“This less-than-robust increase is an indication that the economic recovery has not yet picked up enough strength to significantly raise salary budgets to a level consistent with a healthy economy,” says Christopher Woock, Researcher, Human Capital, The Conference Board. “But the news is not all grim. There appears to be little risk of inflation eroding the real value of the increase.”
The lowest median salary increase budget forecast for 2011 is in the transportation industry—2.25 percent for exempt employees and executives. The insurance industry is also below the 3 percent median overall forecast for non-exempt salaried, exempt, and executives, while the banking sector reported the lowest projected 2011 increase for non-exempt, hourly employees. Across industries, the 2011 forecast for salary increase budgets showed little variation, with no employee group in any industry projected to exceed the overall median of 3 percent.
The projections for 2011 salary increase budgets are up from the actual 2010 increases. The largest year-over-year projected increases are in the diversified services industry—where the projected 2011 median salary increase budget is 0.5 to 3 percentage points higher than the actual 2010 budget—and in the diversified financial services industry—where the projected 2011 median salary increase budget is 0.5 or 0.63 percentage points higher than the actual 2010 budget.
Pay for performance continues to be the common approach for the allocation of salary increase budgets, as companies remain focused on higher-performing employees and growth businesses. While most companies have not budgeted general increases, overall merit increase percentages for both 2010 actual and 2011 projected budgets mirror the trend of those of total increases.
The information for this report was gathered from 313 companies surveyed between April 7 and April 30, 2010.
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.
