 1995 when just 59 percent of companies had this type of program. Furthermore, company spending on variable pay for salaried exempt employees averaged 10.5 percent of payroll in 2002 and is projected to average 10.9 percent of payroll in 2003 (see chart).
Specifically, this Hewitt study shows that the most common types of variable pay plans in 2002 were:
Business Incentives (55 percent) - awards employees for a combination of financial and operational measures for company, business unit, department, plant and/or individual performance;
Special Recognition (52 percent) - acknowledges outstanding individual or group achievements with small cash awards or merchandise (e.g., gift certificates);
Individual Performance (47 percent) - rewards based on specific employee performance criteria; and
Stock Ownership (40 percent) - rewards stock to professionals who meet specific goals.
"Variable pay programs can be a 'win-win' for both the employee and employer, but to be effective, they do require regular monitoring and communication initiatives," said Abosch. "Companies should evaluate their variable pay programs annually to ensure these plans are meeting the intended objectives. Regular communication with employees throughout the year also is necessary to discuss how they are doing against their objectives. This type of focus enables employees to know how they are impacting the bottom line and allows employers to measure program success."
2002 Adjustments in Variable Pay Plans
In a recent "Timely Topic Study on 2002 Variable Pay," Hewitt surveyed 174 U.S. companies and found that 62 percent of organizations said they didn't make adjustments to their Special Recognition Awards, 52 percent made no changes to their Stock Option Awards, 41 percent didn't change their Individual Performance Awards, and 32 percent didn't adjust their Business Incentive Awards. Meanwhile, of those organizations that did make changes to their variable pay programs, the main focus was on communications and performance measurement.
Specifically, 26 percent of surveyed companies added to or enhanced their communications efforts around Stock Option Awards, 24 percent did the same with Business Incentive Awards, 21 percent around Individual Performance Awards and 15 percent of these employers increased their communications around Special Recognition Awards. In addition, 32 percent of the organizations tightened measures around performance criteria for their Business Incentive Awards, 24 percent did the same with their Individual Performance Awards, 10 percent tightened measures around Stock Option Awards and 6 percent did so with Special Recognition Awards.
Copies of the Hewitt Associates 26th Annual "U.S. Salary Increase Survey" and "Timely Topic Study on 2002 Variable Pay" are available at www.compensationcenter.com, or by calling the Hewitt Associates Publications Desk at (847) 295-5000.
About Hewitt Associates
Hewitt Associates (www.hewitt.com) is a global outsourcing and consulting firm delivering a complete range of human capital management services to companies including: HR and Benefits Outsourcing, HR Strategy and Technology, Health Care, Organizational Change, Retirement and Financial Management, and Talent and Reward Strategies. The firm provides services from 91 offices in 39 countries.
Definitions:
Salaried Exempt - All non-executive salaried employees for whom overtime pay is not required by the Fair Labor Standards Act (FLSA).
Salaried Nonexempt - Salaried employees for whom overtime pay is required by FLSA.
------------------------
Produced for Hewitt Associates
Contact: Joe Micucci
(847) 442-7656
joe.micucci@hewitt.com
JoAnne Laffey
(847) 442-7648
joanne.laffey@hewitt.com
------------------------
Hewitt, a human resources outsourcing and consulting firm, surveyed 1,045 companies nationwide, and found that average salary increases for 2003 are projected to be 3.9 percent for salaried exempt employees, 3.8 percent for salaried nonexempt employees, 3.8 percent for nonunion hourly workers and 4.1 percent for executives. This is a slight increase from 2002, which saw an average salary increase of 3.6 percent for salaried exempt employees, 3.5 percent for salaried nonexempt employees, 3.5 percent for nonunion hourly workers and 3.8 percent for executives.
While increases are projected to be slightly higher next year, they are down from 2001, when base salary increases were 4.3 percent for salaried exempt employees, 4.2 percent for salaried nonexempt employees, 4.0 percent for nonunion hourly workers and 4.5 percent for executives.
Meanwhile, 10 percent of organizations in this Hewitt study reported a salary freeze in 2002, while only 1 percent expect to take this type of action in 2003.
Additionally, the Hewitt study shows that workers in many major cities nationwide should experience salary increases slightly higher than the national average projections for 2003. For instance, pay increases for salaried exempt employees in Atlanta (4.0 percent), Boston (4.0 percent), Houston (4.6 percent), Milwaukee (4.4 percent), San Francisco (4.0 percent) and Washington D.C., (4.2 percent) are expected to beat the estimated national average for next year.
Conversely, in cities such as Chicago (3.9 percent), Dallas (3.8 percent), New York (3.8 percent) and Philadelphia (3.5 percent), salaried exempt employees should see salary increases at or just below the 2003 projected national average of 3.9 percent. (See chart for a list of 2002 and projected 2003 salary increases by city.)
"In 2002, we saw many companies take action to reduce salary spending, but organizations nationwide seem to be cautiously optimistic moving forward," said Ken Abosch, a business leader for Hewitt Associates. "In fact, one of the most encouraging signs of increasing business confidence can be found in the amount companies are planning to budget in 2003 for variable pay."
Variable Pay Programs Continue to be Popular
Moderate salary increase projections are offset by companies' intended use of variable compensation plans. (Variable compensation is a performance-related award that must be re-earned each year and does not permanently increase base salary.) According to Hewitt, 80 percent of surveyed organizations currently have at least one type of variable pay plan in place, which is consistent with 2001 when 81 percent of organizations offered variable pay, and up from 1995 when just 59 percent of companies had this type of program. Furthermore, company spending on variable pay for salaried exempt employees averaged 10.5 percent of payroll in 2002 and is projected to average 10.9 percent of payroll in 2003 (see chart).
Specifically, this Hewitt study shows that the most common types of variable pay plans in 2002 were:
Business Incentives (55 percent) - awards employees for a combination of financial and operational measures for company, business unit, department, plant and/or individual performance;
Special Recognition (52 percent) - acknowledges outstanding individual or group achievements with small cash awards or merchandise (e.g., gift certificates);
Individual Performance (47 percent) - rewards based on specific employee performance criteria; and
Stock Ownership (40 percent) - rewards stock to professionals who meet specific goals.
"Variable pay programs can be a 'win-win' for both the employee and employer, but to be effective, they do require regular monitoring and communication initiatives," said Abosch. "Companies should evaluate their variable pay programs annually to ensure these plans are meeting the intended objectives. Regular communication with employees throughout the year also is necessary to discuss how they are doing against their objectives. This type of focus enables employees to know how they are impacting the bottom line and allows employers to measure program success."
2002 Adjustments in Variable Pay Plans
In a recent "Timely Topic Study on 2002 Variable Pay," Hewitt surveyed 174 U.S. companies and found that 62 percent of organizations said they didn't make adjustments to their Special Recognition Awards, 52 percent made no changes to their Stock Option Awards, 41 percent didn't change their Individual Performance Awards, and 32 percent didn't adjust their Business Incentive Awards. Meanwhile, of those organizations that did make changes to their variable pay programs, the main focus was on communications and performance measurement.
Specifically, 26 percent of surveyed companies added to or enhanced their communications efforts around Stock Option Awards, 24 percent did the same with Business Incentive Awards, 21 percent around Individual Performance Awards and 15 percent of these employers increased their communications around Special Recognition Awards. In addition, 32 percent of the organizations tightened measures around performance criteria for their Business Incentive Awards, 24 percent did the same with their Individual Performance Awards, 10 percent tightened measures around Stock Option Awards and 6 percent did so with Special Recognition Awards.
Copies of the Hewitt Associates 26th Annual "U.S. Salary Increase Survey" and "Timely Topic Study on 2002 Variable Pay" are available at www.compensationcenter.com, or by calling the Hewitt Associates Publications Desk at (847) 295-5000.
About Hewitt Associates
Hewitt Associates (www.hewitt.com) is a global outsourcing and consulting firm delivering a complete range of human capital management services to companies including: HR and Benefits Outsourcing, HR Strategy and Technology, Health Care, Organizational Change, Retirement and Financial Management, and Talent and Reward Strategies. The firm provides services from 91 offices in 39 countries.
Definitions:
Salaried Exempt - All non-executive salaried employees for whom overtime pay is not required by the Fair Labor Standards Act (FLSA).
Salaried Nonexempt - Salaried employees for whom overtime pay is required by FLSA.
------------------------
Produced for Hewitt Associates
Contact: Joe Micucci
(847) 442-7656
joe.micucci@hewitt.com
JoAnne Laffey
(847) 442-7648
joanne.laffey@hewitt.com
------------------------
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Tel:
Email us
This is a press release. Press release distribution and press release services by EmailWire.Com: http://www.emailwire.com/us-press-release-distribution.php.
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Study Shows Cities Where Workers Should See Greatest Base Pay Increases
Study Shows Cities Where Workers Should See Greatest Base Pay Increases
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