The information for this report was gathered from over 350 companies surveyed in April and May of 2008. Among the 250 companies that responded both last year and this year, some 35 percent report lower actual 2008 salary increase budgets than they projected last year for executives and exempt employees.
"Companies are responding to a sluggish economy by remaining disciplined on labor cost increases," says Charles Peck, Compensation Specialist with The Conference Board. "They are aided in this resolve by moderate inflation." The Conference Board currently projects a 2.7 percent rise in inflation for 2008 and 3.4 percent for 2009. This means the typical employer is budgeting for salary increases just slightly ahead of inflation in 2009.
Across industry categories, Diversified Financial Services reported the highest increases in 2008 for all employee categories, while Trade reported the lowest. The highest projected increase for 2009 was reported by Consulting Services, while Trade was again the lowest.
Definition
Salary increase budgets refer specifically to the pool of money that an organization dedicates to salary increases for the coming year. It is represented as a percentage of current payroll generally; the salary increase budget is calculated using a predetermined total percentage of base pay (excluding overtime, bonuses, etc.). The budget is used for awarding merit or performance increases to individual employees, as well as for pay adjustments such as promotional increases. Salary increase budgets can also include scheduled "step" increases or salary increases that have been pre-determined via individual contracts or collective bargaining agreements.
